What Is Happening To Digital Media Agencies?

According to Econsultancy, they’re dying out as social media and the lack of anyone clicking on ads, ever, threaten the traditional digital shop’s business model.

Margins are already slim, Econsultancy blogger Chris O’Hara (also SVP, Sales & Marketing at TRAFFIQ) says, and the fact that the industry keeps shifting isn’t helping.

Problem 1: The tools you need for a digital marketing campaign are now free, low-cost, or run by startups eager to gain customers by offering their product cheaper.

Problem 2: nobody clicks on ads, O’Hara says. (This is mostly true, though obviously some people click on ads.) He argues that the traditional ad is no longer compelling and digital marketers that want to stay relevant need to come up with “ads that do things on the page, such as expand, or play video, or tell a story. The exact types of things you cannot do with a standard 300×250, 728×90, and 160×600 commoditised ad unit.” (That may explain the prevalence of things like AOL’s Project Devil and Gawker’s homepage takeovers.)

Problem 3: PR can do a lot of this social media stuff in-house. “A few years ago, this would have been unthinkable, as the cost of hiring a media team would erode much of the margins. Now, with ubiquitous access to platform technology, PR agencies are looking at building small in-house media teams to leverage social budgets, and make deploying social marketing campaigns a core expertise.”

If O’Hara’s analysis is sound, the next few years may be rough ones for digital shops that can’t innovate, while PR will be ascendant.

On the other hand, any agency that hasn’t been exploring social media or more creative ad units is probably already DOA…