Ad agencies rework models amid competition from digital publishers and social influencer firms
Los Angeles-based ad agency 72andSunny is opening a social media influencer division that will help marketers with growing content needs tap into a network of creators with big followings on digital platforms.
Advertisers are demanding that agencies create content faster and cheaper to engage consumers who are spending more of their time on social media services such as Instagram, Facebook and Snapchat.
There is also growing interest from advertisers to weave their brand messages into content from influencers, both to reach consumers who are less inclined to consume traditional media and to benefit from the legions of fans and connections that these people have built up.
The new division, dubbed Sundae, will invite social media content creators who have a minimum of 10,000 followers to sign up via an app that goes live in November. The creators will be asked to select the specific brands they would want to work on behalf of. When a marketer has a need for advertising content for a specific platform — say, Instagram — the agency will ask the Instagram creators that selected that particular marketer to submit ideas to the app.
The agency’s move is also partly defensive. Madison Avenue faces growing competition from a long list of companies that produce advertising content for marketers from BuzzFeed to Vice to social influencer firms. Moreover, some publishers who in the past few years have opened content studios to product native ads are now expanding into agency-like work, creating content for sites other than their own.
Creative disintermediation is a “very significant threat,” said John Boiler, chief executive officer of 72andSunny. These types of firms “are moving up in the food chain and are putting together yearlong plans,” Mr. Boiler added. The agency recently had a client ask if it should hire Vice to create all its social media content.
It’s critical for creative agencies to adjust their business models, ad industry consultants say. Ad firms “must reinvent,” said Greg Paul, CEO of R3, a consultancy that works with agencies and marketers. They need to change and go from producing content a few times a year to producing every day, but “that is easier said than done,” he added.
Marketers are no longer heavily dependent on elaborate and expensive TV commercials but are pressing agencies to create smaller pieces of content.
Nowadays, advertisers are asking for three online videos and 10 GIFs for $10,000, Mr. Boiler said. To be sure, the Los Angeles agency still has ad productions that cost several million dollars.
72andSunny isn’t the only agency reworking its business model. Earlier this month, Omnicom Group’s BBDO Worldwide opened Flare Studio, a crowdsourcing platform that will draw in influencers, freelancers, filmmakers and directors to help create online video content for clients.
Those that join will be invited to compete for briefs posted on behalf of BBDO agencies and their clients, the agency said.
Despite reworking their approach to creative development, agencies face an uphill battle in unseating the newer entrants, experts said.
Some of the new business models are “late to game,” added Mr. Paul at R3 “Companies such as VaynerMedia have already filled the void, so it will be challenging.”
72andSunny executives said traditional ad agencies have a leg up on the competitors because many of the platforms, media companies and influencer firms do not always have the strategic chops to make ad content that truly benefits a brand.
Sundae will be able to “harness” the creative talent but also be able to give the content “strategic rigor,” and make sure it’s building “brand equity” for the marketer, said Matt Jarvis, chief strategy officer at 72andSunny.
72andSunny said it will start with about 100 influencers but eventually will grow the number of people that are invited to join Sundae. Payments for creative work will range depending on the assignment and the number of followers an influencer has but the agency said that payments could likely range from $50 to over $10,000.
Bringing in new resources isn’t without risk.
When plans for the new division was announced internally, several creative executives at 72andSunny asked nervously: “Are you crowdsourcing my job now?” said Mr. Boiler.
Mr. Jarvis said that creative executives have no need to be skittish because the new division will give them more opportunities to be creative directors and help the influencers develop content that meets the needs of marketers.