AdverNET '99 COVERAGE: Emergence of Interactive Agencies - Part 1

From: jon huntress <jon.huntress_at_tenagra.com>
Date: Wed 27 Oct 1999 11:15:19 -0500

As online advertising gained momentum over the last few
years a new type of agency began to form, the interactive
agency. The first session on the Acount and Agency track at
AdverNET '99 covered "The Emergence of the Interactive
Agency." This is the beginning of a two part article on the
subject.

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Charlie Skuba of the Skuba Company introduced the first
session in the Account and Agency track. The subject was
the emergence of the interactive agency. Charlie began by
giving a short history of the development and evolution of
the interactive agency. And the operating word here is
"short", since all this began a little over 4 years ago.
At that time there were only web developers who were
following a number of different business models.
Consequently, the agencies that grew out of that time went
in several different directions, evolving into different
kinds of agencies. The first session was a panel consisting
of Kimberly Carrol, Kate Everett-Thorp, and Gad Romann,
representing both traditional and interactive agencies.

Kimberly Carrol is an account supervisor with
Loren/Allan/Odioso Advertising in Cincinnati. She is the
Strategic Director of LAO Global Products, Financial
Services and Interactive Accounting. Kate Everett-Thorp is
the President and CEO of Lot21, Interactive Advertising
Group which she founded in 1997 in San Francisco. Lot21
has a very impressive client list including Bank of
America, Blue Shield, and Webvan. Gad Romann is the CEO
and Creative Director of the Romann Group, a traditional
agency with an interactive component in New York.

In her introduction, Kimberly stated that traditional
agencies have stood the test of time and will continue to do
so in the information age. She said it would be a mistake
for customers to switch all their ads to online agencies.
The internet is a new medium, but it doesn't undo the
effectiveness of the traditional mediums. Her main point is
that successful advertising campaigns come out of the brand.
The customer always has to come first. The questions that
need to be answered are, "How well are we meeting the
customer's needs? How easily can we solve their problems?
How quickly can we anticipate what they want?" She said it
is the responsibility of the agency to convince their
clients they need a traditional strategic creative partner
to provide and insure the interactive campaign is balanced
and effective, pointing out that this is not a linear
process, there is no single point of contact. At every
stage the customer comes into contact with the company, the
product and the brand, so the essence of the brand isn't
lost and the customer has the best experience possible.

Kate Everett-Thorp represents a state-of-the-art interactive
agency. She told how she started an interactive agency, how
they began and what the current situation with interactive
agencies is. Lot21 is focused on effective online and
digital campaigns and does not do off-line advertising, but
uses off-line partners for that. Coming from traditional
and digital advertising backgrounds, Kate created Lot21 to
take advantage of both worlds and found that there was very
little direct competition. She stressed that while there
is a huge amount of general competition in certain areas,
there are very few other agencies who have specialized in
the digital realm. Being somewhat alone in this market has
also made Lot21 an attractive target for mergers or
acquisitions. With the fantastic growth of e-business,
Lot21 is in a very good position.

She said one of the hard things has been to maintain an
unmatched skill set because the best people are always
leaving to form their own agencies. The traditional way of
learning and growing with an agency doesn't hold in the
interactive world. (Internet time again.) Another factor
here is the small number of truly interactive agencies.
Anyone who starts one has almost instant visibility.

Lot21 is designed and built for the internet. Everything
they do is designed around the specific realities of the
medium. This includes time, turnaround, tracking, the way
they handle their margins and revenue, and the way the staff
is organized. She pointed out that online culture is very
different from traditional agencies. She stressed that their
staff is a new breed of people. The lifestyle is different.
The creative departments of advertising agencies have always
been given more slack in the way they work than the rest of
the agency, but that same independence has spread to all
corners of the interactive agencies. She said even the
accountants wear jeans. (This was the best single argument
I heard at the conference for not trying to create an
interactive department in house.)

Another advantage the independent interactive agencies have
is they have no prior business to hold them back. In the
current environment, it is alright to lose money finding out
what works and what doesn't. This is because the new rules
haven't been written yet and that means you can take a
chance, go out on a limb and actually help create the
future. Because they are an internet company rather than
in communications, Lot 21 has the leeway to take the
chances necessary to be on the front line.

She ended her part of the session by mentioning some of the
downsides. Eventually they will have operations that will
hold them back and the pace will slow down. The fee
structures are difficult to measure and assess, because the
tools are so new. Clients want to pay based on returns.
There is a lot of data, but what does it mean? There is a
lot to risk too, because of these reasons and others. In
many cases, people don't pay cash, but give stock or an
equity position. Even evaluating an interactive agency of
a partnership is difficult because there are so few who can
actually do an evaluation.

What she has seen in the industry is that most traditional
agencies are trying to grow an interactive component from
within, but soon give up and go out and try to find an
existing interactive agency for strategic partnership or
acquisition. Sometimes this is to get a specialty they
don't have in house. But the main reason to acquire or
merge is that it is the only way to find the people with
the expertise you need. Time and time again during this
conference this one theme was sounded by almost everyone.
There just aren't enough knowledgable people in this
medium. If you want them you are going to have to pay the
big bucks, and you will still lose a lot of them. Some of
these people are being offered $10,000 finders fees.

Lot21 opened an office in New York this October and is
planning to be in London and other cities in 2000. The
services they intend to be in is brand work, business
consulting, relationship marketing and future investment.

Because this session provided so much interesting
information, we have split this article into two sections.
Part two will cover Gad Romann's presentation and questions
from the audience. Be sure to check it out on Thursday!

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Received on Wed Oct 27 1999 - 11:15:19 CDT