There’s a new threat on the horizon for advertising agencies. Leading successful service providers including Accenture, Deloitte, KPMG, IBM, McKinsey and PwC are acquiring advertising companies. Why should you take note of this movement if you’re not in the advertising business? Because it serves as a warning for other industries: digital platforms are starting to restructure businesses. Advertising is just one example.
Marketing in the digital age has become a very different story. With the rise of Google and Facebook, it has become a digital story. Money has poured out of print distribution and even TV into digital. But the bigger development is the transformation of marketing organizations and the service providers that serve them.
In the rotation into digital, marketing departments are having to master digital skills. Digital platforms tend to be far more comprehensive than traditional marketing vehicles. This has driven a sea of change in terms of the ecosystem that supports marketing. Historically, the large advertising houses ruled the roost, and they developed websites and digital platforms.
However, they have new fearsome competitors such as IBM, Accenture, McKinsey, KPMG, PwC – large service providers. These companies come to the digital equation with the ability to drive comprehensive digital platforms with scope and impact far greater than traditional marketing awareness issues. They move from awareness to sales to order fulfillment to customer satisfaction. Their end-to-end, comprehensive platforms are creating new digital business models.
Because these new competitors are better positioned to drive an end-to-end digital agenda, they’re moving rapidly into the creative aspect that has long been the providence of the advertising agencies. Rather than trying to build a creative voice, these companies are rapidly acquiring advertising agencies to allow them to participate and deliver the end-to-end digital platforms.
The leading service providers are an emerging threat to the large advertising houses because they are better positioned to buy advertising houses than the advertising firms are positioned to buy systems implementation/integrators.
It is important to note that the usual barriers of entry into a market – such as economies of scale, significant upfront capital investments and proprietary technology – are not barriers in this instance. These service providers have already built economies of scale and are already investing heavily and quickly into digital technology.