Strategy > Digital Business Convergence: Winners and Losers
There’s tremendous convergence happening in the digital media sector. Many different players are doing their best to stake their ground for future growth opportunities.
In the agency world, you’re seeing many traditional agencies scrambling to make the necessary changes to elevate their digital capabilities and position themselves to existing and future clients – especially since their traditional mass-media model continues to be under siege.
Of these agencies that already had digital departments producing web sites and online promotional campaigns, many have now enlarged their investments in digital talent shoring up their expertise and capabilities in order to service the cross-platform and social media needs of clients. Others have elected to acquire ready-made digital agencies, such as Publicis Groupe purchasing Digitas, Razorfish, and just recently, Rosetta.
Digital agencies and technology studios on the other hand have seen exponential growth with hot demand for their innovative development capabilities and expert grasps of all things digital.
Many of these digital specialty firms are now seeing many brands turning to them to be their agency of record - beyond digital.
This has created its own challenges – including how these digital centric teams can quickly round out their capabilities to deliver to the overall integrated brand and marketing needs of clients. Global digital technology companies are likewise acquiring traditional agencies to expedite their total agency capabilities as seen in the purchase of Nitro Group in 2009 by Sapient - now SapientNitro.
At the other end of the digital spectrum are the specialty digital media firms, such as Muzak, who have primarily supplied in-store digital media solutions to leading brands for more than 30 years – background music, audio messaging, and video ads.
These specialty firms have over the years developed proprietary platforms and digital appliances to playback content delivered to store locations over private networks. This includes the music you hear overhead when enjoying your Starbucks Coffee or the video content you see on a screens at the subway station and at The Gap.
These organizations have primarily specialized in customizing or re-purposing content - aligning to client brand directives. As they strive to expand their digital media offerings – beyond in-store, many are finding it challenging to adapt their existing business development approaches to position new offerings to top brand decision makers – many of whom traditionally turn to their existing agencies for digital insights, innovative ideas, and cross-media branding and marketing expertise.
There are many other types of players competing in the digital realm – variations of technology, content, and application-centric digital organizations with their own strengths and challenges.
So who wins and who loses?
Traditional agencies are well positioned to be big winners in digital if they embrace change and transform quickly – positioning themselves as digital innovators with traditional branding strengths, and, more importantly, modifying their business model to develop alternative revenue streams beyond mass media billing and big budget, creative production fees.
Their strength in aligning big ideas to client brands to drive business growth should serve them well. They also have direct and long-standing relationships with key brand decision makers that they can effectively leverage.
Those that don’t embrace change will go the way of the big record companies – organizations that refused to embrace the internet and new revenue models – allowing innovators like Apple to reinvent the business and, in essence, take control of the music industry.
Digital agencies can also win - parlaying their current popularity (based in part on brands urgently wanting to be in digital at all cost) to get closer to strategic and brand decision makers. If they can convince them that their agency expertise can also extend to manage all the integrated brand and marketing assignments – beyond digital – they’re in good position once again. But only by continually investing in innovation can these agencies invent the future and define the new rules for how digital is leveraged and monetized.
Lastly, the specialty at-retail digital organizations need to move beyond order taking - changing how they are perceived as solely niche, in-store digital content partners that mostly execute on the digital branding strategies already defined by others.
They should quickly work to transform themselves –by attracting top brand and strategic talent to their team and building credibility in the marketplace as digital strategists that can add value up stream – where all-encompassing digital strategies can be defined and funded.
These specialty players should also leverage their key differences and advantages - highlighting what agencies do not have – such as established digital networks (distribution channel) that reach 100s of millions of consumers every day, advanced, in-house multimedia content production capabilities, and a successful track record of implementing alternative revenue streams, such as recurring revenue models for content services, platforms, and applications.
An added selling point are the huge meta-tagged, libraries of licensed music and video content that these companies currently sit on, and the long-standing working relationships they have established with original content producers including filmmakers, record companies, and independent musicians. If content is truly king, then this could be their ace in the hole.
So as the digital world continues to converge, merge, and grow, there is plenty of room for many winners. For those organizations unwilling to change and adapt, or who hesitate and remain complacent, there is a high likelihood they will be left behind.
In the agency world, you’re seeing many traditional agencies scrambling to make the necessary changes to elevate their digital capabilities and position themselves to existing and future clients – especially since their traditional mass-media model continues to be under siege.
Of these agencies that already had digital departments producing web sites and online promotional campaigns, many have now enlarged their investments in digital talent shoring up their expertise and capabilities in order to service the cross-platform and social media needs of clients. Others have elected to acquire ready-made digital agencies, such as Publicis Groupe purchasing Digitas, Razorfish, and just recently, Rosetta.
Digital agencies and technology studios on the other hand have seen exponential growth with hot demand for their innovative development capabilities and expert grasps of all things digital.
Many of these digital specialty firms are now seeing many brands turning to them to be their agency of record - beyond digital.
This has created its own challenges – including how these digital centric teams can quickly round out their capabilities to deliver to the overall integrated brand and marketing needs of clients. Global digital technology companies are likewise acquiring traditional agencies to expedite their total agency capabilities as seen in the purchase of Nitro Group in 2009 by Sapient - now SapientNitro.
At the other end of the digital spectrum are the specialty digital media firms, such as Muzak, who have primarily supplied in-store digital media solutions to leading brands for more than 30 years – background music, audio messaging, and video ads.
These specialty firms have over the years developed proprietary platforms and digital appliances to playback content delivered to store locations over private networks. This includes the music you hear overhead when enjoying your Starbucks Coffee or the video content you see on a screens at the subway station and at The Gap.
These organizations have primarily specialized in customizing or re-purposing content - aligning to client brand directives. As they strive to expand their digital media offerings – beyond in-store, many are finding it challenging to adapt their existing business development approaches to position new offerings to top brand decision makers – many of whom traditionally turn to their existing agencies for digital insights, innovative ideas, and cross-media branding and marketing expertise.
There are many other types of players competing in the digital realm – variations of technology, content, and application-centric digital organizations with their own strengths and challenges.
So who wins and who loses?
Traditional agencies are well positioned to be big winners in digital if they embrace change and transform quickly – positioning themselves as digital innovators with traditional branding strengths, and, more importantly, modifying their business model to develop alternative revenue streams beyond mass media billing and big budget, creative production fees.
Their strength in aligning big ideas to client brands to drive business growth should serve them well. They also have direct and long-standing relationships with key brand decision makers that they can effectively leverage.
Those that don’t embrace change will go the way of the big record companies – organizations that refused to embrace the internet and new revenue models – allowing innovators like Apple to reinvent the business and, in essence, take control of the music industry.
Digital agencies can also win - parlaying their current popularity (based in part on brands urgently wanting to be in digital at all cost) to get closer to strategic and brand decision makers. If they can convince them that their agency expertise can also extend to manage all the integrated brand and marketing assignments – beyond digital – they’re in good position once again. But only by continually investing in innovation can these agencies invent the future and define the new rules for how digital is leveraged and monetized.
Lastly, the specialty at-retail digital organizations need to move beyond order taking - changing how they are perceived as solely niche, in-store digital content partners that mostly execute on the digital branding strategies already defined by others.
They should quickly work to transform themselves –by attracting top brand and strategic talent to their team and building credibility in the marketplace as digital strategists that can add value up stream – where all-encompassing digital strategies can be defined and funded.
These specialty players should also leverage their key differences and advantages - highlighting what agencies do not have – such as established digital networks (distribution channel) that reach 100s of millions of consumers every day, advanced, in-house multimedia content production capabilities, and a successful track record of implementing alternative revenue streams, such as recurring revenue models for content services, platforms, and applications.
An added selling point are the huge meta-tagged, libraries of licensed music and video content that these companies currently sit on, and the long-standing working relationships they have established with original content producers including filmmakers, record companies, and independent musicians. If content is truly king, then this could be their ace in the hole.
So as the digital world continues to converge, merge, and grow, there is plenty of room for many winners. For those organizations unwilling to change and adapt, or who hesitate and remain complacent, there is a high likelihood they will be left behind.