Trends to Watch
The Death (and Rebirth) of the Digital Agency? More than 75% of client-side marketers and agency leaders agree that the term “digital” will disappear within 5 years as a meaningful differentiator. In fact, 27% of agency leaders believe the term has already lost its relevance today. On one hand, “digital” is just a label and it’s natural that we evolve beyond reductive categorizations. That said, our data captures an important existential consideration for digital agencies and the clients that hire them. What was once an area of specialized differentiation may become dead weight for agencies and marketers who think too myopically about digital as a distinctive channel or capability and fail to open their aperture to the wider role technology now plays in connecting marketing activities to a more fundamental and integrated human experience.
Innovation and the Tower of Babel Everybody loves to talk about innovation but, interestingly enough, don’t seem to agree on what it actually means. Our study found that agency leaders tend to approach innovation along the lines of design thinking (“solving existing problems in unique and novel ways”) while marketers gravitate to the idea of being first (“doing something that’s never been done before” or “embracing new technology before our competitors do”). More importantly, there is a major gap in how marketers and agency leaders assess the organizational environment necessary for innovation — 73% of marketers believe that their current organizational structure facilitates their ability to innovate while 48% of agency leaders see just the opposite… that their clients’ organizations actually hinder their ability to innovate. No doubt these gaps can be attributed, at least partially, to semantic nuances and distinctive frames of reference. But for a topic (and a term) that is so central to the marketing universe, it might be time for clients and their agency partners to develop a common understanding and agree on what it all means.
Digital Budgets Still Growing (but we spy a cloud or two in an otherwise blue sky) The 2017-18 Global Digital Outlook Study points to increased spending for digital initiatives with 43% of client-side marketing and technology leaders boosting digital budgets and 48% of them increasing their annual spend by 15% or more. Digital also eats a lion’s share of the budget with nearly 50% of the marketers we surveyed now spending 50% or more of their annual marketing budget on digital initiatives. And while the outlook is optimistic, there are signs that growth in digital spending is becoming more selective. 21% of marketers this year said they were actually decreasing their digital budgets (nearly double the 5-year average tracked in our annual study) and the rate at which existing marketing spend is reallocated to digital line items appears to be slowing. Much of this points to an inevitable maturation. But now that many marketing portfolios have been appropriately “re-balanced” for digital, we are entering an era where increased digital budgets are more reliant on growth in overall marketing spend and new investments from outside of marketing.
The Robots Have Arrived and They’re Inviting Their Friends After years of a promised invasion, the robots are finally coming home to roost - machine-driven technologies such as Artificial Intelligence, Chatbots and Programmatic Advertising top the list for investment growth (marketers), revenue growth and anticipated impact on approaches to marketing and design (agency leaders). More than 40% of client-side marketing and technology leaders plan to “significantly increase” their investment in these areas over the next 12-18 months. Additionally, 69% of agency leaders said they believed that the increased prevalence of AI and conversational interfaces would “significantly impact” the way they plan for and design customer interactions in the future.
Agency Leaders Optimistic but Recognize Clear Challenges 86% of agency leaders said they are confident that 2017 will be better than 2016 in terms of profitable growth and there is certainly cause for optimism - digital budgets continue to grow and a slew of emerging technologies promise to keep marketers looking for and investing in the next big thing. But agency leaders recognize clear challenges for the digital business - competition is intensifying as everyone and their brother (…sister, distant cousin and crazy uncle too) now offer “digital” capabilities. Nowhere is this trend more pointed than with the entrance of consultancies (IBM, Accenture, Deloitte, etc.) who’ve rapidly acquired their way into the digital agency landscape. Clients are also building in-house digital teams and in-sourcing digital projects at a greater rate. Concern over the commoditization of digital work also continues to escalate with 53% of agency leaders agreeing that it’s a “serious problem” for their business… the highest percentage in five years.
Marketers Confident and Expanding Digital Capabilities In the 2017-18 Global Digital Outlook Study, client-side marketers were effusive in their confidence and expressed ambitious plans to expand the digital capabilities of their in-house teams. 89% of client respondents rated themselves as “somewhat” or “very innovative” relative to their digital initiatives… a huge increase from 64% in 2016. And 73% believe their organizational structure facilitates their ability to innovate… up significantly from 48% in 2016. Marketers are also building internal capabilities with approximately 50% having fully in-sourced Social Marketing, Customer Insights/Analytics and aspects of web/mobile Digital Experiences. There are signs, however, that marketers’ ambitious reach is exceeding their grasp. Aggressive plans to in-source digital capabilities “over the next 12-months” from the 2016 study didn’t translate into significant increases in 2017. Furthermore, clients are pointing to a more acute, internal talent shortage for the very capabilities they are hoping to build in-house.