What Should Traditional Agencies Do About The Internet Now?

In the context of a contracting ad market, what should traditional agencies and marketing services companies do about their Internet capabilities? After all, the Internet professional services business was troubled long before September 11. In the wake of the tragedies the business continues to suffer enormously. It is contracting rapidly and the consequences have been continuing layoffs, bankruptcies, and fire sale mergers. Here are just two of a seemingly endless stream of examples:

Boston-based Internet professional services firm Zefer raised $100 million from GTCR Golder Rauner in May 1999 and hired a high profile CEO from Cambridge Technology Partners. The company received glowing coverage in the trade press. When the Internet bubble began to burst, the company was forced to call off its pending IPO in April 2000. Then things got worse as layoffs began to take their toll. In March Japanese computer firm NEC led a $48 million investment in Zefer with participation by GTCR. The Boston Globe reported in July that the company decided to seek a buyer. Now the Globe reports that the company has apparently closed its doors, selling some of its assets to NEC and firing 120 of its remaining staff of 300. Reportedly, the other 180 employees were offered jobs with NEC.

After a series of layoffs in response to declining business, it was announced in May that Agency.com would be taken private by Seneca Investments, a joint venture of Omnicom and Pegasus Partners. Concurrent with announcing the deal, Agency.com also laid off 350 employees. The bad news has continued: On September 19 the company reported that it had laid off about 200 more employees.

In the context of this sort of news, traditional marketing services companies might be tempted to stop trying to build Internet capabilities. That would be a mistake.

Notwithstanding the current problems for Internet professional services firms, the fact is that the Internet isn’t going away. It’s becoming an effective channel for marketing and sales, at least for companies that don’t depend solely on the Internet. Moreover, as the telephone and cellular networks were overwhelmed by call volume on September 11, email and instant messaging were the most effective forms of personal communication. That fact alone could accelerate Internet penetration among a nervous population of US consumers.

So, we believe that this is a great time for traditional marketing services firms to strengthen their Internet skills. Over the long term the Internet will assuredly become a fundamental part of the marketing communications mix. Traditional marketers should be acquiring top talent to help them think strategically and build a capability that enables them to capitalize on the opportunity that the Internet will surely provide.

The problems cited above mean that there is a lot of top talent available, and some of those people just might be happy to find a job at a firm that wants to leverage their knowledge.

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