Over the past couple of years, we’ve seen some dramatic shifts in the agency landscape. In what Forrester has dubbed “The Great Race For Relevancy,” virtually every type of agency is now competing with each other like never before. Social media has become the great land grab and just about all agencies are claiming to be “digital” in some ways. We don’t expect the agency landscape to shake out and make sense in 2011. In fact, we expect more dramatic shifts. Here are some agency predictions for this year:

  • Agencies continue to hire and develop talent outside of their heritage. In 2010 some interactive agencies like Razorfish and EVB began hiring “earned media specialists,” while some PR agencies like Waggener Edstrom and The Horn Group built out interactive creative services. Meanwhile, some agencies with traditional creative heritages like Weiden + Kennedy were pioneers in developing content that is truly agnostic to digital and traditional channels while also interactive (see Nike and P&G’s Old Spice). Expect to see these trends become mainstream in 2011.
  • Media planning and buying agencies begin to broaden their horizons. While other  agencies have been making fundamental changes to adapt to the ever-changing digital environment, media planning and buying agencies are still very much focused on paid media (and are still compensated on volume of spend). While some have been successful at integrating online and offline media teams, 2011 will open the window for dramatic change. These agencies will begin to take advantage of new digital media tools (e.g., DSPs, RTBs, exchanges, etc.), the growth of connected TVs, and analytics platforms to move beyond just planning and buying advertising to expanding communication planning services that make them key strategic advisors to their clients. Look for agencies like Starcom Mediavest (with help from the Publicis Vivaki group) to pioneer this space, while those agencies that fail to evolve will become less relevant.
  • Agencies mature with social media. Certainly the great majority of marketers have a long way to go in figuring out how to integrate social media into the organization. But overall we’re seeing marketers mature in this space, and their agencies are maturing as well. While many different types of agencies are still battling for the overall strategy, many are now falling into place in their core skill sets: PR agencies tend to manage word-of-mouth and crises, interactive agencies tend to build strategy and applications, traditional creative and media agencies leverage social to complement campaigns, etc. Expect this trend to continue as marketers continue to mature.
  • Mobile (along with tablets) becomes the next big land grab. With the massive growth of smartphones and tablets and the continued focus on emerging markets like India that have high penetration of mobile ownership, agencies are already fighting for mobile work. With their technology know-how, interactive agencies are in the best position to help marketers navigate The Splinternet, but considering the opportunity in this space, you can expect all agencies to have some form of mobile expertise in 2011 and beyond.
  • A whole new crop of specialists appear . . . again. Technology is moving so fast that new shiny objects are being created almost every day. 2010 was the year of social media boutiques like Big Fuel, Ant’s Eye View, and Powered (recently acquired by the Dachis Group). New types of agencies (or non-agencies) are constantly popping up. 2011 will spawn new types of agencies in the emerging space. Consider Breakfast, an agency consisting of what you might consider inventors that focuses on futuristic experiences, or Zugara, a firm that specializes in augmented reality. And many of these agencies will be scooped up by the big holding companies looking to fill out their skill sets. (Speaking of acquisitions, let’s not forget that some big digital agencies like AKQA, Rosetta, and IMC2 are still independent and will become increasingly attractive to the holding companies looking to expand their digital portfolios in a highly competitive environment).
  • Everyone continues to (pretty much) fail at analytics. Analytics positions are hot at agencies right now. Every type of agency is trying to improve their capabilities. But the truth is that marketers themselves are still very much fragmented in their approach, and until that is sorted out, the great majority of agencies will be stuck managing the data in their corner of the world. Expect improvement, especially with real-time metrics, but agencies will continue to struggle to tell the full story through analytics in 2011.
  • Technology innovation becomes the new creative. Agencies are often hired based on their ability to generate “ideas” (though I would argue it is only one of many reasons they’re hired). This won’t change moving forward, but the way those ideas are manifested is changing dramatically. And while you don’t need to be an engineer to come up with ideas in the digital age, it helps dramatically when the agency has the ability to understand what can and cannot be built. That’s why agencies like SapientNitro are succeeding in expanding their business model — because they can balance the head in the clouds ideas with the feet on the ground know-how.

So what does this mean to you as an interactive marketer? Well first you can expect more agency confusion as it will continue to be difficult to determine which agencies excel at the many different digital services. However, it also opens doors to working with new types of agencies. For instance, interactive marketers have always been more comfortable with building and buying media (i.e., owned and paid), and if your interactive agency isn’t up to speed with earned media, then you have the opportunity to work more closely with the PR agency to learn new skills. To succeed in this environment, you should commit to your agency relationships (i.e., don’t hire them to be strategic and then treat them like vendors or vice versa), set clear roles with the agencies, and constantly evaluate your agency performance and knowledge.