How can agencies continue to create value for advertisers now and in the future?

Last week, we touched on how the global advertising industry is changing and its impact on the client-agency relationship.

The development of digital communications is fundamentally shifting the nature of the advertising industry. The greatest paradigm shift is moving from mass media, which targets large aggregated groups of consumers to personalised media, which allows messages to be customised to highly targeted groups or individuals, and the potential for direct interaction with consumers. This results in vastly greater complexity to branding and advertising and the necessity of integrating brand campaigns across new and old media channels.

Creating and developing brands has always been central to the advertising industry, however, rapidly increasing commoditisation driven by the internet is making brands even more important to consumers confused by the plethora of choices confronting them.

The global advertising conglomerates such as WPP, Interpublic and Omnicom long ago rebranded themselves as diversified communications firms, and today, even small agencies are increasingly finding that "advertising" fails to describe the scope of the work they do, which can include public relations, brand consulting, e-commerce implementation, strategy consulting and more. No doubt the term advertising will live on, it is an increasingly poor description of what these firms do.

Just as over the last decade, new competitors such as management consultants have moved onto what had previously been the turf of the advertising agencies, the agencies are now broadening their ambit and poaching business from professional service firms in other fields. One of the key issues that agencies are encountering as they build up their online expertise is whether to apply that beyond the traditional scope of advertising.

It is impossible to implement online marketing for a client without encountering fundamental business strategy issues. Advertising agencies can either team with strategy consulting firms, or indeed become strategy consultants themselves. Some agencies have unambiguously positioned themselves to address their clients' internet strategy issues, at times putting them in direct competition with firms such as McKinsey & Co. and Boston Consulting Group. While it is an obvious opportunity, it also requires not only developing a completely new style of client relationship, but also hiring an entirely new breed of executives, with an MBA almost a prerequisite for entry.

Information overload continues to be a problem. Communicating messages effectively increasingly depends not just on presenting those messages to people through media, but getting them to spread them to others through word-of-mouth. We see the advent of viral marketing, which endeavours to get ideas and messages to replicate and spread in the same way as viruses. This continues to be implemented in guerilla PR or events rather than traditional advertising, in an attempt to create news that people will talk about. Effective implementation of viral marketing has delved into skills sets requiring an understanding of cognitive psychology and the nature of informal communication networks between people. We see this dynamic taking place extensively in social network media.

The future of the advertising industry will depend on how effectively practitioners can adapt and apply their existing competences in a rapidly changing business environment. The ability to create and understand the dynamics of both old and new media are potentially incredibly valuable. In a world of ever-increasing media channels and choices, there will be an insatiable demand for content. Producing media programmes may not be advertising, but it draws on the competences of the agencies and allows them to integrate advertising into media production.

In a business world which is increasingly dominated by innovation and alliances, the core competences will be the creation of knowledge and ideas, and working with others to create value. The best of the advertisers are extraordinarily well placed to apply their expertise to their clients, working with them not only to help them develop ideas, but also to enable them to work more closely with their partners, clients and suppliers in creative processes. Clearly, those advertisers who have come from a black-box mentality not only will find it a difficult to implement this, but will increasingly struggle with their core business. However, those that are effective at highly interactive client relationships based on the co-creation of ideas, and can apply these skills in new areas, will see immense new opportunities continue to unfold.

Ross Dawson is chairman of Future Exploration Network and a globally recognised keynote speaker and author.