Are we doomed? Is the proverbial parrot dead, or is it just resting? Are we currently witnessing the demise of the digital agency?
Feeling the squeeze
This is, undoubtedly, a hot topic in the web design industry. There is no shortage of doom mongers pronouncing the end of the industry as we know it. But is that a fair assessment? What exactly is going on and do we need to worry about it? And most importantly, what are the next steps?
The problem begins at the bottom end of the market.
Is the bottom of the market collapsing?
Those days are gone.
A new generation of web apps allow anybody to create attractive and easy-to-use websites. The best part: These new apps require no design or coding skills. Services such as Squarespace and the Grid are commoditizing the bottom end of the market. All it costs, now, to have a professionally build a site is only a little more than the cost of your hosting service.
That is, of course, if you even want a website. Thousands of smaller businesses have decided that a Facebook page (and maybe a Twitter handle) is all the web presence they require. After all, why pay a professional web designer when you could put together an online profile yourself in merely a few hours?
Is everybody moving in-house?
The top end of the market is not looking much better.
While the bottom end of the market is being commoditized, the top end appears to be moving in-house. For many enterprises, digital design is business critical. As such, these enterprises become concerned about their reliance on third-party suppliers. Using external suppliers for business critical functions is risky. What if they go out of business? What if they are too busy to make essential updates? What if they start working for the competition?
Additionally, external suppliers are not conducive to continual deployment. The tipping point comes when it makes more financial and managerial sense to move these functions in-house.
The result is that larger organizations begin to acquire their third-party suppliers. This is a quick way for them to build in-house digital teams that have all the requisite expertise and skillset. This is a trend I expect to move down market over time.
Meanwhile, their competitors are building their digital teams from scratch. Either way, the aim is the same: to reduce their reliance on external agencies.
This is forcing those agencies at the top of the market to push down towards the middle. At the same time, the commoditization of the bottom part of the market is forcing others to push up. This results in an increasingly competitive environment, one further diluted with large numbers of new graduates flooding the market.
But things are not as gloomy as they first appear. I believe that for the smart agency, the future holds a lot of potential.
Surviving the change
Without a doubt the market is changing, but it will not simply disappear. In fact, we have seen a similar scenario before. When desktop publishing first came along, it had a devastating effect on print design houses. The bottom end of the market collapsed, while the high end of the market chose to use technology in order to move print design in-house.
Yet, despite this, we still have a vibrant graphic design industry. It is smaller, but still alive and kicking. I expect a similar thing to happen with digital agencies. So how do you ensure your agency is one of those that survives?
Few in-house teams are ever going to have every skillset at their disposal. For example, only a select few can justify employing a full-time designer. In the same respect, they may not have enough work to keep a data analyst busy, but more than enough for their front end team. So when in-house teams require these additional talents and skillsets, they will have to rely on third-party providers. This creates an opportunity for digital agencies to thrive by focusing in a niche specialism.
But it is not just specialist skills that in-house teams need. They will also need specialized knowledge. Digital agencies can thrive with a deep understanding of new technological innovations and practices.
I also believe there will be opportunities for digital agencies to play a more consultative role. One where they are able to introduce best practices from client to client. Where they can help train and mentor in-house digital teams on what is going on within the broader industry.
In-house teams will also lack the capacity to undertake larger digital projects alone. Even if they have the right skillset, they will not have enough people to execute in the requisite timeline. Without the right people, they will be unable to carry out business as usual and work on larger strategic projects too.
The days of taking a brief and working on it in isolation are long gone. In-house teams will demand agencies to work in close collaboration. To essentially become a part of their team, albeit temporarily, and provide them with the bandwidth and capacity to finish the project.
Adapt or die
What is clear is that digital agencies are not about to go away, but they certainly will change. The agencies who survive will be those who can adapt to this new reality.
To paraphrase Charles Darwin:
“It will not be the strongest agencies that survive, nor the most creative that survive. It will be the ones that are the most adaptable to change.”
If you currently run a digital agency, I would encourage you to look long and hard at your working practices and specialisms. Do not wait until the storms of change engulf you. Now is the time to adapt.