Agencies to accelerate Web3 investments as clients pursue latest ‘shiny object’

Dive Brief:

• Agencies will accelerate investments in Web3 and metaverse-related services in 2023 to try and meet climbing client demand, according to Forrester Research predictions shared in an email with Marketing Dive.
• While the researcher described those technologies as “marketing’s latest shiny object,” their high place on the priority list compliments the category’s broader focus on digital expertise. Work surrounding analytics, computer sciences and digital design interface are all expected to grow 20% within agencies next year. 
• As tech and media companies make cuts, a competitive new talent pool of digital specialists will emerge for agencies to chase. At the same time, marketers are expected to shift resources back to third-party services providers from in-house shops as they contend with a complicated privacy landscape. 

Dive Insight:

Agencies have defied expectations so far this year, with the large ad-holding groups posting consistent growth even as the economic picture worsens. Bets on e-commerce, data-driven marketing and retail media have buoyed the sector as other channels feel spending cuts that are typical of a downturn. All of the “Big Four” recently raised their full-year guidance in earnings reports despite looming recessionary fears. Looking ahead to 2023, Forrester still sees a lot of bright spots for the once-beleaguered industry.

There has been a good deal of chatter about legacy agencies reinventing themselves as tech firms, assisting clients with the type of involved digital transformation that became necessary for many during the pandemic. That trend will continue next year, Forrester predicts, with a fresh crop of product marketing and strategy-focused leaders heralding a “changing of the guard.” The researcher believes one major holding company will replace its chief executive with a product-focused lead in 2023, as Interpublic Group did when it appointed Philippe Krakowsky CEO in 2019. 

In terms of investments, Forrester sees agencies prioritizing three main items: digital creative and design interfaces; Web3 and metaverse consulting services; and partnerships with platforms like Meta Platforms, Roblox and Fortnite. While the metaverse has drawn greater skepticism from investors and analysts of late, marketer demand has held steady: Nearly 70% of CMOs at consumer-facing brands are seeking strategy in this area, according to Forrester.  

One of the big questions hanging over agencies is retaining the talent needed to get these projects off the ground. Attrition has been high in an infamously intense field that’s seen an already thin work-life balance further blurred by the pandemic. Forrester pointed out that hybrid models appear here to stay, which could curtail some of the collaborative mindset and high energy that is a staple of the culture. 

On the other hand, tech companies that once easily beat out agencies when vying for digitally savvy talent are downsizing after overexpanding earlier in the pandemic. That opens opportunities for agencies, but also competition on other fronts. 

“Digital job growth will be fueled by tech and media company layoffs, like those of Tesla, Shopify, and Netflix,” Forrester wrote. “But agencies will need to compete with their own clients to woo digital specialists for their growing direct-to-consumer and commerce ambitions.”

Despite that, clients could become more dependent on agencies amid a proliferation of data privacy laws and the coming deprecation of third-party cookies. Forrester foresees a “pendulum swing” back toward third-party marketing services providers due to these factors, with less than 20% of in-house shops wielding digital media expertise in 2023. A full fifth of media management master services agreements will also be rewritten next year, per Forrester, resulting in agencies taking on more risk in navigating consumer privacy sensitivities.