Perspective - Online adaptation provides exciting ifuncertain challenge

It's been a year of rough and tumble for media agencies. Yet there are reasons to be cheerful. Agency performance is on the rise, with Willott Kingston Smith's recent report showing a 13.4 per cent increase in operating profits at the top 30 media agencies. Things haven't been quite as tough as in 2005, but there's still a vulnerability and lack of visibility surrounding traditional media. The optimism is directed towards the online industry.

As Adam Smith, GroupM's futures guru, said last month: "It's all internet. If you take that out, the growth is zero." This week, ZenithOptimedia released figures which indicate that global internet advertising will grow seven times faster than offline advertising during 2007.

We all know online spend is on the rise, but the level of challenge this has presented to media agencies cannot be underestimated. Most of the major agencies, even the ones who have been massively off the pace in terms of online and digital planning and buying, have realised that they need to re-engineer their businesses as the shape of the market changes.

While this is potentially exciting, it's also proving challenging for agency directors and their staff. It's a tough but enjoyable challenge for most.

There remains the issue of who is best to capitalise on increased online ad spend. On the one hand, specialists such as i-level have led the market and raised their game further by investing in new-generation consultancy services. On the other, it's not hard to see a day, already past for some advertisers, when online buying needs to be integrated into offline media activity.

So, the general media agencies are in a good space if they get their act together. Many already have, they just face the issue of whether to integrate their specialist online services - the Media.Coms and Media Contacts of this world - into their main operations.

For the time being, the wise money is on this not happening because advertisers aren't ready for it, but, within 12 months, most agencies will probably have done this.

There are still big issues related to online planning and buying: a skills gap and wage inflation in a market where skilled online people are hard to find, coupled with the differing pace at which agencies and media owners are integrating their off- and online sell.

That said, the general picture is rosy for media agencies. They are forcing themselves higher up the client agenda, and with consumers influence over brands and advertising constantly growing, they are showing themselves better placed than the average ad agency at plotting a way forward.

So, the end-of-year message is that media agencies are more exciting, if less predictable, places to work than even a year ago. That has to be a good thing.