The growing number of internet companies that seem prepared to toss
advertising money around like drunken sailors presents agencies with an
acute dilemma.
Should they be prepared to relieve them of their cash in the hope that
there is a lot more where that came from or be wary of what might happen
when the would-be client wakes up to sober reality?
The question has become even more apposite with a prediction that many
online companies in the US which have been handing out ad accounts of up
to dollars 20 million could fall victim to a shake-out predicted to hit
the sector by the third quarter of next year.
Flush with cash generated by IPOs or investment bankers, the business
models of 80 per cent of such companies are going to be challenged, it
is claimed, and investors are not going to be happy. The upshot could be
a lot of burned fingers on Madison Avenue as agencies are stuck with
unpaid bills or dot-com companies just disappear.
Since barely a week goes by without another big UK agency picking up
internet business, what happens if the bottom falls out of the market
here too?
For agencies, the need to embrace one of the most exciting media
developments of all time has to be tempered by pragmatism. Just as no
agency could have ignored the advent of commercial TV in the 50s or the
explosion of commercial radio 30 years later, so none dare shun the
potential opportunities presented to them by internet clients.
But that doesn’t mean abandoning caution or diverting a huge amount of
resource into business which may yet prove illusory.
The answer seems to be a measured approach in which resource is
allocated if and when the account grows. Far better to set up a small
division staffed by twentysomething technoturks than devote large
amounts of time and effort to it from the outset.
If the account withers on the vine, the agency has lost only a modest
outlay on overheads. If it flourishes, the agency has a blossoming
division with enough expertise to capitalise on a burgeoning market.
