Why Ad Agencies Need to Become Software Companies

Mark Schaefer

If you’re an advertising or marketing agency, how do you differentiate yourself today?

• Do you have the best creative talent? (A claim that is fleeting at best.)
  
• Do you have scale so you can handle a global account? (But size can also be a detriment in an always-on fast-reacting world.)
  
• Do you specialize in a certain vertical like healthcare or automotive? (Can you sustain those entry barriers?)

Here is one point of differentiation that may seem foreign to the traditional notion of agency life: MATH. After all, we never saw Don Draper fiddling around with a slide rule did we?

Software as the backbone

I sense that increasingly, there is an algorithm arms race heating up in the agency world. Businesses need to find …

• Math to estimate influence.
  
• Math to establish reach.
  
• Math to mine the nooks and crannies of the social web to find insight and ideas.
  
• Math that finds new customers
  
• Math that makes sense of Big Data
  
• Math that shows that you are more productive and essential than another agency.

Of course this is nothing new. There are many companies that have competed in this manner for years in a little industry called the software business. In essence, advertising and marketing agencies need to become software companies but the difference is, I’m not sure they see this as their core business. And it is.

While we see increasing employment opportunities for data scientists, I would expect that agencies in our business would also act more like software companies by …

• Pursuing patents on software
  
• Buying companies that have software specialities
  
• Elevating software development as a core competency
  
• Establishing software as a C-suite function.

This is different than “IT,” which is largely seen as a help desk cost to be reduced (admit it!). What I am suggesting is nothing less than transforming the agency model. Whoever owns the data wins, and whoever figures out how to discern meaning from the data becomes indispensable.

To me, this seems like such a fundamental strategy — become indispensable. But I don’t really see any large agency stepping out aggressively in this way.

Do you? What do you think?

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