The digital marketing industry is undergoing profound change in the wake of advancing automation. Increasingly, client companies are adopting in-house measures that would have been outsourced to external partners in the past. However, what at first glance seems to be a simple form of in-housing (versus out-sourcing) turns out to be much more complicated, and client companies are realising they still need advice in critical strategy areas. It is here that new entrants into the space formerly only occupied by digital agency firms are increasingly under pressure, on the one hand from clients to also offer and supply strategic digital advice, and on the other hand from large and small  IT and management consulting firms that have realised the potential for valuable new business.

In-house trend

Client companies increasingly have access to the technologies and skills needed to create and distribute digital content in-house. Thus as may be expected and according to a number of recent surveys, more and more client companies are performing at least part of their “digital advertising” operations actively in-house, as opposed to hiring classical advertising agency firms. However and interestingly, where they are now rapidly realising a need for assistance is in the more tricky planning, evaluation and interpretation aspects of their campaigns. Thus, what is striking here is that the tasks now most being outsourced are of a strategic nature. Where digital agencies were previously assisting their clients with implementation and technical know-how they are now increasingly being asked to offer digital strategy consulting services instead.

Competition from both management and IT-consultancies

The move away from offering pure advertising and digital skills to consulting has attracted new players in the market. The competition being faced is now no longer from other agencies alone but also coming from IT and management consulting firms, who have “smelled the bacon” and have started beefing up their Digital Consulting offerings, for example with rapid acquisition of digital agencies and aggressively marketing their consulting offerings.

It is only logical that large consulting companies scent the opportunity and push into the market. This, alongside the in-housing trends mentioned above, of course means a change, but not the end for agencies. Digital marketing agencies will always be the niche provider of certain specialized services, but the market share is likely to contract as so many new players begin to offer these services.

Is the future now “hybrid”?

We believe good prospects for the future can be expected for hybrid agencies and/or hybrid management consulting firms, which offer a holistic triad of marketing, consulting and technologies and bring with them an abundance of experience in “digital”. Advertisers today may now also have to hire staff experienced in the development of strategy, accompany the implementation, and later assist with operational issues when needed. Consulting companies need to acquire design and advertising experience. As usual in the digital space, those who adapt best, win.

Reference: Adzine (June 2019)