The Year Ahead for ... Media Agencies

Gerry Boyle says that although challenging times still lie ahead, two tough years have strengthened the capabilities and resolve of agencies.

It's been said the only good thing about 2010 was that it was not 2009. Yet as the industry continues its attempts to shake off the hangover from that testing period, you could argue similarities between the years outweigh any differences: investment levels languish 7 per cent below 2008 volumes; the new-business market remains "vibrant"; efficiencies are driven deeper; people are working even harder. So far, so very 2009.

And there's much to argue that 2011 could be equally bleak. Recent government cuts have put the brakes on consumer confidence - a metric that our sector's fortunes follow perhaps more than any other economic indicator - which in itself could portend another tough year. But if we look at some of the more cheering aspects of our business in 2010, there are a number of real positives that suggest we can shake off the hangover sooner than we think. We can't forecast the economic climate but we can be sure of two enduring influences on our business this year, both of which will have a major bearing on this year's success.

First, clients will continue their drive for efficiency and effectiveness, and, second, the pace of technological change will remain relentless. Right now, two tech behemoths tower over the market: Google, consolidating its position as the UK's largest media owner, and Facebook, which now serves more than one third of all online ads to UK consumers. Accordingly, a great positive of 2010 was the extent to which the media industry began to integrate and exploit technology platforms to create value for ourselves and our partners. We transposed the success of auction-based buying across to display media and we invested in development capability and systems to help clients analyse ROI in real time.

Technology itself is creating a rapid polarisation of our business in terms of how we create value for our clients. At one end of the spectrum is performance-based media, largely digital, where the line of sight between media impact and business result is unequivocal. After a nascent 2010, demand-side platforms will find a place at the heart of many clients' business plans this year; Facebook bid-management tools will pump out thousands of creative variations every day; and brands will begin to optimise communications against "current location" as well as demographics, attitudes and a plethora of "likes". Further to that, advanced analytics and econometrics will play a greater role as clients seek to understand the behaviour of consumers and the value of their media investment - last year saw more than half of our clients undertake some form of econometrics project and 2011 indicates even further growth.

At the other end of the value spectrum lies the creativity that leaps out of that understanding. This is the creativity in strategy, thinking, content and placement that has the power to supercharge performance. As the choices available to marketers continue to multiply exponentially thanks to technology, so the role of the media agency - to establish and exploit the clear and present business opportunity - is magnified. The polarisation is under way and it is the speed with which we realign ourselves to exploit it that will determine our success in 2011 and beyond.

Such polarisation has major implications for talent across the industry. The traditional hunting grounds for talent remain fertile but our diet will become ever more varied. In 2011, the media industry will need to attract, retain and nurture data analysts, developers and creative technologists - alongside our "traditional" disciplines - and will ask for an ever wider and varied skillset from its current talent pool. The task of satisfying our new talent requirements is made doubly difficult through increased competition for these skills from within and beyond the marketing communications sector.

It also means we have to further re-imagine how we work with our media owner partners. On one hand, we require new and unprecedented levels of collaboration, with specialists from agency and media owner teaming up to create fantastic innovations in sponsorship, gaming, branded content and social media. We need much clearer strategic principles to determine relevant partners: does the client require the richness and openness of The Guardian Open Platform, or an alignment with the exclusive, curated, paid-for content of The Times? On the other hand, performance media will throw into stark relief the effectiveness of every impact or impression, pitting media brands against each other almost regardless of context. In this polarised environment, the bond between agencies and media owner must grow ever stronger as both parties work harder than ever to deliver at each end of the spectrum on our clients' behalf.

Inevitably, all of this has ramifications on our business model. Polarisation serves to underline the middle ground of pricing and discount, oriented around the TV market that for so long has defined our sector. This middle ground remains a critical part of what we do, but we cannot be judged solely on how we deliver here. We must replace the vicious cycle of budget and media pricing-based remuneration with the virtuous circle of investment and return-based remuneration models. In the latter, our commitment to and understanding of clients' businesses is deeper and more steadfast. We will have to place more at risk, but there is so much more to gain at every level of our relationship with clients.

The clear refrain of recent years has been a criticism of the agency world in its response to the digital age. The brutality of the past two years has strengthened our capabilities and resolve. The time really has come for us to challenge the client community to embrace new value-based models that allow for a return on both our creativity and performance. After all, so many of our clients have, with our help, developed strong and more profitable digital relationships with their customers while remaining locked in unhappy analogue marriages with us, their agencies.

We must not allow the ebb and flow of consumer confidence to knock our own confidence in the value we create for clients. By collectively carrying this confidence into our client servicing, talent strategies, media partnerships, remuneration models and new-business effort, there's a great chance to ensure that 2011 will seem light years away from 2009.

Gerry Boyle is the group chief executive of ZenithOptimedia.