All is not well in new-media land. The huff, puff and promises of
the past few years have been exposed in a few short weeks.
The closure at the end of last month of Lowe Digital, Lowe
Howard-Spink’s new-media unit, preceded by just one week the demise of
Mark Dickinson’s and Robert Hamilton’s company, Indexfinger, and
followed hard on the heels of the widely reported troubles at AMX
Digital, New Media Factory and Webmedia.
That several young companies in what is still a very young industry
should fail is of little surprise. But such casualties are normally a
natural consequence of competition, the bottom line being that they’re
just not good enough. In contrast, the names lost to the new-media
industry are among its cream. So what’s gone wrong?
The fact that both Lowe Digital and Webmedia have not gone out of
business, but have downsized and restructured, gives a few clues. Both
have dropped their labour-intensive, low-margin production functions and
are to concentrate instead on strategic consultancy.
There is a growing school of thought in the industry which believes
that, alongside other factors of genuine importance - including
cut-throat price competition from cowboy operations and the
unwillingness of clients to commit too heavily to what they still regard
as an unproven medium - the structure of new-media agencies is a crucial
issue for those still trying to prosper in the area.
Three types of new-media agency have emerged: strategic consultancies,
an approach typified by most ad agencies; online production companies
such as Hard Reality and Good Technology, which often work in tandem
with ad agencies to deliver a service akin to that of TV production
companies; and full-service shops, such as AKQA, Syzygy and Bates
Interactive, which deliver a one-stop shop package, including strategy,
project management, design and production.
Is any one of these models doomed to fail? Which one will emerge as the
blueprint for the future of new-media agencies?
Ross Sleight, a director at BMP InterAction, BMP DDB’s strategic
new-media unit, claims it is a difficult industry in which to operate as
a full-service agency. ’If you go to an agency that has Web programming
and production staff on its payroll, you’ll find it coming back to you
with an idea that’s production-based. It has to pay for them somehow,’
’No one person can do creative, programming and account handling. It’s
not right to have production in-house. When a creative comes up with an
idea, they should employ someone to facilitate that idea in a way that
will add to it.’
Like many others, however, Sleight only mentions structure in the
context of those other pressures currently afflicting the industry:
’Another issue is that there’s an awful lot of competition out there and
it’s harder and harder to make money.’
Ajaz Ahmed, managing director of AKQA, believes the problem lies more
with new-media agencies’ reluctance to assign to new media the
disciplines that traditional media religiously follow.
’The most important disciplines in advertising are planning and account
management. We have account managers with a strong business background
who are able to advise clients on structure. A new-media shop should
have exactly the same personnel as a ’normal’ one,’ he says.
’If we tried to mix technology and creative it could be disastrous
Everyone thinks you should be flexible in your roles but I don’t want
creatives doing programming or account managers providing operational
Ahmed admits AKQA works as it does because its clients, which include
BMW, Sainsbury’s and Orange, have come to demand it.
’A lot of clients are used to the traditional structure,’ he says. ’But
this industry is dealing with a medium unlike any that existed
Part of the problem is that you have to generate enough income to
bankroll such an expansive structure. Robert Hamilton, the technical
director of Indexfinger, thinks companies undercutting each other is at
the root of the malaise.
’The new-media agencies that focus on strategy rather than site-building
have probably found that production has rapidly become a commodity
market,’ he says.
But he also blames clients for a lack of proper marketing discipline in
their approach to the Web. ’Often a client considers that just having a
Website is enough, as opposed to setting business objectives and
evaluating a site’s performance against them. So when a company around
the corner will produce a site for half your price, it’s difficult to
convince a client that your solution is worth what you’re asking.’
However, Ahmed believes agencies that are prepared to invest in their
futures have nothing to worry about. ’Few agencies are prepared to
invest in providing their clients with leadership, direction and
education to ensure the client embraces the medium to the benefit of its
Agencies need to take a long-term view. When this doesn’t happen, client
and agency suffer,’ he says.
Of course, there may be a simpler explanation for some of the recent
closures - bad management. As Ahmed puts it: ’There’s another very
important equation in all this: profit. Agencies make a profit because
their overheads and expenses are less than their fees. If agencies can’t
get this equation right, they die.’
Mark Westall, joint managing director at Hard Reality, agrees that bad
management rather than structure causes companies to fail. ’If you look
closely at the industry, you have new-media companies such as AKQA
working successfully with a traditional agency structure but also
companies with no structure to speak of working equally well,’ he says.
’It comes down to quality of management. The fact that there are people
making money, however they work, shows that the market isn’t in decline.
It’s just growing up and shedding some weight.’