Return of the Dinosaurs: Traditional ad agencies are back in the online loop

Internet.com (March 7, 2001)

Open up an Internet trade magazine at any point in recent years, and the odds were you’d find advertising industry news dominated the “hot” new interactive shops.

To hear these brash young Web marketing mavens tell it, the “traditional” ad agencies were dinosaurs frozen in the Ice Age of the “Old Economy.”

Well guess what? Those dinosaurs are back, thawed out in the dot com meltdown of 2000 that has changed the online landscape. And the big boys are looking to have the upstarts for lunch.

“The agencies are waking up from their slumber,” says Peter Naylor, vice president of ad sales at Terra Lycos.

“In the early days, the agencies did not understand the real value of the Internet as a marketing medium and they were slow to adapt to it,” agrees Murray Gaylord, vice president of brand marketing at Yahoo. “There is no question that now they <I>are</I> starting to get it.”

In fact, if industry coverage was to be believed, the traditional agencies were so out of it that many advertisers considered them irrelevant — doing mega-deals directly with Web publishers.

Was it true? Yes, but. A big part of the reason for the end run lies in the fact that the biggest chunk of online advertising dollars was coming from other dot coms.

“The more traditional shops were not quick to sign up the dot coms, who did their media buying in-house, and that’s where that perception comes from,” says Naylor.

The Old End Run

Richy Glassberg, chairman and CEO of Phase2Media, says part of the blame also lies with the publishers themselves: “There were a lot of people who were leaders in the space who weren’t media people, so they went directly to the clients. Now that people aren’t getting by on stupid dot com dollars, they’re going back to the agencies.”

Glassberg also questions just how many dollars ever actually changed hands between Web publishers and advertisers: “They would do a deal and issue a press release but a lot of it never got bought. It was just because the client needed to be seen to be doing a multi-million dollar deal.”

“Deals being done through the agencies weren’t of the magnitude of the deals that were being done directly by the publishers and were getting the ink,” says Kevin Wassong, founder of digital@jwt, the interactive arm of J. Walter Thompson.

But even those at the biggest agencies are willing to admit the large firms had their own baggage to sort out.

“Agencies were probably perceived as another layer, and rightfully so,” Wassong confirms. “Agencies were also perceived as being a barrier, and rightfully so. Agencies three years ago were perceived as ‘not getting it,’ and rightfully so. However, agencies have changed dramatically.”

But that is not all that has changed.

Has their time come (again)?

A confluence of factors have made the big agencies a force to be reckoned with on the Web: Internet penetration has reached critical mass, measurement tools have ushered in the era of online branding, and the agencies now have their own interactive expertise in place. All of which means their big “traditional” clients are ready to take the plunge. And with the demise of the dot coms, those big traditional advertisers are where the real money now lies.

“Web publishers realize that we are the people who control the major budgets of the large brand advertisers and so they are more aggressive in coming and talking to us,” says David Jacobson, an Interactive Strategist at TBWA\Chiat\Day.

Yahoo’s Gaylord, a former chief operating officer of the Ad Council, confirms as much.

“We understood well over a year ago that the real long-term opportunity for the Internet is going to come from traditional advertisers because the bulk of spending has been from traditional advertisers,” he says.

Over the past year, Yahoo has dramatically stepped up its efforts to court the big ad agencies, but that warming relationship is also changing the nature of “Internet time.”

“Working with agencies is very different than working with advertisers directly,” Gaylord says. “The whole planning process takes longer.”

One reason is the broad strategic focus on overall branding that the big agencies bring to table, as well as the emphasis on the Internet as just one element of the overall marketing mix.

“As keepers of the brand, it makes a lot of sense for the publishers to deal with the agencies because that’s what we’ve been hired to do in the first place,” says TBWA/Chiat/Day Interactive Strategist Joseph Jaffe. “We are able to present the plan in a shape and a form of most utility to the client’s brand.”

That, the publishers insist, suits them just fine.

“We want to be seen as full service advertising solution providers rather than just banner salesmen,” says Naylor of Terra Lycos. “Web advertising deserves a place in every major shop right alongside TV. It’s just another line item on a media plan that needs to be considered.”

Next week: Changing relationships

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