Nothing has busted open the ad industry quite like the internet. Brands were once served by a single type of agency that promised to create TV ads capable of engaging tens of millions of consumers at any given time. But as media channels fragmented, many creative shops found themselves hamstrung by ageing structures and natural conservatism. And while cash-strapped brands turned to procurement, digital marketing evolved from being an afterthought to the instant and economically unrivalled force it is today.
Yet there is growing evidence to suggest that digital may soon cease to exist as a standalone marketing discipline. The recession has meant commoditised creative services, and as the boundaries between digital and traditional channels blur, questions are being asked about the need for specialist agencies.
Last year Subway, Royal Bank of Scotland and Virgin Trains were among a number of brands that used the economic downturn to consolidate their advertising arrangements. Indeed, the term 'digital' - which was so vogue in the early part of the last decade - was something of an anachronism by the end of it.
Dylan Williams, head of strategy at Mother, believes this is symptomatic of a watershed moment in the evolution of digital.
"A few years ago, when media channels were fragmenting and technology developing so quickly, marketers were looking for specialists to make sense of it all and organise their brand activity in a tightly controlled and managed way," he says.
Williams adds: "Now, with media converging and digital occupying so many more spaces than just the internet, there's a new line of argument that suggests any specialist company can only ever approach a problem with a channel-biased point of view. Brands no longer want a digital strategy; they want strategy for a digital world."
As brands look at how they can best equip themselves in a digital world, many are experimenting with arrangements that 10 years ago would have generated something of an industry-wide outcry.
In 2007, Eurostar raised eyebrows after it shortlisted Glue as the only digital agency to vie for its creative account. The agency eventually lost out to Fallon, but any suspicion that the climate was changing was confirmed a year later when 3 UK moved its entire creative account out of Euro RSCG and into Glue, which has since developed full-scale campaigns across TV, radio, digital and outdoor.
As media channels continue to atomise, agencies have reorganised themselves accordingly. Traditional shops have brought digital more to the core of their offering, while digital agencies have thought about how to future-proof and defend their territory, many unsuccessfully.
Brands, too, are changing how they interact with agencies. "There is far more fluidity around the boundaries of each discipline," says Ian Armstrong, manager of customer communications at Honda.
Armstrong adds: "Strategy, creativity and execution are no longer the properties of a single shop, but are universal territories - and all are up for grabs."
He maintains that marketing departments are no longer beholden to traditional structures, and agencies, too, must be prepared to be more fluid about their offering. "Nowadays the skill of a brand lies in its ability to manage the cross-functional talents of its agencies so that it gets the best within every field," he says.
"That means drawing on the intellectual, creative or executional capacities, but not necessarily setting clear lines of demarcation early on."
Digital technology has also greatly accelerated the speed of marketing, something that both brands and agencies have had to respond to. "Marketers now have to be much quicker at monitoring the flow of conversation and ensure that they are properly structured in the way they do this so they can respond speedily," says Robin Auld, the outgoing marketing director of Domino's Pizza.
Little wonder that brands are increasingly restructuring their marketing arrangements and finding new ways of communicating with their customers.
Volvo is among the brands that has redistributed its marketing spend to focus more on natural search and social media; it has hired Mindshare to manage its search optimisation and social media and PR accounts (see Casebook).
Meanwhile, Ocado, which appointed CHI for TV ads in 2007, has adopted social and mobile media to try to foster a closer, real-time relationship with its customers.
"A decade ago, 90 per cent of what the external world knew about your brand was a product of the company or agency," says Jon Rudoe, Ocado's head of retail and marketing. "Now that figure barely touches 10 per cent, while the rest is created by what people are saying about, or experiencing from, your brand.
"Rather than dictating the values of their brand, marketers have to relinquish control. The more pressing question now is what is being said about my brand, and how can I be part of, and affect, that conversation?"
But this creates its own internal challenges for marketing departments. "Where, for example, does Twitter sit in the marketing team? Is it a function that belongs to the chief executive, the remit of a digital expert or should it be outsourced to an agency?" asks Rudoe.
A fresh approach
With such changes taking place inside marketing departments, agencies are also finding themselves readdressing the way they do business.
"Agencies simply have to be far quicker and more imaginative at media cross-fertilisation," says Tim Duffy, the chief executive of M&C Saatchi, which relaunched a centralised planning department across all seven of its companies last year.
"Brands are looking for agencies that can step above the specifics of channel planning and implement universal ideas that will move their business on," he adds. "Two worlds are colliding and agencies simply cannot afford to be left behind."
Ben Fennell, the chief executive of BBH London, agrees. "We are investing in more data and analytics skills within the strategy function, so that we can gain a deeper understanding of what is happening to our clients in real time," he says.
Fennell adds: "We need instant understanding and feedback when developing our content, and have brought creative technologists into the creative department."
But as traditional agencies reshape their offering, the existence of standalone digital shops is being put under threat. With digital technology so prevalent, agencies will be under pressure to define their point of difference beyond a specific channel.
"2010 will see a shift in nomenclature for our industry," says Johnny Vulkan, partner of Anomaly. "Words and phrases like 'agency', 'multi-disciplined' and 'integration' have come to mean different things to different people.
The answers we'll be looking for will be much simpler and more jargon-free than the current descriptions suggest."
Some believe this new struggle for definition could kill off agencies that are unable to articulate what they do.
"Put simply, digital agencies will not exist in the next 10 years because the good ones will gravitate towards strategic, channel-neutral thinking, while those that have a passion for the craft are likely to become digital production houses working alongside those agencies," asserts Steven Hess, the chief executive of Weapon 7. "The rest of them may not survive the next decade."
So agencies that manage to sell channel-neutral thinking while demonstrating technical expertise may succeed. But there is no guarantee that brands will want to allocate their entire marketing budget to an integrated shop that purports to offer everything.
"I'd be afraid of complacency," says Domino's Auld. "All agencies go through good and difficult periods and no matter how technologically advanced an agency is, you simply cannot be assured of having all the best talent in one place. Plus it's important to maintain a healthy sense of competition, especially when opportunities for work are no longer governed by channel but by universal strength of ideas, creativity, execution and strategy."
New ways of working
One point of agreement is that the new digital decade will see an end to the old system of retainers, with agencies instead charging single fees for their ideas, strategy, implementation and licensing.
"Digital media has changed the approach to marketing spend," says Ocado's Rudoe. "Rather than hefty investments in above-the-line campaigns, it makes sense to invest in improving your product and then find the right combination of social media to get people talking about it. That's a different set of spending priorities to a traditional media strategy."
Anomaly's Vulkan believes agencies should charge for their results, and not for the time they have put in.
"In a media-neutral world, a good solution should have a demonstrable effect on the client's business," he explains. "Marketing must encompass the products themselves, views on pricing and distribution, and, of course, communications."
There is a growing body of opinion that agencies must be prepared to carry the same risk and rewards as their clients. While cross-disciplinary rosters may remain, their purpose may be vastly different in the future.
"Brands are likely to be far more demanding in relation to how these rosters are used, dialing up competition between agencies and eliminating crossover," says James Kirkham, director of Holler.
"For example, the blurring of the lines between PR and digital needs addressing," he adds. "Many quality digital and social media agencies truly understand how to cajole communities into action on Facebook or Twitter, but can all PR agencies claim to do the same?"
The future alternative
With skills fragmenting, an alternative to the current agency set-up might emerge. "As larger shops swallow up the smaller digital talent of the last decade, you're likely to see new approaches float to the top," says Honda's Armstrong. "For example, there is room for a collegiate of co-habiting, smaller agencies that share a philosophy and pool talent depending upon the particular brief that comes in.
"And as procurement continues, brands will start to ask the obvious question: 'Why am I paying for all this overhead of a glitzy office and soft furnishings if I can just buy the talent on an ad-hoc basis and use it as I need it?"
Who will win from these changes? "Only the creative businesses that can take the very best from two colliding worlds will prosper," asserts Ben Fennell, the chief executive of BBH London.
He adds: "As the new decade unfolds, and the emphasis on the digital specialist diminishes, agencies will have to demonstrate a breadth of media expertise, depth of strategic thinking and a nimble-footedness that can give brands what they need without being wedded to the entire package. Clients that are strong-willed are visionary enough to work in this non-linear environment will reap rewards."
Smart thinking when planning a digital marketing campaign:
1. Avoid consolidating agencies for cost purposes. This is likely to be a short-term solution to the recession. Instead define the skills you need and who is in place to offer them
2. Empower agencies by making them feel as though they are in contention for all aspects of your marketing requirements, not just their 'patch'
3. Social media requires instant and continual attention. Start by asking how to create meaningful dialogue with consumers.
4. Explore fee structures that are connected to real-world results. Are there ways that both brand and agency can explore the new opportunities together while sharing the risk?
5. Encourage healthy competition and eliminate unnecessary overlap. There is no reason for a PR and digital agency to both work on social media
Casebook: How Volvo overhauled its digital strategy
Car manufacturer Volvo last year moved away from its traditional safety-based brand messaging by adopting a new strapline: 'Life is better lived together.'
It coincided with a significant shift from traditional marketing to a digital approach. The company appointed Mindshare to manage its search optimisation, social media and online PR accounts.
The strategy culminated in a live cinema gaming experience in which audiences waved their arms in the air to 'drive' a Volvo around a virtual course.
Consumers in 12 cinemas around the UK battled against each other during the live event; it was the first time cinemas had been used in such a way. The winning cinema was the one in which the participants moved in unison - i.e. demonstrating the brand's strapline.
Volvo currently invests just 3 per cent of its £19.75 million advertising budget in digital, according to Nielsen.
Despite revising down its total UK marketing spend due to the tough economic climate, Anita Fox, Volvo UK's head of marketing communications, claims that more will be invested in search and social media during 2010 than ever before.
Casebook: How Ocado shifted its marketing spend
Having used radio and TV ads to push its online delivery service, Ocado has turned to social media in a bid to foster a closer relationship with its customers in real time.
"Social media allows us to understand how our brand is consumed in the real world and gives us the ability to address people's concerns in real time," says Jon Rudoe, Ocado's head of retail and marketing.
The company maintains a dialogue via Twitter and frequently uses it to garner feedback on how its brand is perceived.
It achieved a first last year when it launched an online shopping app for the iPhone.
Casebook: How Sony Europe hired a new type of agency
Nothing shows the change of the marketing mindset as dramatically as Sony's decision to call time on its relationship with the Publicis-owned agency Fallon last December.
The agency that had helped to revive the Sony brand and resurrect TV advertising with award-winning spots, including 'Balls', 'Paint' and 'Play-doh', was cast aside in favour of Anomaly, a relatively untested agency in the UK that sells itself on the notion that the old agency models 'are all broken' and 'the traditional solutions are becoming less and less effective'.
Sony Europe's vice-president of marketing communications, Ben Moore, said at the time that Sony would look at "an increasingly sophisticated and media-neutral brand strategy that allows us to exploit existing and evolving media channels".
How Anomaly answers this challenge over the course of the coming year will be scrutinised as a glimpse of the future.
The agency will act as Sony's key strategic and creative partner, sharing the account between its UK and US offices.
One of Anomaly's priorities is to develop a campaign to promote Sony's association with the football 2010 World Cup, which is being shot in HD.
Casebook: How TUI Travel restructured its marketing department
The digital revolution has accelerated the pace of communications in every aspect of life. In light of this, TUI Travel, the parent company of Thomson and First Choice, overhauled its marketing department to help it respond more quickly to the needs of its customers.
Moving to a cross-brand approach, the marketing department was divided into two separate teams: one covering brand strategy, and the other CRM and innovation.
The first covers brand-led direct marketing activity, freeing up the CRM and innovation team to focus on faster feedback to customer-generated communications, as well as keeping track of how digital technology is evolving.
The move has helped the marketing department to deal with enquiries more quickly, without compromising on brand engagement.
The leaner marketing department recently appointed social media agency Nixon McInnes to develop a strategy for its First Choice brand.
The travel company wants to boost engagement with families online, promoting First Choice's holiday villas and establishing itself among its target audience as a 'caring brand'.