Future for the ad industry is... Simples

Advertising clients increasingly want "integrated" campaigns that blend online and traditional media, direct mail, marketing, public relations, social networking and even customer loyalty programmes. Instead of using a roster of agencies with expertise in different disciplines, clients are keener to use just one or two firms which can offer many of those skills under one roof.

"About half the new business pitches we are working on are integrated pitches," says David Kershaw, chief executive of ad agency M&C Saatchi. "Clients are no longer saying they want just advertising, they say they want a range of [marketing] tools."

At the same time, as brands have slashed budgets in recession, many agencies have found it useful to diversify and reduce their dependence on advertising income by offering other marketing services.

Of course, cost-cutting is a factor behind all this as brands think one agency can do more for less. But there is also an understanding that, in a fragmented media world, it is more important than ever to have a single, clear message across all platforms.

And, as many firms have begun to recognise, this needs to start with simplifying the creative process — for example, by not having separate teams for TV, press, digital and so on.

"The plethora of specialisms no longer makes much sense," argues Stephen Woodford, chief executive of agency DDB London, part of the
Omnicom empire. "As media become more fragmented, agency structures must become simpler. We have to remove the barriers that stop people working together and many of those are structural."

However, trying to restructure an agency business can pose quite a challenge. Many have separate divisions or silos, with different profit-and-loss (P&L) accounts. Sometimes these subsidiaries have only found themselves under the same roof because of acquisitions. "There has been a tendency for everyone to want to protect their own P&L," says one boss. "They say, If I can bring in a piece of business worth £200,000, do I really want to give half of it to my sister agency?'"

Or as Kershaw puts it, comparing his own independent firm with the global giants: "At some of the big holding companies, one sucker has to be head of team X, pulling together strategy and creativity from all these different places, and I think it is a very difficult job."

Breaking up those silos and rewarding staff on the basis of the parent company's results is one way to change that internal mindset.

Kershaw recently launched a "central strategy unit" at M&C, dubbed "The Brain", to increase collaboration across advertising, marketing and PR. This has already involved taking all the planners from the different sub-agencies and seating them together. "The idea is that from the very beginning of the process, which is to understand the consumer, that is done using the people from all these different disciplines," he says.

The key players are what Kershaw calls "navigators", the agency staff who understand how to use this "palette of influences" and can "navigate clients through the much more complicated media environment".

While more integrated campaigns are important to clients, it can help agencies to diversify their income too. At Chime, which includes PR firm Pelham Bell Pottinger and ad agency VCCP, chairman Lord Bell has made a big push into global sports marketing. Chime hopes it could generate as much as 20% of revenues this year.

Woodford at DDB reckons his agency has reduced its reliance on traditional advertising from about 80% to 60% in the last five years. He says much of the new work has involved building websites for clients, creating online applications and games, staging experiences such as events, and managing social media.

"It is a myth that the rise of digital means the death of traditional' media," adds Woodford. "It just means there is more media for consumers and advertisers to choose from. The winners will be those who use old and new media and play to their respective strengths. A brilliant print campaign can transform a business just as a brilliant digital one can. But it would be better to have both, working together as one."

That's what integration means.