Digital Essays: Buy one get one free

It may appear to be a strange concept during a recession, but those rare digital agencies that actually produce their own content can steal a march by offering digital development for free.

We are in changing times; marketing and advertising agencies are scrabbling to become more digital, while digital agencies are trying to elbow their way into the strategic and creative roles played by more traditional agencies.

In the end, it seems the whole top end of the creative and strategic industry is becoming homogenised, with all the big independent agencies, and certainly agency groups, offering a bit of everything. All things to all men, or a Jack-of-all-trades?

But before examining how we got here and what the future holds, we should be clear about one thing: the survivors in this market will be those who actually make something, and the losers will continue to tout strategic hot air until they simply run out of puff, something it's quite easy to do in this low-oxygen, crisis economy.

Over the past five years, the digital agency that started out as the poor relation is now, in many client meetings, sitting near the head of the table. This has not escaped the notice of the smart men and women who lead the major agencies across the UK and who have spent the past three or four years peddling hard to catch up with the trailblazers emerging from the dotcom era who were cool, creative, innovative and successful.

If the established marketing and advertising agencies lacked direct digital knowledge, they had buying power, scale and major blue-chip clients. They have used this to tempt thought-leaders, creative geniuses and technical gurus away from pure-digital shops to offer a serious and credible digital offering. They have absorbed the knowledge behind building websites, communities, digital applications, campaigns and other digital media and added their traditional marketing, advertising, strategic or brand knowledge to the mix.

This movement is putting serious pressure on the digital agencies. But it is also creating a raft of mega agencies that all offer a very similar range of skills but with no real USP. All very good at what they do, but all the same.

We believe there is one discipline that can allow a savvy agency to avoid falling prey to this conformity and that's the ability to create content, specifically broadcast and video content.

Very few agencies (digital, traditional or otherwise) want to go to the expense of investing in the infrastructure of studios or production companies with all the film-making hardware and software that goes with it. This is despite the sea change in the way we are consuming video-based content online.

It makes this a unique arena: critical, like digital, but unlike digital, expensive to do. Branded content is on everyone's lips. If the industry (brands, agencies, broadcasters and media owners) can make it work, there is no denying that TV-type budgets currently allocated to the 30-second spot are going to be shifted into this space.

Why isn't it happening right now? Audience fragmentation means the industry has yet to find a comfortable model which delivers enough money to fund production and agency fees. A model that allows the creation of credible, engaging content, but which also offers real value and return on investment for the client. Once we crack this (and we will), it will be a huge growth area for those businesses which are sufficiently creative and financially stable to take advantage. Part of solving the problem lies in working out how we make this type of content creation more measurable for clients and brands.

If we can do that, then more of the money will go into the bit that the audience really engages with (the content itself and associated calls to action), and less in the process of getting it there. Given the unique position of companies that create content, one simple answer is to give the other parts of the mix away for free: specifically the digital element.

Free? That's madness, surely? In the current economic climate, there are many stories of digital agencies offering their time for free, just to be associated with a brand. But this is a false economy. Not only does it devalue the product in both the client's and the agency's minds, it causes a cashflow nightmare for smaller businesses.

However, giving digital development away for free when you have already made a healthy margin from content creation offers fantastic value for the client and a sustainable model for the production company/agency.

With a one-stop shop, the client has fewer agencies to brief on a project and a stronger tie-in with the agency across different parts of its business.

In addition, now that these agencies can attract the best ex-digital agency employees, there is no loss in quality, creativity or technical expertise.

The smarter agencies out there are looking into how revenue sharing models can be brought into the mix. For example, with more than 15,000 iPhone applications already on the market, and Android (the mobile software platform), BlackBerry and other equipment manufacturers following suit, these little devices present great opportunities for agencies to create something genuinely useful and innovative. They not only pay for their own development but also generate their own revenue streams.

One day, in the not-so-distant future, these revenue sharing opportunities will push the digital agencies who have spent many years charging by the hour, or by the day, or in some cases by the "studio day", to giving time and effort away for free.

The digital agencies that face a very bleak future are those that remain focused on wringing every last hour of chargeable time from a client.

This method of billing is less true in content creation. Yes, it has a line item cost, but this is usually based on an agreed fixed percentage. In addition, the budgets for producing TV quality content that actually delivers (we are not talking about wedding videos on a handy-cam) is much higher than your average digital build.

So digital is a relatively small part of the project value.

Any company that has a high-value, content creation function with measurable and defined percentage profits could take this approach and potentially increase its market share and client portfolio.

This would not be good news for pure-digital agencies, the majority of which do not produce content themselves.

However, we are all used to the "freemium" model online, in which the base features are free but we are happy to pay for the higher functions. So, why not with agency services?

- Andy Rogers is the managing director at etv online.