In December 2008, I found myself sitting in a conference room with HubSpot co-founders Brian Halligan and Dharmesh Shah, along with one of the tech startup’s emerging sales leaders, Peter Caputa, talking about the future of the marketing agency ecosystem.
Caputa, who would become VP of sales and architect of HubSpot’s Agency Partner program, was championing an internal effort to drive HubSpot’s growth through a marketing agency value added reseller (VAR) program. My firm, PR 20/20, had become HubSpot’s first Agency Partner earlier that year, when we saw an opportunity to bundle our services with their software.
The four of us shared a belief that the old guard of traditional agencies would struggle to remain relevant as a new breed of more agile, technology-driven, digital-savvy agencies emerged. It wasn’t a question of if, but when, and how quickly.
In our minds, the transformation had already begun.
A Growing Agency Market Emerges
The meeting occurred just two months after HubSpot’s inaugural Inbound conference, which drew a few hundred early adopters. HubSpot was a 2-year-old upstart marketing software company out of Cambridge, Mass., with wild ambitions to disrupt the marketing industry.
Fast-forward to May 2015. HubSpot is a publicly traded company with more than 15,000 customers worldwide, a market capitalization exceeding $1.8 billion (as of May 22, 2015), an Inbound conference that is expected to attract 13,000-plus attendees this fall, and an Agency Partner program that includes more than 2,300 agencies in 90 countries and accounts for an estimated 40 percent of total revenue.
As HubSpot has grown, so has the market potential for agencies.
HubSpot estimates that for every $1 spent on marketing software, $5 to $10 is spent on agency services. The agencies that saw the opportunity, took a chance, and joined the inbound marketing movement have potentially created a distinct competitive advantage over their peers.
The Rate Of Change Continues To Accelerate
Agencies are thriving because the industry is moving too fast for brands to fully internalize the majority of marketing activities.
In its 2012 “Turbulence for the CMO” report, Accenture says that CMOs are turning to a large mix of agency partners and marketing service providers, outsourcing “between 45 percent and 75 percent of marketing activities.” This includes core digital activities such as paid search (41 percent), search engine optimization (39 percent), social media monitoring (37 percent), email marketing (33 percent), Web analytics (32 percent), marketing analytics (30 percent), and marketing automation (28 percent).
Source: Accenture
As the rate of change created by technology innovations accelerates, and the matrix of marketing technology providers expands, opportunities will emerge for forward-thinking agencies. Tens of thousands, if not hundreds of thousands, of agencies around the world have the same ability to see technology shifts, transform their businesses and drive performance.
Seizing those opportunities requires two things: immersion and integration.
Technology Immersion
In my 2012 book, “The Marketing Agency Blueprint,” I hypothesized that tech-savvy agencies, what we termed hybrid agencies, would become a disrupting force in the marketing agency world. These firms thrive on change, and continually apply shifts and advances in technology to strengthen their businesses, evolve their services, and deliver greater value to clients.
Agencies that understand technology trends and innovations are able to more readily adapt their own business models, continually increase efficiency and productivity, evolve client campaigns, and make strategic connections of seemingly unrelated information. The Marketing Agency Blueprint
For agency leaders, being immersed means having an insatiable appetite for knowledge about the marketing technology industry, and constantly tinkering with new products and services.
Agency leaders should consider forming labs divisions, in which the most tech-savvy employees are charged with continuously testing marketing technologies for ways to optimize processes, fuel efficiency and drive performance for both the agency and clients.
Technology Integration
Many of the core technologies we use to run PR 20/20 today — Basecamp, BuzzSumo, Evernote, Google Apps, GoToMeeting, HubSpot, Podio, PR Newswire’s Agility, TimeFox, Quickbooks Online, Yammer and Zapier — came from experimentation and a curiosity for what was possible.
Being immersed is the starting point, but agencies must have the willingness and ability to integrate new technologies that will transform pricing models, services, processes and infrastructure in response to market shifts.
Success requires a consistent commitment of time and money, at times without an immediate return on investment in sight. Calculated risks with measured experiments become critical to deciding when to fully integrate new technologies, and when to sunset initiatives and move on.
Our partnership with HubSpot started this way in fall 2007. I was impressed by the software during our initial conversations, but I didn’t understand how we would use it. I knew the industry was quickly shifting toward search, social and content marketing, and I saw HubSpot as a vehicle to accelerate our understanding and capabilities.
It was only a matter of months before we began to recognize the true potential of bundling our services with their software, and expanding our capabilities to provide more measurable impact on our clients’ businesses. And, of course, we’re not the only ones.
The Tech-Savvy New Breed Of Marketing Agency
While traditional agencies are slowed by legacy systems and conservative cultures, more nimble firms are immersing their teams in marketing technology, and taking chances on integrations that lead to lower operating costs, increased productivity, improved client performance and higher profitability.
These agencies are building more scalable and valuable business models. They are disrupting the status quo, and ushering in a new breed of tech-savvy hybrids that will redefine the agency ecosystem in the months and years to come.
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