A New Business Model for Digital Agencies
Monday, May 11, 2009
What if your digital creative agency sold 100 little digital experiences instead of 1 big website?
UPDATE: For instance, this would work like in a retainer relationship, the client agrees to pay $500,000 and the agency agrees to concept, design, develop, and launch 100 individual digital experiences (sites, apps, whatever) in 10 weeks.
Last Thursday I attended The One Show Creative unConference. I met some great people from some of the best digital creative agencies all over the country. Matt Anderson, from Struck Creative, lead a thought provoking discussion that helped me to answer to some questions I've been kicking around for a while:
- What should digital agencies do as fewer clients are interested in buying that big expensive flash site?
- How can digital agencies adapt to an environment where the appropriate tool for the job often means that the work can be done quickly and cheaply? (WordPress, anyone?)
- How can an agency increase their odds of creating a big hit when it's impossible to predict what's going to catch on?
Most digital agencies rely on selling the execution of a big beautiful, usually flash-based, website. The more complex the site is, the more expensive it is, and the better it is for the agency's business. But, the market for that business is disappearing.
I want to see a new digital agency model that sells a package of 100 small digital experiences, that can each be executed quickly and cheaply, instead of selling the 1 big digital experience.
Here's how I imagine it might work.
Rule 1: If it can't be done quickly and cheaply, it's not an option.
The agency should be structured in order to take 1 digital experience from concept to launch in 1 week for every 5 employees. If you have a 100 person agency, you should be launching 20 small digital experiences each week. Embrace the tools that will help you get it done.
Rule 2: Make a lot of pots.
Sean Howard told me this story, which I quoted when I wrote about the end of the microsite.
A ceramics professor comes in on the first day of class and divides the students into two sections. He tells one half of the class that their final grade will be based exclusively on the volume of their production; the more they make, the better their grade. The professor tells the other half of the class that they will be graded more traditionally, based solely on the quality of their best piece. At the end of the semester, the professor discovered that the students who were focused on making as many pots as possible also ended up creating the best pots, much better than the pots made by the students who spent all semester trying to create that one perfect pot.
Rule 3: Sell ideas, not things.
When this agency pitches clients, you don't pitch one big idea, you pitch the first 10 small ideas. You say these are the first 10 ideas we're going to build, and there are 90 more where that came from. For $500,000, we will concept and execute 100 ideas over
Rule 4: Everything launches, the client gets to buy the hits.
No one can predict which idea is going to become and internet sensation. And not every potential hit will get approved by the client's legal or PR department. These concerns don't matter because you're going to launch every good idea you come up with. Work for the client initially launches without the client's name attached. If it takes off and becomes a hit, they get to claim it. If they don't want it, the agency can either take it for themselves or kill it.
Rule 5: Phase 2 - Everything is iterative.
A tiny fraction of what you launch will be worth additional time and investment. Create strict qualifications for what makes the cut. Work on all of these select projects using an agile process, making small changes as you go. There's no finish line, there's just one improvement after another.
What do you think? Are you ready to go out and start this agency? I know of at least a couple people who would like to introduce you to some clients.
I'm sure there are lots of details I haven't considered. Please let me hear all about it in the comments.
36 Comments:
yes, this is what the future *should* look like. now we need to see if anyone will buy it.
I agree. The amount of time it takes to sell *anything* and guide it through layers of approval makes it really hard for the agency to make money on anything but the Big Flash Site.
But yes, a nice version of the future worthy of looking forward to.
While 100 executions might sound aggressive, it's all about diversifying your approach. In the same way that spending your entire ad budget on a 1/2-page print ad in the USA Today is a bad idea... spending your entire budget on a Flash microsite probably isn't going to work.
So, yeah, there's something fantastic and scary about this idea. It reflects a liberating approach to digital campaigns. But it also requires humility to admit that we don't always know what works.
And thanks for the shout-out. It was great to have you in the discussion.
Mike,
An interesting concept for sure…. This would be a great “agency” to work for.
I’d like to get my “realist” hat on and do some dissecting though .. as there will be sacrifices such an agency has to make:
1) You cannot do away with large and complex websites. Even if your client is very forward about spreading the message, big companies (with nice budgets ☺ ) need a home/hub that will probably be connected to some sort of heavy CMS that will let easy administration of various content. I think the Kroger website is a great example of this. They have a massive ecosystem of a website built on top of Sharepoint. The size itself was a massive undertaking and I am sure cost a wallop (given the fact hat Razorfish made it). However, large companies need IR, PR, Career, etc sections that need to be highly dynamic…. Not to mention anything consumer facing. *****You can certainly use an a smaller creative agency to drive awareness*******, but some project are too big. I love wordpress with all my heart, but it comes to a point where it is not the optimal platform.
2) With all the stars I put in the last point, I might as well address size and scalability. This seems like a job for a small agency. 100 viral ideas are no small task. CP+B had 1 monster hitter for Burger King (the friend sacrifice). Even if you can scale financially, you will have a massive creative drain. Also, the larger an agency gets, the more out of control their overhead becomes. There is a reason why Leo Burnett is firing people and digital media shops that are under 30 people can’t keep up with the growth. I think that this concept is for an agency that takes a stance on being small until they change their model.
3) I am confused about rule 4. You might lose some public companies on this ☹
Ok time to break out of the organized and critical numbered list. Given the stipulation that you a) will never get big b) never work with public companies, I think that the concept for an agency like that = huge fun.
The most important and VALUABLE point that you made is in Rule 5. The additional time and investment is what counts here. Companies like Carrot Creative and Sproutbox use their digital media mojo (albeit in different ways) to jump start good ideas into potential ventures, and a company whose sole creed is to churn through ideas that engage people is bound to find the next --insert popular social services here--
Bam
g
Valuable thoughts Mike :o)
Fits very well with this quote from Mark Earls:
"Light lots of small fires".
I absolutely love the concept, especially the honesty of "we don't know what will stick". You could also take the concept to a stage where you constantly start new stuff, see what sticks and then sell these to companies. Although I'm not sure that #4 would always work with the current social space as people seem to get pissed when they discover later on that a big company is behind the think they have been becoming part of.
Nevertheless I think this would be a really interessting challenge for an agency. Coming up with and foremost launching ideas constantly might become pretty tough quit fast...or might lead to the most amazing period of creativity ever. Love to find out which of the both it will be.
Lovely thought, Mike.
The industry has a stake in positioning ideas as rare, precious and solid.
What if, instead, we think of them as abundant, disposable and liquid?
Loving this as well, did you see this:
http://stealourideas.tumblr.com/
@ivv - in this model the burden of approval rests completely on the client side. this agency is going to execute and launch every good idea they come up with. If the client likes it, they have the option to claim it. And since it's already out in the wild without their name attached, they have a much stronger motivation to make that approval process happen quickly.
@garysheynkman yes, i admit that most brands need a home. But, most brands do not need a large or complex home. WordPress is more than enough of a CMS for most brands - Kroger included. i'm not trying to sell WordPress here (i don't even use it myself), but the point is most big companies buy more than they need, and big agencies like it that way.
i agree that this model favors an agency that's willing to stay small.
Rule 4: Everything launches, the client gets to buy the hits.
you're right, this will definitely be the hardest part for the client to wrap their head around. but it's the only way that it could work. you couldn't possible produce this many ideas this quickly if every one of them went through the corporate bureaucracy. the upside for the brand is that they have a much better chance of getting a hit.
@jkleske yes, i think that producing original ideas should be part of the mix. maybe 1 original for every 20 client ideas? and those can definitely be sold as bonuses to clients.
and for any skeptics out there, i promise you that clients are coming around to this way of thinking. they want big internet hits. they understand that no one can predict what will be a hit. so...they want to try lots and lots of small ideas and see what works. their seeking agencies who can work quickly and cheaply to get it done.
The predication that the era of the website has matured. No longer is the budget or need for massive website redevelopment projects - on the scale we had before when brands were starting from zero. So we have to make up for those projects with a greater volume of smaller projects... math.
I agree that part of the solution is to focus on smaller tactical projects via the explosion of ancillary channels (social).
Interesting concept of launching all... perhaps not with the client's name at the top? Doing it fast and slapping up early iterations following the agile process makes sense. We can't afford to wait for pixel perfection or can't assume we know it.
Hi mike
I think this is an interesting concept. I certainly spend a lot of time talking with clients about finding a big internet idea rather than trying things to see if they work. In my mind, the talking is bigger waste of time and money than the doing.
Whilst some brands will always need some internet based services that are big and heavy this presence alone does not cater for the multiple communities they want to engage. A multitude of 'stuff' lets you talk to many communities in ways relevant to them, and you're right, you can pick the ideas that stick, and indeed focus on the communities for whom you appear most resonant.
There does need to be a shift change in approach to communications to make this happen. In pre-determined paid for media you know the space you need to fill and you have one bite of the cherry. This is how agencies and brands have done it for a long time. To change this mentality will need a fairly robust ROI model, certainly to get past some of my friendly clients!
Key for success:
Good (confident) client!
Agree it sounds like a fun place to work.
But how do you propose the agency makes money? You know, for rent and salaries and stuff.
Do the clients pay the agency a retainer for coming up with ideas, knowing that not all of them will work, but also knowing that the agency is going to come up with better ideas than they could have themselves? And the "ideas that stick" payment then becomes a sort of incentive bonus?
Do they outsource/freelance the work and tell the creators they'll only get paid if a client buys it?
The retainer would have to be pretty high to pay people to invest the amount of time and effort into creation you propose. You can get a bunch of 24 year olds to work for peanuts, but there's going to be competition for talent and competition from other industries that pay more money.
If we can convince clients our ideas are valuable enough to pay decent money for, then your model can work.
@alanwolk yes, this is a retainer-type arrangement. the client agrees to pay $500,000 and the agency agrees to concept, design, develop, and launch 100 individual digital experiences (sites, apps, whatever) in 10 weeks. Included in that cost is the option to claim any ideas that the client likes. (obviously this means that each concept needs to be executed cheaply and quickly, that's the point.)
other concepts developed independently of client contracts would be available as a la carte (with a much higher per/concept price tag).
i'm thinking that all work would be done in-house. many top digital creative agencies already have all the skills they need to pull this off.
I have been thinking similarly of late, and support all of your ideas. In the digital space we have the capability to over analyze statistics such as views, durations, where people are coming from and going to, etc. This deluge of data pushes clients to very safe solutions and very little risk taking. The data is good, it can guarantee low levels of success but at the same time it almost guarantees nothing will be wildly successful or viral. To achieve that level, faith, risk, and gut feelings need to be considered (hard to quantify those into data). That is what I like about rule 4, a bit of scatter shooting allows that potentially wildly successful idea to exist.
hey mike, yea that's been talked about for a while now -- Anomaly finally did it with Converse -- but what people can't answer is how do you connect all those things? Building technological back-end can be a bitch...
@mikearuz: The problem, of course, will be getting clients to agree to that kind of model and accepting that it's worth the amount of money the agency will need to charge to stay afloat.
For years, we've sold them on the production angle, telling them we had the craft down and that we could make everything look a lot better. The idea part sort of got short shrift.
But ideas are what are going to make agencies viable in the digital space. Not choosing the right shade of blue. Convincing clients of that is another matter.
@alanwolk
You're right on. In fact that's the topic that started this discussion. Ideas vs. Things. Concept vs. Execution. Agencies (digital, traditional, whatever) have been giving ideas away for free and selling the execution.
But it feels like the tide is turning. Execution might be as simple as setting up a Twitter feed or a Facebook page or customizing a WordPress site. As execution fades (in some cases anyway... I don't see labor-heavy projects disappearing completely), it's now our task to convince clients that ideas are worth paying for. I hope we can do it.
Hey Mike, (i think we met at UnConference)
Some good thoughts and like most of the other comments I agree. I'm not sure there are many clients that would take this long term approach though. You have to be really sure that you are still gonna be around a year later when one of these digital fires actually bursts into flames.
Although perhaps with the industry and economy meaning less people are moving jobs perhaps this could happen.
Hope so.
I think this is a very inspiring idea.
I think this approach is even better when we have a project/assignment where the goal is metric based. So for example, "we need to generate X amount of leads" or "we need to get X amount of unique visitors" and so on. In those situations, it will give a nice focus for the 100 ideas you're developing and executing - so they're not just a bunch of random experiences. But also, when we have these sorts of assignments, we tend to rely on one idea to drive all those leads/visits/etc. Having a 100 little ideas - like you said - will let the best ones rise to the top and you can continue investing in them until you reach your goal.
By taking this route, you may even get to build performance bonuses into the agreement if you beat their objectives. And that might be a win-win for both parties.
Very interesting and I like the application of Agile development ideas to digital advertising. However, to pull this off, I think you need a few baseline infrastructure points; smart digital creatives, small teams with few final decision makers, very smart consistent strategy team that can sell through ROI, and the best media agency I have never heard of. Alot of roadblocks, but having said that, it is something every digital agency should strive towards, and a company I would love to work for. A producers dream for sure.
Mike,
I love it. Great post.
I think the natural tendency when you put forward a proposal like this is to want to poke holes in it-- it's so different. Couldn't possibly work.
Though, it does raise a couple of key points.
I don't think it's wrong-- but I do think it's incomplete to say destination microsites are dead. While we've long since seen the demise of the hub & spoke model, the interconnectedness of the social web ultimately means that a certain set of consumers will wish to follow your brand's path down to a more (choose one) robust/informational/experiential fountainhead. Call it a "maven trap" if you will (via @brianchiger), but at the very least your brand's site should give those who wish to learn more and/or experience more the opportunity to do so. But I digress.
With regards to the rapid production model you outline, I think it's core to our industry and to setting client expectations for the future. Consumer engagement now requires a greater quantity of creative output, and constant iteration is essential. That said, I do see an inherent danger lurking here-- the potential to mistake the need for rapid production with the ability to execute without an overarching strategic and creative framework. Our new reality (whether your "agency" or any other) dictates that we move quickly, which is all the more reason why we need to ensure that we have ourselves pointed in the right direction before we begin our sprint.
Thanks for the post. Great seeing you last week at unConference.
-Alex
Hi there,
Sorry, I can't agree.
The points about being flexible and thinking across channels are spot on but most agencies are already there.
Not so for making lots of pots.
It's like making an argument for cheaper TV production and more distribution channels in the hope of getting better content.
Similarly it's not about size or numbers it's about quality.
Digital agencies have a massive advantage over TV production companies and advertising agencies at the moment because they understand 'digital propositions'.
Why develop 100 mini experiences when you can develop a great format (idea) that will play out as TV series, radio show, live event ... or widget?
In this model the agency gets paid for the intellectual property they have invested in an idea - rather than waiting for the crumbs that come their way.
There is room for everyone in the market, so for some, small will be beautiful but better to THINK BIG.
Al Cox
Head of Strategy
Collective
http://www.collectivelondon.blogspot.com/
Al,
Agree completely that there needs to be a consistent thread in all production.
I also agree that the "buying only what you want" model for the client is one of the largest potential issues from a compensation standpoint. If it's already out there in its finished state, what incentive does the client have to pay for it? (Aside from integrity, which can't be assumed, contractually.)
However, I do think it's misleading and incorrect to say this model is "like making an argument for cheaper TV production and more distribution channels in the hope of getting better content." There's no basis for comparing quality TV content and quality digital content- because the format in digital is not fixed. Make one :30 spot, you can put on every channel, and quality trumps quantity-- the only thing that dictates quantity, after all, is the strength of the media buy,
In digital, an execution can take many forms (blog post, application, dedicated site, video, static imagery, widget, etc. etc.) and the frequency with which that execution is socialized and spread around by word of mouth is completely dictated by the extent to which consumers find it interesting. We're now entering (have already entered) the era of brands as quasi-publishers. No one would ever advise The New York Times, Huffington Post, or anyone in between to write only 1 fantastic article per week. Frankly, no matter how good it was, it couldn't be guaranteed it would be interesting for their entire readership. Instead, by focusing on a wide range of output, they can ensure a higher success rate.
I definitely think there are a few issues with this model verbatim, but it's heart is in the right place, and does reflect a changing reality in the way in which consumers engage with and share content. And ultimately, how brands' content becomes meaningful.
Mike,
Love this sort of daring thinking, here's where I struggle with it though:
1. In my experience, getting a client to buy one good idea is tough. The client-partner relationship would have to be one of total trust for this to work and that's a rare thing.
2. In my experience, coming up with good ideas is tough. 10, ok. 20? 30? I don't know. I think by the time you get to #25 the law of diminishing returns kicks in.
But maybe I'm just getting hung up on the numbers, which surely wasn't your point. Rather, could an agency be on retainer to just crank out little idea nuggets week after week. Hmm, I'm somewhat sceptical, but then again I don't work at an idea factory like Undercurrent ;)
Sounds like the makings of a reality show...
I'm the guy who does the big and the small sites for the agency, and I tell you it's a lot of work.
Making 2 small websites will take longer and be harder, and more things can go wrong.
Add features and problems go this way: 1+2+4+6+10+16+...
Add other websites and problems go that way:
1*2*4*6*10*16*...
There is no quickie. Even deploying wordpress and customizing templates and adding all analytics thingies, plus testing and asset creation takes a LONG time.
The silver bullet is in the detail and the connection to the customer.
As I was reading the blog post and the several comments that followed, there seemed to be a common underlying theme, which in my mind revolved around “getting the client to buy in”. Every other comment posted insinuated or almost foresaw client hesitation to this new type of thinking or business model. Why are brand managers, marketers, or the brands themselves so hesitant to jump into new ideas or creative solutions? Does it all come down to dollars? Brands still insist on investing money on traditional media such as TV, print, radio and flashy sites even when the market for all these media is declining. There are a plethora of digital conferences, social media conferences, digital signage conferences all this knowledge and the tools out there yet no brand has really “taken the bull by the horns” to exploit all these new assets, empower and challenge their agency to do something different. If it is done right, if its done strategically….what is the worst that could happen? Maybe in this new environment the client needs to encourage and challenge their agency, give them a little freedom to come up with new creative solutions….not one knock out campaign to win an award, but many strategic solutions to put a brand on top.
Great conversation Mike, thought I would send my thoughts..
http://tinyurl.com/qfklux
Matt Spangler
mrmattspangler.com
hey mike,
i believe you and i met at the PSFK Good Ideas in Digital breakfast late last year... yes? good to find you on the interwebs.
i think this is a really interesting concept, and i think it might be all the more viable in that it automatically sparks very specific questions - which imo means that this model likely has a decent feasibility rating.
i'm sure i'm repeating some thoughts here, so i'll try to keep it short. if i were a client who was considering this model, some of my questions might be:
re: #2 - yeah, by making a lot of pots, you are statistically more likely to end up with a greater NUMBER of good pots, but not a greater PERCENTAGE of good pots. so if you're launching ALL of these ideas, as you say, how can you prevent the greater percentage impact of the not-so-good ideas (per the client) on my brand, vs. just the ones i choose? i assume that as a client i have to give you some assets to make these - my products or logos or something - that would make the ideas clearly referential to my brand (otherwise this doesn't much make sense) but then those items are just a represented in the ideas i don't choose, giving them some legitimacy.
and in this era of hunger for transparency, the company can't pretend to have had nothing to do with the generation of ideas. they'd have to disclose this somehow, or they'd get reamed when people found out. how does their legal dept deal with this? i'd want a very comfortable solution to this issue if i was a client. this public "throw-it-at-the-wall-to-see-if-it-sticks" ideas flies in the face of everything we have come to understand of building brand integrity: consistency is key, long-term vs. short-term. etc. help me overcome my uneasiness about this.
re: #3 - just to be clear, given that you are actually launching these little ideas, aren't they ideas and things? they are executions after all, that go on to live in the world. i assume that the client picks an idea and then there is a bit of focused attention there, yes? how do you differentiate between ideas and things?
re: #4 - what exactly is the client buying when they "buy a hit"? do they buy the rights to that idea? to just that video? to the concept? etc. also, what happens if they want you to take the other ideas down? do you have a non-responsibility clause in the contract? how do you protect yourselves as an agency from a possibly negative outcome (which is all the more likely the more ideas are launched).
re: #5 - this is excellent. i think this is really powerful. i do, however, think iterations need to have some kind of arc - at least in their subsequent lives - which should be clearly defined. i suppose this is obvious, but i could see it getting a little haywire. also, i imagine that once a client picks a few ideas, the iterations only apply to what they picked? or how many iterations do you ask to let live before the client says, enough already - because technically you'd be spending their retainer hours on ideas they didn't choose, so how can you bill them for that work?
just my 2cents. thanks for thought-provoking.
@bernardurban has some interesting ideas on a similar but more innovation focused topic here: http://bit.ly/HrtW3
If it's possible to come up with 100 ideas for clients, and sell them, or not, I'll leave unsaid. It's some very interesting ideas though.
In my mind the underlying issue or subject is what, I believe, Russell Davies phrased "don't sweat the small stuff". If it's 3 small things or 100 hundred doesn't matter - it should be x number of relevant and interesting things. The important thing is that it needs to be OK to do small things. As someone said; production can be setting up a twitter account, and in those cases it's easy to start small things (harder to do them well, but that's another story).
So yes, digital agencies should be quick and do small things. It can be like EA posting the Tiger on water response to "the bug" in the game. Quick and fairly small, but oh so talked about and oh so much cooler than a big fat fun-for-3-minutes-site with a budget the size of Rwandas deficit.
Great discussion and something we are actively selling to clients. The analogy we use that seems to resonate: "It's less like producing a blockbuster movie and more like producing the nightly news." Haven't sold the content creation retainer as of yet but instead we create a list of content ideas in the strategy portion of the project and then we create a release schedule. Would love to get to retainer as scoping each small content idea is a pain the ass. BTW - this isn't just about moving budget from big flash websites, it's also moving budget from traditional media buys and production. Why spend $3 million to produce and place a 30 second spot when you can create 100's of engaging content shorts that engage people and start conversations? Compare the metrics of reach and engagement to back it up.
Very interesting post. We're also heading slowly in this direction. It won't replace the bigger projects, but is certainly the way the world seems to be moving.
Not sure about the pot analogy - the numbers game is useful, but to an extent. Research, analysis, tailored propositions and follow-up information take time but create better results. Pots don't have that problem. At a new business agency like Sponge NB, we look more at quality first simply because our clients' time is so valuable.
As an agency are you trying to solve a client's problem or solve your broken business model? New media is about conversation not conversion, which presents challenge for the advertising industry in terms of culture and economics.
Hi,
I think its a great idea and to put my money where my mouth is I have decided to move forward from changing our corporate model from being a one large digital agency solution provider to a niche "Lighting many Fires" solution Provider.
We will put this thought process in action with Launch of our new Agency in January 2010 we have named it "DigitalMirchi" (Mirchi is chillies in Hindi).
We will launch the agency in India and will sell the concept to some of our very large clients and open a Private Blog where all of you can see our progress.
Will off-course pick your brains on putting the business model and client presentation together.
Wish us Luck!
I have been doing a new site for the last 2 and 1/2 years and it is not already done. It seeems I am the perfect example of what not to do nowadays. I will keep your lessons very tight. Thank you.
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