These days, wacky dotcom advertising is nothing more than history. In
their place have emerged more sober clients with slimmed down budgets
and focused initiatives. For interactive agencies, the battle to win
cash-strapped clients is heating up, with many waging a price war that
will very likely damage the medium instead of gaining the web
much-needed credibility.
Yet, seemingly lost among the grim news are solid indicators that Asia
has embraced the internet. Across a number of markets, internet usage is
rising. Which has interactive agency directors like Larry Lok wondering
if stagnant, or worse yet, faltering growth at agencies is more the
result of shops failing to craft their interactive offerings to meet
market needs.
"I am not saying that they have to operate at exceptional margins, but
they should have tweaked services by now to provide greater value to
their budget-strapped clients," says Lok, director of interactive and
digital services at Leo Burnett. Lok is confident of the sector's
continued buoyancy.
He cites third quarter growth for Burnett being substantially larger
than the previous quarter, which was again better than the first
quarter.
For others, the struggle remains very real indeed, made more ironic by
the fact that while the web is becoming a serious business, the market
remains saturated with business models that don't work.
The situation has naturally confused clients and destroyed pricing
structures.
That agencies are partly to blame for the situation is true. But it's
also true that the steep learning curve for this revolutionary new
medium tripped up a good majority. Fortunately relief is at hand. OMD
interactive manager for Greater China, Jerry Yee, says that while
budgets are thinly stretched, they are unlikely to fall further next
year. "At the moment, the maximum budget we are seeing is about
US$50,000. I doubt it will go lower," he says.
Reduced client spend has forced agencies to cut staffing or re-absorb
interactive spin-offs. Ogilvy & Mather Beijing's managing director
(interactive), Chris Reitermann, warns that a pure online advertising
agency model does not work. Lok adds: "To be quite frank, we welcome the
many closures.
There are simply too many web agencies. This makes the market price for
e-offerings artificially low. Occasionally, a new client will say, 'but
we can get it at this (lower) price from some dotcom'. What they don't
realise is that they are paying for effectiveness and creativity, not
the website or banner."
At Grey, chief executive Viveca Chan says its business grew by about 50
per cent over last year. "We did some major hiring in the beginning of
the year and with the growth slower than expected, we needed to trim a
couple of jobs."
Douglas Koo, managing director at MindShare's M Digital, meantime notes
some positive signs with clients running regular campaigns. "This is a
departure from ad hoc campaigns that were planned just around specific
promotions or as an after-thought." The agency operates in 10 regional
markets and recently launched operations in Mumbai and Bangalore in
India.
Other agencies though are feeling the pain from the dotcom dust-up.
Sources say FCB reduced the headcount of its interactive team from 25 to
four.
However, David Crane, FCBi regional director, stressed that staffing
changes were a result of integrating the creative and production teams
within the agency. "The integration of the two teams means that our
staff can now work on both interactive and traditional sides," he
says.
With the market saturated, a growing number of agencies are turning
their attention to relationship marketing. "The key is to get clients to
understand that this is not a tactical mass marketing tool," says
Reitermann. "It's a strategic tool to build relationships with a target
audience."
Educating clients is another crucial step. Reitermann adds: "There will
always be pressure on costs, but this is or should not be the deciding
factor. It's not about costs - it's about ROI."
For now, interactive agencies are also hoping the gloom enveloping the
media industry will aid online as advertisers use the medium to maintain
a marketing presence rather than dispense with advertising altogether.
