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How To Fix A Broken Advertising Industry

Dave Balter 06.22.09, 12:30 PM ET

. . . With the rise of the Internet and the evolution of new-media offerings -- from mobile to social media to word of mouth -- client needs have changed. Yet the models of most agencies, built on the traditional foundations of TV, print and radio, have not.

. . . in many cases, new media moves at a speed that's too fast for traditional agency models. As a result, even the best-intentioned agency becomes "sticky tape" in the process of delivering a "2.0-type" program for a client.

For a new-media vendor, working with an agency often results in endless rounds of revisions, rewrites and reworks. The meetings and pitches alone triple the workload for everyone involved. For a vendor, this process redirects focus from its core competency to multi-layered sales. It's no wonder that massive brands like Procter & Gamble have publicly stated that they're frustrated by the lack of collaboration between advertising and marketing-services firms.

This failure to adapt isn't the agencies' fault alone. It's propagated by the very brands who pay their bills, and it's aggravated by the new-media vendors who seek their business.

Brands are well aware that the market has evolved, and they request forward-thinking innovation from their agencies. . . But the way that brands pay agencies, through retainers and percent-of-media-purchased fees, actually forces agencies to focus exclusively on traditional media. Funding "dedicated staff" models disguises the true cost of inefficiencies that occur when agencies scramble to learn and pitch a new medium. This model seldom offers any upside for an agency that identifies a more efficient new-media shop.

Often, when an agency lacks both the competency and the vendor relationship, the client short-circuits the system and engages directly with the specialist -- widening the gulf between agency and client. By not requiring that a sizable percentage of media budget be allocated to new or social media programs . . . clients are inadvertently stalling progress that the entire industry could be making.

Of course, there are a number of examples of client/agency partnerships that have been developed to solve new-media challenges. Two years ago, WPP created Enfatico, a massive dedicated agency to Dell. The concept came with an entirely different billing model that focused on integrating new- and old-media programs. Earlier this year, Enfatico folded back into Y&R, but the experiment was hardly a failure. Rather, it's a first draft of the future of advertising.

The new-media vendors exacerbate the problems. Poll most of these companies about collaborating with agencies, and they'll roll their eyes in frustration. But as vendors, we spend more time trying to sell our specific flavor of media rather than helping agencies understand how our solutions work together. . . . We create confusion instead of clarity.

The advertising ecosystem is in a massive state of transition, so it's not surprising that things are so chaotic. . .

Dave Balter is the founder and CEO of BzzAgent, the advertising industry's only cross-continental word-of-mouth media channel.