The shake-out of the new-media industry shows no signs of slowing,
with the news last week that yet another agency has folded.
This time it was Lowe Howard-Spink’s new-media unit, Lowe Digital, whose
clients included Vauxhall. Many argue its demise is a further example of
ad agencies entering unknown territory without the necessary technical
or intellectual expertise.
’It’s not a natural link for agencies to set up a new-media arm,’ says
Martin Child, managing director of new-media consultancy Traffic. ’It’s
a different discipline from advertising, not just because of the
technicalities but because the Internet is a one-to-one medium rather
than a mass medium.’
Yet it isn’t just ad agency ’bolt-ons’ that are suffering. Recent months
have seen a spate of closures which have included independent new-media
New Media Factory went into voluntary liquidation this month after two
failed mergers. The news came a week after AMX Digital was bailed out by
Real Time Interactive after cash flow problems. The list of other
new-media companies that have recently gone to the wall includes Web
Media, Obsolete and Web Ltd, and nearly everyone in the industry expects
there to be further consolidation this year.
So what is happening? Is the industry slowing down after its explosive
growth, or are the companies themselves to blame?
Figures released this week have shown that most online publishers are
still having a hard time selling ad space on the Web, with only around
pounds 1.4m worth of ads booked each month (see New Media, page 15).
Andrew Pickup, Microsoft’s Internet marketing manager, says: ’A lot of
firms and agencies saw the Net exploding and jumped on the bandwagon. Ad
agencies were particularly keen to set up new-media arms to attract
clients. The question is whether they were thinking long-term or whether
it was a knee-jerk reaction,’ he says.
Give it time
Ajaz Ahmed, managing director of AKQA, also questions whether ad
agencies are committed in the long term. He believes the dynamic and
immature industry needs continued investment and the time to fully
Others say the needs of clients are changing rapidly and that agencies
are folding because they are not responding fast enough.
’The closure of a large segment of a market is not indicative of client
demand slowing down, but of companies using the Internet
Instead of using Web sites as company brochures, more clients are
tagging on to existing sites, sponsoring particular sections of content
sites for example,’ says Tim Brown, managing director of Realmedia. This
explains the fall in demand for production companies.
Ahmed believes the fault lies with the industry as a whole. ’I think
what’s missing in our industry is focus on the client. New media is
still a distress purchase for clients. They don’t enjoy it because they
are still confused by it. Many specialist agencies aren’t explaining how
the medium can be used as part of the client’s overall marketing
strategy,’ he says.
Specialists provide technical expertise, but can lack marketing
expertise; for ad agency units it’s vice versa. For agencies to survive,
they must provide the mix of skills clients are demanding.