Smaller guys are out to get a slice of the big picture

I-Level’s success may be a warning shot for mainstream players, says Tony Lithgow

Ever since biblical times when David struck a blow for the little guy, there's been no shortage of challengers anxious to take on the Goliaths of this world.

Now it's happening in adland, where media agency giants are increasingly being faced by smaller specialist organisations out to grab their clients.

Last week, online specialist I-Level pulled off a spectacular coup when it took a key slice of business from mainstream agency Initiative.

In a move that underlined the growing importance of online as a medium, mobile phone giant Orange revealed it was moving its digital planning and buying business from Initiative and giving it to I-Level instead.

It has been a big blow for Initiative, which had handled all offline and online planning and buying for Orange since winning the account two years ago from Media Planning Group.

But the mobile phone company made it clear that it thought its online spend – worth nearly £8m a year in billings – would be better off in the hands of a dedicated online specialist.

Significant pointer

Nor does I-Level's win – in the face of stiff competition from agencies such as Quantum Media, Unique Digital and MPG, as well as Initiative – appear to be an isolated occurrence.

Industry observers reckon TV planning and buying specialist Guerillascope's success in making it to the shortlist of four in the battle for the £25m Sony BMG account is a significant pointer to future trends.

Even though Guerillascope failed to secure the key account, the fact that it came so close proved a jolt for the media big boys – particularly when the other three competitors were major players Starcom, Vizeum and Manning Gottlieb OMD.

One senior agency figure says: "These things are all straws in the wind. The mainstream agencies can't afford to be complacent and just assume that the better price deals to be had from keeping an account in the hands of one agency will always prevail."

He insists: "If clients believe that the smaller specialists can offer them a degree of expertise that they might not get from the big players, then they could well turn in ever increasing numbers to the small guys. The big boys must always look to upping their game. If nothing else, this could be a kick up the arse for the industry."

The debate now seems to be whether the mainstream media agencies can rise to the challenge and outflank their smaller rivals by offering clients an improved range of services – or whether they have left it too late.

Big advertising clients seem torn too. A client source says: "It's whether you stick with the usual suspects, providing a tried and trusted service and with a sufficient take on the ‘big picture' or whether you opt for something a bit more adventurous and specialised – take a risk, if you like.

"Big established brands are more likely to go for the former – the safe option. Upcoming brands with everything to gain and not so much to lose, tend to favour the latter."

I-Level founder Andrew Walmsley is in no doubt about the secret of his agency's success.

He says: "There's a trade-off sometimes between coordination, as it might be perceived that you have better co-ordination if it's all in one house, and competence because that house might not actually be very good at new media.

"There's not much point in coordinating something if you're not very good at bits of it."

He points out: "Most of the big traditional media agencies have a digital operation of some sort. They've been trying to do it for years, but the reality is that volume is very important in this business. It's not because of negotiating leverage but because of market knowledge.

"If you do a lot of this, you naturally get to be very good at it. If you merely dabble at it – if you've got a couple of people or a team of half a dozen people in a team working on it – then your exposure to themarket is necessarily limited.

"We've got nearly 70 people here. That, coupled with the enormous turnover we have going through this market across a whole range of different sorts of products, means that we know what's going on in the market and we know better than anyone else."

Commercial reality

He says some general media agencies lack the expertise in digital that they have in TV and press buying. "They are putting at risk their client relationships by providing services that are of less marketable quality than their other ones are," he says.

Walmsley emphasises: "I don't think traditional agencies should cease to develop their services."

But he warns: "I think the commercial reality is that most have missed the boat and are now too late to develop these services to anything like the sort of depth that is required by serious online advertisers."

Matthew Ring, business manager at Guerillascope, believes specialist agencies also have something different to offer.

"The main difference, especially when it comes to TV, is that we're not tied in to deals," he says. "We'd have loved to have won the Sony BMG account. But I suppose it would have been a bit of a gamble for Sony. If things had gone wrong, it would have been their marketing chief 's head that would have been on the block."

However, many mainstream agencies say hiring specialist agencies has its drawbacks. Jim Marshall, chairman of Starcom UK, says separate specialists may suit the structure and requirements of certain clients.

"But the problem is that you don't have the in-house knowledge and expertise to inform the planning process. I do think there are very distinct benefits from being able to go to a media agency and get all these areas under one roof," he says.

"I think that as the bigger agencies get their act together and further develop these areas of specialism, that will pose a threat to the specialists. I think their business could be under threat, but in the end, when you're talking about a sector of the market which is growing like topsy at the moment, there are opportunities for all."

But Marshall cautions: "Once a market place stabilises out and it starts to show much reduced growth or no growth, the pressures start mounting."

In those circumstances, he says, bigger agencies could start poaching expertise.

"It wouldn't surprise me if some of these companies were bought, for example. It's the law of the jungle, isn't it?"

Will Collin, a founding partner at strategic specialist Naked, says: "In every competitive market, you can either take the bigger-is-better, economies-of-scale approach or you can go the other way and narrow down a niche and be good specifically at one thing and not compromise your focus by broadening your offering."

He adds: "As big agencies discover that there are successful specialists out-niching them in particular areas, then one business strategy is to try to build your own to compete; another is to acquire. Both tactics have been used – whether it's groups like WPP acquiring specialist players in digital or whatever, or whether it is companies starting up their own digital specialists or marketing specialists and so on.

"Talent will out. Clients will always want to work with the best people and the best people don't always want to work in large agencies where their specialism is not necessarily a focus."

Toby Hack, head of OMD TVi, OMD's digital and interactive TV specialist, says: "A lot of it is that many clients have seen how much and how quickly the internet has grown and they see it as a very important part of the future of their communications – and they want experts."

Warning sounds

He says the same rule applies when it comes to specialist agencies in the various fields – including mobile, strategic communications, sponsorship and even TV and radio, which have specialists such as Guerillascope and Radioworks.

Hack says: "Clearly, all clients want the best level of service."

He goes out of his way to praise Initiative, which he describes as a very talented agency. "But, plainly, Orange have gone to I-Level because they can see some benefit to their business in doing it."

Hack has a warning for all agencies as the future unfolds. He stresses that advertisers will want "very high levels of rigour and ability in specialist services like product placement, sponsorship, interactive TV, mobile and web as well as data and direct".

He says: "Agencies will have to develop all those skills to retain that client business – and those are growing areas as well. I think agencies will all ramp up their efforts in these areas and probably buy in the experts."

Hack echoes Marshall's forecast that big agencies will undoubtedly seek to acquire smaller rivals to get hold of their specialist knowledge.

So the giants in the business are clearly not going to take this new challenge to their supremacy lying down.

Slice of the action: specialist agencies are poised to cut themselves a bigger segment out of the juicy advertisingmarket. Unlike Goliath then.