Analysis: Upturn a distant hope for digital operators

The results of the Asia Digital Marketing Association's (adma) first regional digital marketing survey make grim reading.

For starters, the results have raised questions whether Asia's digital marketing shops will survive into the future because clients have not only frozen online marketing budgets, but are apparently also handling web-based campaigns in-house.

The results of the survey revealed that just over 20 per cent of brands work with online marketing companies, with two-thirds of marketers preferring to manage digital marketing internally.

Whether marketers are still nursing wounds from the dotcom crash or are only now dabbling in interactive services (hesitant to allocate sizeable budgets into what is still a relatively new medium) is uncertain.

But budgets for online marketing appear to be "extremely low", according to interactive marketing consultant Douglas Khoo, who worked with adma on the survey.

Indeed, the survey illustrated that only 20 per cent of brands in Asia will spend more than 15 per cent of their marketing budget on digital marketing this year. And, only four in 10, despite signs of a revival in the region's economy, increased budgets in 2004 over last year. "Some clients have been burnt before," explains Graham Kelly, executive creative director at Saatchi & Saatchi. "They may have over-invested and are ultra-cautious now. In the US, clients are starting to go back to online, faster than they are in Asia."

The findings, according to industry experts, have exposed experience gaps at major advertising agency networks in digital marketing. "Because clients have had bad experiences with their agencies, they consequently have brought these critical tasks in-house," says Michael Zung, managing director at OneXeno.

Ken Mandel, CEO of XM, believes that most network agencies just pay lip service to digital marketing. "They are still lacking in a digital offer and traditional agencies, in general, are not investing in this. Most just tag on an interactive name to please clients, and instead outsource work to smaller digital shops."

But the scarcity of professional services is also playing into the hands of the few agencies, like OgilvyOne and Group M's interactive media agency mOne, which have well-rounded offers in place.

Interestingly, Mandel says client mindsets are evolving and many are overlooking conflict issues to secure a professional partner, an approach that would have been inconceivable a year ago. "They are allowing competitors in the same category, as long as there are no leakages between clients. There are just not many digital agencies of a certain level out there."

That, however, could change. While few agencies have made a concerted push into online advertising in the past few years, as the economy picks up, network agencies are expected to begin reinvesting resources in digital services.

Take Carat, which is already on a major spending spree, kicking off with Taiwan, with plans to buy into five digital agencies by year-end. The agency is putting its digital operations in place ahead of a projected revival in the interactive field. Earlier, Leo Burnett's interactive arm, iLeo, announced it would bring below-the-line operations under a single network to help advertisers foster closer relationships with their customers. The agency is placing its current below-the-line arm, iLeo, under the umbrella of Arc, a network of marketing services operations owned by Burnett's parent, Publicis.

Ultimately, smaller shops, analysts argue, will need traditional agency partners if they are to survive and grow beyond execution work to handle strategy planning for clients. After all, few clients today are running purely digital campaign. Most are turning to online marketing to break through the confines of 30-second television commercials. Adds Mandel: "The challenge for these agencies without networks will be to partner with traditional companies of their own size and to move away from just website or banner creation to engage in strategy."