Magic Quadrant for Global Digital Marketing Agencies


Archived Published: 17 October 2012 ID: G00230499

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Summary

Most players in this market are on a quest to become the ultimate full-service agency. (This document has been made available free of charge to support a new Gartner offering called Gartner for Marketing Leaders. For more information, visit www.gartner.com/digitalmarketing.)

Market Definition/Description

This Magic Quadrant focuses on front-office digital marketing agencies that are strategically and creatively led. Many have roots as far back as the 1950s and 1960s. In the mid-1990s, a new type of service provider — the Web development firm — joined the mix when buyers and sellers validated the Internet as a place to conduct business. The rush to the Internet quickly overheated, however, and after the dot-com bust, many agencies failed, and many consolidated. After an industry reset, the survivors began an evolution toward full-service interactive marketing and campaign development services — supported by technology underpinnings, analytics and program management. One of the most significant changes was the evolution of the industry's decades-old creative services competency — into a discipline we now call "experience design" (or user experience [UX]).

Today, the world's largest digital marketing agencies are responding to demand from chief marketing officers (CMOs) who are eager to adopt the mobile and social opportunities that stem from a more robust data-driven environment. While many have a vision to help CMOs rethink the future of marketing, most deals that leverage social, mobile and big data often represent one-off-style engagements, illustrating that marketing executives are still learning and experimenting. The opportunity to execute the ultimate digital dream on a larger enterprise scale exists, but these deals are rare, given the intense competition around pursuits from CMOs who have the vision, propensity for risk — and, of course, budget.

Although this is a robust service market, most digital marketing agencies are still deeply ingrained in their creative services and promotional offerings (supported by analytics and optimization of the promotional mix). Others are more ambitious, seeking to become crossover agencies that add management consulting, ideation and product development to their traditional promotional offerings.

Magic Quadrant

Figure 1. Magic Quadrant for Global Digital Marketing Agencies
Research image courtesy of Gartner, Inc.

Source: Gartner (October 2012)

Vendor Strengths and Cautions

Accenture Interactive

Accenture Interactive is a Visionary. Though officially announced in 2009, it has competed in the space for more than a decade. The decision to create a separate business under the Accenture Interactive brand signals the organization's intent to compete as a serious player in providing marketing effectiveness and efficiency through analytics, innovation and industrialization. Ad Age estimates Accenture Interactive's 2011 revenue was more than US$450 million.

Strengths
  • Brand and reach: Accenture Interactive extends the "performance improvement" brand of its parent firm to CMOs at large enterprises looking to tightly manage cost while bolstering marketing's performance. A mature global recruiting/staffing model supports large programs that require coordinated delivery on a global scale (it runs global Web operations for P&G, its founding client). It also has a mature offshore delivery component built into its methodology.

  • Performance and analytics: Accenture Interactive extends its management consulting tools and techniques that stem from its business performance advisory services to marketing performance. In addition to its work in customer insight analysis, it has strong capabilities in measuring marketing effectiveness. Many of the firm's measurement, marketing optimization and effectiveness tools and techniques have been patented.

  • Results-driven: Accenture Interactive's clients candidly report outcomes such as 60% decrease in campaign cycles, 100% increase in lead-to-deal conversion rates, 40% reduction in marketing costs, and 67% reduction in marketing acquisition costs. Some clients say Accenture Interactive's engagement managers push them hard to be more aggressive in setting ambitious business objectives, underscoring the commitment to its brand.

Cautions
  • Limited creative services: This is a creatively led business, yet creative and UX services represent only 5% of Accenture Interactive's delivery resource. While clients report the firm is good at helping them design and execute on a vision and plan for a global digital marketing operation, they go elsewhere for creative services, experience design and campaign ideation.

  • Occasional rigid approach: Accenture Interactive targets huge organizations with aggressive goals, attracting the ambitious client. However, some clients report challenges when Accenture Interactive is asked to work with their existing vendors, citing some inflexibility in how programs are executed.

  • Small or midsize businesses (SMBs): Accenture Interactive actively targets Global 2000 CMOs who manage $1 billion in marketing spending (it does 40% of its business with the Fortune 500). Buyers fitting this profile get the lion's share of the firm's executive attention as well as access to top talent.

AKQA

AKQA is a Leader and is known for innovation (its first client was Richard Branson's Virgin). AKQA was the first agency to be named Interactive Agency of the Year by leading trades in the U.S. and Europe in 2006, which it repeated in 2007 and 2011. (AKQA collected more than 100 major awards in 2011 and was the most awarded global digital agency at Cannes Lions International Festival of Creativity.) Ad Age estimates AKQA's 2011 revenue was US$250 million. In June 2012, WPP agreed to acquire AKQA for a reported US$540 million, and this acquisition is subject to regulatory approval.

Strengths
  • Integrated portfolio: AKQA beat several formidable competitors for a global engagement at Verizon due to an integrated offering that combines strategic and creative services with UX, digital commerce and technology; AKQA scores high in competitive mentions among well-known, creatively driven firms.

  • R&D: AKQA fuels a diverse innovation pipeline with its R&D-style engagements at Google, Facebook, LinkedIn, and several mobile, wireless and gaming companies. Clients cite ideation, innovation, creativity and design skills as reasons to hire AKQA.

  • Innovative and forward thinking: AKQA is known for spotting trends early; it built mobile applications for BMW in the late 1990s far ahead of its primary competitors; AKQA Mobile was launched in early 2005. AKQA is known for pushing CMOs to take risks and "push the envelope" in how they market their firms. At the time of this report, AKQA had a backlog of requests for iPhone/iPad software app development on behalf of its many clients.

Cautions
  • Potential turnover risk: AKQA reports it is aggressively hiring digital natives (under 30) in all global regions. While this is a positive move, its historical low turnover could be at risk as young people often leave their first job after two or three years.

  • Resourcing: AKQA occasionally tags new hires to specific clients (for example, after a major win) versus leading competitors that manage a more consistent cost structure by drawing teams from a steadier pool of global resources. This appears to be a temporary state, as the firm is clearly getting better at managing its resources as a global network of talent.

  • Threats to creativity: AKQA has always been fiercely proud of its independence, which stems from the entrepreneurial spirit of its founder, famed Internet pioneer Ajaz Ahmed. While the agency will operate with some independence, a culture of independence and creativity is always at some risk after an acquisition.

Digital@Ogilvy

Digital@Ogilivy (part of the WPP network) is a Visionary. Ogilvy has aggressively invested in its digital capabilities during the past five years, drawing upon its relevant skills in public relations and social marketing to differentiate itself. Ad Age estimates Digital@Ogilvy's 2011 revenue was US$869 million.

Strengths
  • Brand and identity: Digital@Ogilvy has a deep capability in identity, brand and PR; it is known for its strong creativity (its work with IBM Smarter Planet has been highly successful). It recently launched a video practice, helping IBM and DuPont, for example, produce and distribute branded video across multiple platforms.

  • Global reach: Half its work represents global assignments. Digital@Ogilvy has been quick to adopt new trends, delivering engagements with digital, social and mobile components with clients in all global regions.

  • Early insight into social: Its launch of Social@Ogilvy has engaged IBM, Nestle, Unilever, Ford and UPS to scale enterprise social applications through Ogilvy; the firm has also been a leader in socializing its own business — which it has used to support thought leadership around social best practices.

Cautions
  • Promotional bias: David Ogilvy was a firm believer in using marketing to sell more products — a cultural attribute of the company that sets the tone for its deep promotion and measurement/analytics capability. Expect Ogilvy's people to have a marcom and promotional bias toward the marketing discipline versus one that is rooted in business strategy.

  • Integration: Ogilvy tends to cluster its capabilities around various practices (for example, Digital@Ogilvy, Social@Ogilvy, Mobile@Ogilvy and Neo@Ogilvy). While the firm has worked hard to integrate the various capabilities that play into digital marketing under its Digital@Ogilvy banner, there is still work to do. (Please note that OgilvyInteractive has been retired.)

  • Technology: Digital@Ogilvy's technology skills focus on applications in areas such as digitally enabled direct marketing, campaign management and analytics. It lacks the larger-enterprise architecture, application development and system integration skills of the Leaders in this space.

Digitas

Digitas, a Challenger with roots in direct marketing/direct response, moved into the digital area in the late 1990s; it is known for its work in digital advertising, loyalty and affinity programs, content management, and analytics. Originally started in Michael Bronner's dorm room at Boston University, it now has more than 3,000 people. Ad Age estimates Digitas' 2011 revenue was US$554 million.

Strengths
  • Vertical expertise: Digitas has industry experience in healthcare, financial services, media and entertainment, travel, pharmaceutical, and consumer packaged goods (CPG). It has access to VivaKi (digital R&D) and Zenith (data and analytics), and it has the buying power of Starcom MediaVest to add more capability.

  • Comprehensive digital program management: Eighty percent of its program wins in the past couple of years are characterized by underlying project streams in social, mobile, content marketing, UX and analytics.

  • Customer insight: Digitas has strong roots in customer management, which it leverages in its analytics, one-to-one marketing and back-office integration.

Cautions
  • Limited reach: The majority of clients are across the U.S., the U.K. and France (with an evolving presence in China). Digitas has not yet penetrated other global regions and emerging markets as fully as its competitors.

  • Key losses: In 2009 and 2010, it lost clients Home Depot, Cadillac and InterContinental Hotels; Chili's was lost less than a year after signing a contract for digital media buy/plan, social, mobile, display and search.

  • Higher pricing: Digitas pricing tends to reside toward the higher side, which reflects the premium it places on its creative, UX, media and technology talent. Digitas prefers large-scale retainer relationships, which may not appeal to clients that seek more fixed-price, project-oriented arrangements.

Draftfcb

Draftfcb, a Challenger, which was created from Interpublic's merger of direct marketer DraftWorldwide and advertising network FCB, has evolved into an integrated service offering under a single management team. Ad Age estimates Draftfcb's 2011 global revenue was US$955 million — more than half came from the U.S.

Strengths
  • Customer insight: Draftfcb's wins are consistently led by its brand and multicultural insight. Many are supported by its Institute of Decision Making, which studies behavioral economics and neuroscience. Draftfcb is particularly noted for its expertise in digitally enabled healthcare.

  • Multicultural: Draftfcb's brand consultants focus on companies that market globally with locally oriented cultural presence. It recently appointed a group creative director to secure its multicultural delivery skills among key global clients (for example, Acer, Beiersdorf, Greenpeace, Kraft, Honda, Volkswagen, and Sony Ericsson).

  • Increasing commitment to digital: It is aggressively hiring across all digital disciplines (analytics — where it is already strong — mobile, social and search); more than 400 new hires were reported in 2010 to beef up digital talent.

Cautions
  • Integration: While Draftfcb is making investments to assure global engagement delivery in a more seamless model, clients report global account management issues as the company works to integrate digital with its traditional businesses.

  • Client losses: In 2011, Draftfcb lost one of its oldest global clients, SC Johnson (a relationship that spanned nearly 60 years and was one of its largest accounts). Other big-brand losses include State Farm (the TV work went back to DDB) and MillerCoors. Clients should watch for evidence that Draftfcb's new leadership team is stabilizing, given its recent, often well-publicized turbulent management environment.

  • Creative skills took a setback: Some clients report Draftfcb's middle-of-the-road creative skills. This appears to be changing, however, as Draftfcb renews its creative efforts, as evidenced by its Oreo Daily Twist campaign, which was publicly lauded. Time will tell if this is an isolated trend or one that is more firmwide.

iCrossing

iCrossing, a unit of Hearst, is a Visionary and is known for its roots in search marketing, brand tracking and deploying connected brand strategies. In the past few years, it has aggressively expanded its expertise beyond search to secure broad-based digital agency of record (AOR) relationships with clients such as LG Electronics, Toyota Motor, DirecTV and AAA. Ad Age estimates iCrossing's 2011 revenue was US$200 million.

Strengths
  • Global reach and integrated offering: iCrossing has revamped its global staffing, delivery and governance model to acquire some key global clients. Its aggressive acquisition history has resulted in a well-rounded, nicely integrated competency center with capability in business strategy, marketing strategy, creative services, UX, social, mobile, and search and analytics.

  • Search: iCrossing creates integration platforms to build connected brands, informed by its own ability to develop deep personas and provide search-informed customer insight. iCrossing is starting to be recognized for integrating its connected brands approach to its mobile marketing programs.

  • Content marketing: iCrossing takes advantage of access to Hearst resources to offer global content development services to clients that require multilanguage, multicultural support for internally deployed websites, content marketing and campaigns.

Cautions
  • Skills integration: A stream of acquisitions enhances skills beyond its search legacy, adding digital, social, mobile and analytics to its skill set; however, there is still some integration work to do. While being part of a major media company gives it unique strengths, this is an unproven model, and it may show bias toward Hearst content.

  • Creative services still maturing: While competent in creative services and UX, iCrossing is still establishing these native capabilities; its first chief creative officer came on board just this year (Patrick Stern from R/GA). iCrossing's market awareness as a global, full-service, digital marketing agency is also still evolving, as evidenced by its low competitive mentions.

  • Rigid methodology: Clients report iCrossing can lack flexibility in its approach to creatively led projects that require out-of-the-box thinking and an unwillingness to "be comfortable with being uncomfortable."

IBM Interactive

IBM's participation in this space goes back to 1996 with its Interactive Media service line that was rebranded in 2008 as IBM Interactive, which is a Leader. The new service line has an even-stronger commitment to digital marketing, as evidenced by a substantial creative services and experience design competency (which clients report delivers work of high quality). Ad Age estimates IBM Interactive's 2011 revenue was US$415 million.

Strengths
  • Global maturity: IBM Interactive has relationships with Global 1000 executives in every sector in every region, thanks to its brand and global service legacy that opens doors to the world's leading CMOs. Since its inception, IBM Interactive has rapidly secured digital AOR relationships at key accounts, many from large consumer brands.

  • Business strategy and creative services: Reference clients speak highly of IBM business strategists, who come well-armed with knowledge and insight into how digital technologies impact current and future business models across a wide range of verticals. Clients consistently cite they were pleasantly surprised by IBM Interactive's strong skills in creative services and UX.

  • Ability to facilitate CIO/CMO relationships: IBM Interactive works with client CIOs to prepare organizations for scale versus a series of one-off solutions (particularly in mobile/social, as evidenced by its references). Clients point out IBM Interactive's skill in facilitating unity when the CIO and CMO must collaborate for mutual results. The interactive arm of IBM is clearly adept at drawing on the heritage of its larger global services organization (references report high satisfaction with program management, issue resolution and overall client service).

Cautions
  • Limited market position: IBM Interactive targets large organizations with big global challenges. SMBs with limited resources may not get top priority.

  • Complex sales model: Clients cite account management as a plus once it gets ingrained in the account; but the road through the presales journey can be fragmented as account executives mobilize their landscape of sales and delivery resources.

  • Expensive: Clients occasionally cite IBM's high pricing, citing inflexibility in negotiations.

Meredith Xcelerated Marketing

Meredith Xcelerated Marketing is a Niche Player. It was renamed Meredith Xcelerated Marketing (or MXM) in October 2011 as the digital marketing arm of Meredith Corp. Ad Age estimates MXM's 2011 estimated revenue was US$180 million.

Strengths
  • Content marketing: Being backed by large U.S. media company Meredith Corp. gives MXM a leg up in content creation and content marketing, which is also one of the firm's primary business drivers (its parent company Meredith Corp. has been doing custom publishing since 1969).

  • Customer engagement: MXM leverages its roots in customer insight analysis to its offerings in content marketing, mobile, social, analytics, predictive modeling and measurement. Its roots in customer insight analysis hail from consumer brands. MXM has strengths in automotive, given its work with Acura and Chrysler. It is also strong in entertainment.

  • Growing global expansion: Half of its 1,400 employees reside outside the U.S. It is aggressively growing its business outside North America.

Cautions
  • Silo-oriented operations: Sales teams cluster around digital, social and mobile. Major account pursuits are led by senior managers, particularly the CMO. While the firm has a good balance of clients, it is biased toward consumer and retail accounts.

  • Billing model: MXM's billing approach can be biased toward retainer models. This gives MXM a bit of a disadvantage when it competes with agencies that offer more flexible billing, particularly for fixed-price project work.

  • Limited strategic services and technology: MXM clusters its strategic services around content, digital CRM and road map planning versus higher-level strategic marketing and business strategy opportunities. Only 10% of its portfolio comes from technology and application development.

R/GA

R/GA (part of Interpublic) is a Leader, founded in New York City in 1977 by Bob Greenberg. It is aggressively adding business strategy, branded entertainment and product ideation into its traditional digital marketing portfolio of services. Ad Age estimates R/GA's 2011 revenue was US$242 million.

Strengths
  • Broad-based service portfolio: R/GA is highly regarded in its approach to global identity, brand integration, strategic and creative services. Its longest relationships stem from strategic brand engagements with accounts as varied as Nike, L'Oreal, McCormick, Google, Avaya and MasterCard. Throughout the years, it has received approximately 2,500 awards in creative competitions.

  • Product ideation and innovation: Although the true one-stop shop is still somewhat elusive, R/GA is clearly headed in that direction, adding product development expertise, production ideation and business-strategy-led engagements to its traditional services model.

  • Experience design: R/GA has developed a reputation for making complex, underlying technology invisible to the end user (for example, its work on Nike+ and now Nike+ FuelBand is regarded as one of the best socially driven digital experiences of 2011 and 2012). R/GA is known for encouraging its clients to push the limits of technology when it comes to creating engaging interactive user experiences that connect legacy products to innovative digital services and digital apps.

Cautions
  • Global reach still maturing: Although R/GA has offices in Europe, Latin America and Asia, the bulk of its revenue comes from the United States. Most of its creative work is produced from New York. While this hasn't hurt its global delivery skills, R/GA may not be appropriate for clients that expect people on the ground in local areas in the regions where they operate.

  • Loose methodology: R/GA operates on the principle "if you put really smart people in a room, they'll figure it out." Delivery is not an issue at R/GA, and its approach has worked well for the company, but clients that expect a highly structured methodological approach won't get it from R/GA.

  • Pricing flexibility: Some clients report R/GA pushes for a time and materials (T&M) or retainer model, even when they believe the work could be specified in enough detail to fix its price.

Razorfish

Razorfish (part of Publicis Groupe) is a Leader and was founded in 1995 as one of the first Internet startups. Its success has proved a company doesn't need Madison Avenue roots to build a formidable creative service capability. It was a pioneer in breaking the mold by teaming copywriters with UX engineers and developers to help its clients market interactively. Today, it has 2,500 people with presence in the U.S., EMEA and Asia/Pacific and is noted for its broad-based, full life cycle service offering. Ad Age estimates Razorfish's 2011 revenue was US$422 million.

Strengths
  • Business and industry insight: Clients report Razorfish's business and marketing strategists are capable of tackling tough problems in retail, high technology, CPG, automotive, financial services, travel, healthcare, manufacturing and hospitality when innovation is needed for growth, customer acquisition/retention strategies and loyalty programs.

  • Digital commerce, business process and technology: Razorfish uses its mature cross-discipline methodology to deliver large commerce engagements that require a unified, cross-channel, online/offline experience supported by application development, system integration, CRM, UX, social, mobile, search, business process engineering and performance.

  • User experience evolution: Razorfish combines its mature expertise in UX and cross-channel integration with its cloud-based Fluent content marketing platform to implement large, ongoing campaigns across multiple channels and multiple languages. Its Performance Marketing offering adds cross-channel measurement and total ROI effectiveness to the scenario.

Cautions
  • Global presence more virtual than physical: While the firm is capable of delivering global programs with its cross-geography methodology (in conjunction with sister agencies such as VivaKi), two-thirds of its people still reside in the U.S. Clients requiring people on the ground in local regions for their project may find this an issue.

  • Distractions from multiple owners: Razorfish has been through multiple acquisitions throughout the past 10 years (it was even temporarily owned by Microsoft), which has been a big distraction for employees. At present, the firm is more stable than it has ever been, and there's no evidence that Publicis is interested in divesting it.

  • May be oversubscribed: Clients note Razorfish tends to charge higher fees than its peers, reflecting a high level of demand for Razorfish services. Less-prominent brand clients or SMB projects shouldn't expect easy access to Razorfish's A teams.

SapientNitro

SapientNitro, a Leader (with diverse awards in creative, digital commerce and communications), enjoys a reputation as a one-stop shop for CMOs desiring strategy-led engagements supported with big ideas, engaging user experiences and complex technology underpinnings. Sapient became a billion-dollar firm in 2011; approximately two-thirds of the revenue pie come from SapientNitro (US$686 million), according to Ad Age estimates.

Strengths
  • Agile delivery model: A mature global staffing model brings teams of business strategists, marketers, designers, UX experts, technologists and Project Management Institute (PMI)-certified program managers together with greater speed than its competitors. Its account management model has successfully secured long-term relationships and high client "wallet share," healthy margins and a shallow bench.

  • Heavy lifting/mobile: With roots in application development and system integration, SapientNitro secures large integration projects that require scale and global reach. SapientNitro is recognized for its innovation in mobile marketing; clients such as New Balance, Sony, Barnes & Noble and Vodafone seek SapientNitro's expertise in fast-moving consumer goods (FMCG), user-centric UX, back-office integration and analytics. In 2011, it bolstered technical capabilities further with the acquisition of Digital and Direct (for digital asset management) and German mobile marketing agency Clanmo.

  • Digital AOR: SapientNitro has used its diverse range of talent and services to migrate clients such as MetLife, Unilever and Marks & Spencer into broad AOR relationships. SapientNitro draws on expertise in client management, brand and experience engineering; and the company has made investments in social, mobile and gaming.

Cautions
  • Key losses: Less than two years after Sapient acquired the Nitro Group, SapientNitro lost two founding clients — Virgin Blue and CGU Insurance (Australia). These appear isolated cases versus a firmwide trend.

  • Inconsistent execution: SapientNitro is part of publicly traded Sapient (Nasdaq: SAPE), which includes its Global Markets division. The two entities have distinct business and operating models, and the economic drivers of growth and cyclical trends can vary. As such, Sapient's financial results have been inconsistent, which could create risks (for example, employee attrition).

  • New competitive threat: The movement to join marketing and IT at the hip validates SapientNitro's well-known business strategy. However, new partnerships that blend the heavy lifting of mature IT services providers with leading advertising agencies will bring the competitive level up a notch (for example, WPP and Infosys). This challenges SapientNitro's pursuit of the type of client it needs to sustain its leadership as the go-to firm for excellence in strategy, technology, UX and creative.

VML

Founded in 1992, VML (a WPP company) is a strong Challenger with exclusive focus on digital marketing. It grew from 100 people to 1,200, adding people across North America, Europe, Latin America, Australia, India and Singapore. Ad Age estimates VML's revenue for 2011 was US$154 million. It has one of the industry's more balanced representation of business-to-business (B2B) and business-to-consumer (B2C) accounts.

Strengths
  • Program management and overall execution strength: VML is known for applying rigorous project management and passionate work ethics to deliver creatively led, integrated campaigns, as well as globally deployed websites. It was recognized by Ad Age as one of 10 Standout Agencies for 2012, largely due to its skillful methodological blend of creative, technology, digital and program management competencies.

  • Early commitment to digital: VML embraced digital in the early 1990s. Its history and skills helped it acquired 30 new clients in 2011 (while losing no existing relationships). It has used its digital reputation to acquire many new clients outside the U.S., including in Australia, Singapore and India.

  • Agility: Clients cite VML's agility in navigating complex delivery with empowered teams that are always willing to go the extra mile. Some reference clients cited early project delivery with no compromise to quality. Clients are quick to note VML's ease at working with their third-party vendors and management consultants, avoiding "account control" politics and issues that don't add client value.

Cautions
  • Global resourcing: While VML has been a full-service agency since its inception, it went international just two years ago, lacking the global staffing maturity of IBM, Accenture and SapientNitro. Its offshore delivery capability is still evolving.

  • Sales model: VML depends on its senior managers to develop new business. Firms with a more organized, dedicated approach to business development and account growth tend to garner higher wallet share. VML has a strong offering that it does not always use to its advantage when it comes to cross-sell opportunities in its account base.

  • Could be more aggressive: While VML certainly responds to delivering exactly what its clients want (on the timetable they want it), it lacks the aggressive tactics of the Leaders in pushing its clients to take more risks; it could also push the envelope a bit harder on its own vision of the modern, global CMO.

Wieden+Kennedy

Wieden+Kennedy (W+K), a Visionary, is one of the world's most creatively awarded independent advertising agencies. Its work with Nike is legendary. The significant social lift it has generated for several global consumer clients, and other high-profile successes, have made W+K a sought-after digital partner for CMOs eager to harness the power of the social Web. W+K's 2011 revenue was US$265 million, as estimated by Ad Age.

Strengths
  • Integration: W+K moved along the social learning curve faster than its competitors, helping it sustain relationships with many of the world's biggest consumer brands (for example, Nike, Nokia, Coca-Cola, P&G and Delta). Its penchant for risk has paid off many times, as evidenced by its many viral marketing successes and its expertise in integrating paid, owned and earned media for Chrysler, Old Spice, ESPN and Levi's.

  • Balanced growth: W+K takes a deliberate, balanced approach to business development. Half of its revenue comes from non-U.S. operations (as estimated by Ad Age). It has responded to the consumer's appetite for content through its arts and culture delivery channel, producing branded and nonbranded content (through W+K Entertainment).

  • Innovation: W+K funds its own innovation (for example, the Portland Incubator Experiment — a collaborative center in which marketing, technology and culture intersect to explore and redefine brand experiences). Its "India Tube" initiative explores ways to effectively harness creative talent from all corners of the globe.

Cautions
  • Not as transparent as competitors: W+K is fiercely proud of its independence and has put measures in place to prevent its acquisition by a larger advertising network (or anyone else, for that matter). However, it occasionally uses its independence as a reason to cast a cloud of secrecy over how it operates.

  • Resource management: W+K appears to lack the more-sophisticated staffing models of competitors, given its history of laying people off when accounts cut back. For example, 40 layoffs this year were tied to Target. However, it did make adjustments to its staffing model this year in efforts to avoid this practice.

  • Methodology: W+K has a loose way of operating, as expected in a firm well-known for its creativity. Clients note its creative and ideation are not terribly collaborative; hence, they leave W+K to go create the big idea on their own. W+K may not be appropriate for brand and marketing managers who want to play a strong, collaborative role in the ideation portion of the engagement.

Wunderman

A Visionary, Wunderman was founded in 1958 by Lester Wunderman. The company (now a member of WPP) is noted for executive relationships at major brands (many span 40 years). A series of acquisitions in recent years has expanded its global reach and digital marketing capabilities. Ad Age estimates Wunderman's 2011 revenue was US$1.1 billion.

Strengths
  • Brand management and marketing performance analysis: Consumer giants such as Ford, Coca-Cola and Microsoft sustain their Wunderman relationship due to its people on the ground in all global regions who are knowledgeable in digital brand management and analysis. References cite Wunderman's skills and insight in helping them improve overall marketing performance, particularly promotional-mix optimization.

  • Measurement and analytics: It is known for its sophisticated range of measurement and analytics tools to assess brand/campaign performance, database marketing effectiveness and sales promotion. Its KBMG subsidiary (previously KnowledgeBase Marketing) adds more strength by combining social, consumer and business data to its clients' customer management systems.

  • 1-1 marketing pioneer: Wunderman pioneered a new advertising model decades ago with its philosophy, "the consumer, not the product, is the hero." Its heritage in personalized direct marketing is used to inform its 1-1 marketing strategies in key verticals, particularly large consumer brands and retail, where it has been experiencing most of its growth.

Cautions
  • Emerging technology: Although its people clearly understand the marketing world is changing, Wunderman still needs to convince CMOs that it is as agile as the startup that understands mobile and social better than the traditional ad network.

  • Sales: Growth has come primarily from an existing client base, which could begin to erode its market share if it doesn't focus on net new business, particularly among B2B marketers eager to adopt the habits of their leading consumer counterparts.

  • SMB: Although smaller firms can benefit from its many talents with flexible pricing, Wunderman actively targets CMOs of large corporations with the budget to orchestrate consumer experiences across all online and offline touchpoints.

Vendors Added or Dropped

We review and adjust our inclusion criteria for Magic Quadrants and MarketScopes as markets change. As a result of these adjustments, the mix of vendors in any Magic Quadrant or MarketScope may change over time. A vendor appearing in a Magic Quadrant or MarketScope one year and not the next does not necessarily indicate that we have changed our opinion of that vendor. This may be a reflection of a change in the market and, therefore, changed evaluation criteria, or a change of focus by a vendor.

Added

This is a new Magic Quadrant.

Dropped

This is a new Magic Quadrant.

Inclusion and Exclusion Criteria

Global digital marketing agencies need to meet the following criteria to be included in this Magic Quadrant:

  • Revenue: Providers in this evaluation must have global revenue of at least US$150 million.

  • Front office: Providers in this evaluation focus on delivering customer-facing digital experiences (recognizing they are supported by underlying technology and integration to back-office systems). Providers that focus primarily on back-office or marketing business support functions of an operational nature are not analyzed in this report.

  • Full-service provider: Full-service agencies needed to offer at least four of the five of the following capabilities: strategic services (business, marketing and/or brand strategy); creative services and experience design; technology implementation, including digital commerce; program management; and measurement and analytics.

  • Global reach and staffing: Providers in this evaluation have a global reach, in which they've helped clients launch solutions that reach out to a global audience in at least two global regions. Agencies should practice a global staffing model, in which engagements are not constrained by the talent available in the client's geography; rather, teams are derived from a global resource.

  • Competence in paid, owned and earned media: Providers in this evaluation have competence in helping clients design and deploy digital marketing solutions in all three media types: paid (for example, advertising and search); owned (for example, websites, blogs and communities); and earned media (for example, through public relations or social networks).

  • Five new clients: Providers in this evaluation acquired at least five new clients in 2011.

Evaluation Criteria

Ability to Execute

Product/Service: We looked at providers with full-service, integrated offerings supported by cross-discipline competence in strategic and creative services, experience design, application development and system integration skills, analytics, program management, and media planning/buying services.

Overall Viability (Business Unit, Financial, Strategy, Organization): Key aspects of this criterion are the vendor's financial health (including the health of the parent company, when applicable) and the degree to which the provider is committed to its digital marketing services.

Sales Execution/Pricing: In this area, we assess the provider's global business development capability, the ability to manage a global brand, and the flexibility of its billing model (for example, fixed price, T&M, retainer, performance-based billing and fees for equity). We also looked at the provider's track record in cross-selling its services to garner larger wallet share in its major accounts.

Market Responsiveness and Track Record: A provider must be able to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, client needs evolve and market dynamics change. We looked for evidence of this agility in the history of acquisition, alliances and new hires in digital, social and mobile.

Marketing Execution: As is the case in mature markets, many providers are difficult to discern because they are deeply similar in their history, point of view, competencies and service life cycle approach. Hence, we looked for evidence of thought leadership and ability to differentiate on modern marketing techniques of social and mobile, particularly those that are integrating emerging techniques into the larger marketing strategy versus helping clients build one-off applications.

Customer Experience: Client acquisition costs are high in the business, and success comes from the ability to retain business and build wallet share at existing accounts; hence, we looked for evidence of sustained client relationships and any key client losses in the past two to three years. This was supported by feedback from references, Gartner inquiries and other client-facing interactions, informed by our participation at Gartner conferences and other industry events.

Operations: In this business, managing and mobilizing resources across a global landscape is hugely challenging. The challenge comes from creating cross-discipline delivery teams that have the right mix of talent for the client engagement — as well as the right chemistry. It's often said, "The team can be right for the job, but if the chemistry isn't there, you're doomed." Hence, we looked at how projects are staffed from a global pool of resources (versus drawing talent from the client's geography) and how flexible a provider is in managing talent to the client's liking. Talent occupies the biggest chunk of a provider's cost structure, so we looked at signs in which staffing up/staffing down — in response to a single client engagement — exists. Such practices can wreak havoc on morale and the art of running a predictable business, so we looked for how providers approach their business operationally, particularly engagement staffing.

Table 1.   Ability to Execute Evaluation Criteria

Evaluation Criteria

Weighting

Product/Service

High

Overall Viability (Business Unit, Financial, Strategy, Organization)

High

Sales Execution/Pricing

High

Market Responsiveness and Track Record

High

Marketing Execution

High

Customer Experience

High

Operations

High

Source: Gartner (October 2012)

Completeness of Vision

Market Understanding: Here we looked at the provider's strategic understanding of the full marketing mix in driving the client's business (versus the more limited promotional mix), as evidenced by the depth of its thought leadership and strategic services. We also talked to reference clients about the provider's ability to contribute to its core business strategies, as evidenced by the provider's industry knowledge as well as its methodology for helping clients assess strategic business options, particularly those that are key to the client's growth initiatives.

Marketing Strategy: The provider's go-to-market strategy should align with emerging trends and the overall direction of the market for digital services. We looked particularly at the provider's ability to integrate its traditional business with emerging trends in social media and mobile marketing. We also looked at how active a role the provider is taking in education of the market in emerging trends and techniques. Competitive mentions also play a role here, because they are an indicator of brand awareness.

Sales Strategy: This criterion looks at the provider's approach and ability to secure new client wins, especially those in recent years. This is not a volume business; profitability depends on the ability to develop long-term relationships that increase wallet share at existing clients with large brands. Hence, we looked at the ability to sell longer-term relationships versus the ability to score one-off wins.

Offering (Product) Strategy: In this area, we looked at the provider's competency mix and how well it has incorporated multidisciplinary services into an integrated offering, from strategic services to the underlying components that drive the engagement: creative services, technology build-outs, measurement and program management. We also asked references about the provider's skill and ability to transition their engagements from strategy to implementation — and to postimplementation support (when applicable).

Business Model: This is a service business that hails from creative talent, which is usually intangible and difficult to price. Hence, the early days of this industry were dominated by T&M-style billing, whereby clients were billed for time, not necessarily results. That changed when technology-driven system integrators entered the market (providers that have spent years perfecting scope management and fixed-price engagements). These providers have put pressure on firms with creative roots to be more disciplined in how they scope and price engagements. Hence, we looked at the robustness of a provider's business model when it comes to how it financially engages with clients — from T&M and fixed-price structures to those that are performance-based. We also asked providers if they substitute fees for equity in the client's business to gauge the flexibility (and risk propensity) of its business model.

Vertical/Industry Strategy: While the decision to pursue select verticals is a strategic choice of the provider, we nevertheless looked for investments in industry applications of digital marketing as a way to differentiate. We also looked at how the provider is approaching a vertical market: with a mere point of view or with an offering that is customized and infused with industry knowledge in its delivery.

Innovation: Providers in this industry rarely have an independent R&D budget, opting to fund innovation "on the client's dollar." Hence, we looked for the provider's penchant for pushing its clients to take risks, couched by a methodology that can put boundaries on risk through techniques such as pilots or independent R&D efforts. Hence, the best R&D is manifest in client engagements that push the envelope. We also looked at providers who fund a portion of their own R&D with partners, universities or their own research labs.

Geographic Strategy: Providers in this market are global players; most have years of experience in the design and implementation of global brand awareness campaigns. However, the global reach of most providers has been heavily focused on North America and Europe. That is changing of course, as nations such as Brazil, Russia, India and China (BRIC) assume their place in the global economy. Hence, we looked for investments in markets beyond the provider's corporate address. We live in a virtual world, however, so having people on the ground in various regions isn't more important than delivering a global engagement. Hence, we looked at global capability as much as geographic presence.

Table 2.   Completeness of Vision Evaluation Criteria

Evaluation Criteria

Weighting

Market Understanding

High

Marketing Strategy

Standard

Sales Strategy

Standard

Offering (Product) Strategy

Standard

Business Model

High

Vertical/Industry Strategy

High

Innovation

High

Geographic Strategy

Standard

Source: Gartner (October 2012)

Quadrant Descriptions

Leaders

Leaders in this market provide have a broad representation of all competencies, from strategic services (whereby they also provide business strategy) to technology, experience design and marketing effectiveness. Leaders have evolved from the producer model, staffing their program management competency with PMI-certified professionals. While Leaders have attributes of fast followers, they also invest their own R&D dollars to set market direction. As a result, Leaders are the providers to watch as you try to understand how new offerings might evolve.

The providers in this segment also have the ability to populate engagements from a global resource versus drawing on talent in the client's geography or global region. Leaders have also remained viable, despite a challenging global economy. Leaders go beyond the promotional P of marketing, and they often show up on competitive bids outside their primary sector (for example, management consulting, production ideation and product development). Hence, Leaders are often referred to as crossover firms. Leaders also help today's CMO develop digital marketing platforms for the future, versus one-off engagements that are more proof-of-concept-oriented.

Challengers

Challengers have a strong ability to execute their current offering but have not yet had the opportunities to execute a vision for digital marketing on a scale of the Leaders. Challengers are poised to become Leaders if their vision develops and they begin to execute on the type of client engagements that will move the market forward. Large end-user clients may fluctuate their engagements between the Challengers and Leaders as their needs shift from management consulting and product ideation to a more narrow need to execute a promotional plan.

Challengers deliver solid work, but many tend not to be as aggressive as the Leaders when it comes to pushing their clients to take risks. In essence, they do as they're told by their client, avoiding opportunities to push the envelope too hard. As with the Leaders, Challengers are working hard to master a global staffing model, but they may still need refinement. The Challenger's strategic services are typically embedded in marketing and promotional tactics, because they lack the kind of consulting power that the Leaders have invested in, as evidenced by Leaders' recruitment of business strategists from top management consulting firms.

Visionaries

Visionaries align with Gartner's view of how this market is evolving, but they need more opportunities to execute their vision of marketing through real client engagements. Hence, they are still proving they have the right capabilities to deliver against their vision. Visionaries are often strong in creative services, UX, search, analytics and performance. And while they have a good portfolio of skills, they often choose to apply their resources and talents to brand, identity and the promotional P of marketing, along with their talents in advertising or public relations. Many haven't kept up with the type of business strategy expertise we find in the Leaders.

For end-user clients, Visionaries fall in the higher-risk/higher-reward category. They often introduce new technology, services or business models, but they need to build financial strength, service and support, or more-sophisticated sales models and partner/alliance programs. Whether Visionaries become Challengers or Leaders depends on how far they want to push the breadth and depth of their service offering beyond marketing's promotional P. Many Visionaries have been acquired (for example, by WPP or Interpublic) to augment their parent company's creative strength or their financial coverage.

Niche Players

Niche Players do well in a segment of a market, or they have limited ability to innovate or outperform other providers. This may be because they focus on a functionality or geographic region, or they are continuing to stick to what they do well, avoiding the risk-taking attributes of Visionaries and/or Leaders. Niche Players are often new market entrants. Alternatively, they may be struggling to acquire the type of client that hires providers with leadership or visionary qualities. Niche Players, because of a more limited view of marketing, usually do what they do very well. They have reasonably broad functionality but with limited implementation and support capabilities, and relatively limited customer bases compared with Leaders, Challengers or Visionaries.

Context

This Magic Quadrant analyzes digital marketing agencies that compete on the global stage. Agencies were evaluated on how well they are executing their vision for digital marketing through client references as well as investments in their people, methodology and R&D.

Market Overview

This document has been made available free of charge to support a new Gartner offering called Gartner for Marketing Leaders. For more information, visit www.gartner.com/digitalmarketing .

Agency Heritage Still a Buying Factor

Marketing executives and their digital marketing teams are encouraged by this market's movement toward deeper full service. However, many savvy CMOs report that when the agency pitch begins (and when references are later checked), the provider's DNA of origin still resonates, something that continues to influence their buying decisions; for example, advertising networks have a heritage in advertising and PR; interactive marketing has a heritage in Web development and digital commerce; Web 2.0 boutiques have a heritage in search, social, mobile, games, UX, community and so forth; and system integrators have a heritage in application development and system integration.

While creative firms continue to soak up technical skills and technology-driven firms move into the creative turf — all are working to integrate the marketing, creative and technology competencies required for the one-stop shop. Two new entrants (IBM Interactive and Accenture Interactive) set the bar even higher with their management consultants, mature global reach and PMI-certified engagement managers.

Securing the CMO Relationship

The firms analyzed in the Magic Quadrant are the global players, with revenue of at least US$150 million (see the Inclusion and Exclusion Criteria section). All are getting in line to talk to executives from the world's largest marketers, which are under pressure to redefine, re-enable and reinvent marketing, as a socially enabled digital world converts monologue to dialogue, multiple media to transmedia, and faceless segments into personalized markets of one.

The reinvention, driven by Moore's relentless march to put compute power into anything that moves (see "Innovation Insight: The 'Internet of Everything' Innovation Will Transform Business" ), is sending the CMO into the hands of digital agencies, armed with points of view (POVs), digital natives and creative genius powered by technical wizards to make it all work. Hence, the global digital agency strives to be the one-stop shop for its clients — something that is still largely aspirational. A 2011 Gartner survey indicated marketers are using significantly more agencies than when we polled them in 2008. Hence, marketers still have a tendency to buy best of breed, realizing one agency can rarely do it all.

Marketing's Three Eras

How did marketing evolve to where it is today, as a set of disciplines that is rapidly becoming digitally enabled? It's evolved in three distinct waves. The first one stems from the 1960s, with full-service advertising agencies that built and promoted postwar consumer brands through print and newly adopted broadcast media. In those days, agencies on New York's Madison Avenue teamed copywriters with illustrators to create a brand's identity — raising its awareness through mass communications and storytelling, largely through television. It was a model that went unchallenged for decades until the arrival of a new communications technique — namely, the Internet, which would forever change the way marketers engage their constituents.

The World Wide Web powered a second era (and a new breed of provider) that took advantage of the Internet's inherent interactive marketing capabilities — pairing graphics designers with computer scientists. Now, marketers were able to do business online, with corporate websites, email marketing campaigns and virtual marketplaces. And, with the power of computers behind the marketer's communications efforts, the idea of selling to a "market of one" came into being, and "personalization," "customer experience" and "customization" became part of the marketer's everyday lexicon.

Marketing executives bought the services of these new interactive marketing services providers in droves — including those that became business units of firms with roots in application development and system integration. Valuations of these providers soared, only to fall with the dot-com bust of 2000, sending many smaller players into the hands of bankruptcy and merger and acquisition (M&A) lawyers.

Social, Search and Mobile Launch the Modern Marketing Era

The surviving players entered a third era, fueled by the social Web and mobile computing — developments that have also unleashed armies of startups looking to capitalize on a new marketing paradigm. The global digital marketing agencies, not content to spend the time developing their own search/social/mobile capabilities, are now competing to acquire startups with the greatest talent and insight.

Why would digital marketing agencies do this? Because the third era adds even more possibilities to the one-on-one marketing paradigm that began during the last century. But this time, consumers rule, and they are demanding an experience on their terms, especially if they are willing to share who they are, where they are, what they are doing, and who they are doing it with. For providers with roots in advertising, the participation of buyers in the marketing process is especially challenging. Great advertising may win awards, but if the product isn't being discussed online, its share will go to those products that are.

It's a world in which paid media is integrated with campaigns that "earn media," garnering the attention of the C-suite and boards of directors eager to appear relevant and hip to the new rules of marketing, especially socially enabled efforts that generate huge awareness (and sales leads) without spending a dime on traditional media.

The Ultimate Digital Dream — Within Reach but Still Elusive

Today's opportunity is ripe for those with the gumption to deliver the ultimate digital dream: right offer, right buyer, right time and right context. It's a complicated scenario. Only those with the ability to effectively peer into the giant focus group created by a social Web that is always on, but not always easy to read, are qualified to play. The bar for market entry continues to rise (the only new full-service firms to come on board in the current wave are Accenture Interactive and IBM Interactive, which are actually spinoffs of work that goes back 15 years).

Consolidation Continues

The consolidation that began right after the turn of the century, characterized by Interpublic, WPP and Publicis acquisitions of companies such as R/GA, OgilvyInteractive and Razorfish, respectively, continues. Providers continue to use acquisition as a strategy to secure their place as a full-service digital agency. For example, during this wave, iCrossing acquired Wallaby Group; Epsilon acquired both Bigfoot Interactive and Aspen Marketing; AKQA acquired Magnet Interactive; Accenture Interactive acquired CadenceQuest and Origin Digital; and IBM acquired Unica, Coremetrics, SPSS, Sterling Commerce and Cognos.

Sample acquisition events throughout the three eras of digital marketing are as follows:

  • The first era: Pre-Web's rise and evolution of the Big Four agency networks (listed are a subset of member agencies), circa 1960 and beyond:

    • WPP: Landor Associates, Hill & Knowlton, Y&R, JWT, Grey, MEC, Burson-Marsteller, G2, GroupM, Fitch, Addison, Bespoke Communications, Ogilvy Group and Wunderman and so forth

    • Interpublic: Foote Cone & Belding (now part of Draftfcb), Dailey, Deutsch, Hill Holliday, IPG Media Lab, McCann Erickson Worldwide, FutureBrand, Gotham, KRC Research, Jack Morton, InnovationsDigital and so forth

    • Publicis: Saatchi & Saatchi, Bartle Bogle Hegarty, Kaplan Thaler Group, Phonevalley, Fallon, Bromley, Starcom MediaVest, Big Fuel, ZenithOptimedia and so forth

    • Omnicom: DDB; BBDO; Proximity; Fame; Goodby, Silverstein & Partners; Merkley+Partners; The Kern Organization; TracyLocke; Zimmerman; Cone; Ketchum; Porter Novelli and so forth

  • The second era: After the organizations' rush to the Web, the dot-com bust sets off a wave of M&A activity, circa 1998 and beyond:

    • Modem Media was acquired by Digitas.

    • CUBOCC and Reprise Media were acquired by Interpublic.

    • Critical Mass, Rapp, Organic, and Resolution Media were acquired by Omnicom.

    • Edge Consulting (analytics), Origin Digital and Digiplug (digital media) were acquired by Accenture Interactive.

    • Innovyx was acquired by Rapp Collins.

    • Capita Technologies was acquired by DraftWorldwide.

  • The third era: Agencies expand global reach, especially to BRIC nations, while acquiring firms with Web 2.0 social, mobile, analytics and search skills, circa 2007 to present:

    • Sapient acquired the Nitro Group.

    • Publicis acquired Digitas, Razorfish and Rosetta.

    • Hearst acquired iCrossing.

    • Digitas acquired Tribal, and it expanded to France, China, India and Sweden with Business Interactif, CCG, Solutions and Joy.

    • iCrossing acquired Sharp Analytics, 3GNet, Wallaby, Red Aril and Spannerworks (expanding capabilities in search, mobile, social, analytics, data management and digital media).

    • IBM acquired Unica, Coremetrics, SPSS, Sterling Commerce and Cognos.

    • Accenture Interactive acquired CadenceQuest and CAS (enhancing its retail skills); it also bought Memetrics, MediaSenz and Media Audits to build on its skills in analytics and marketing mix optimization.

    • Meredith acquired Genex, New Media Strategies, O'Grady Meyers (for social and interactive) and The Hyperfactory (for mobile).

    • Wunderman acquired DataCore, Blast Radius, Actis and Designkitchen (enhancing digital, creative and analytics).

    • Razorfish acquired Longtuo (for digital commerce, UX, digital media and measurement).

Please note: The above represents sample acquisitions, and they should not be construed as a comprehensive view of all acquisition activity.

Competing in the Modern Era

In a creatively driven business, pitches that lack the big idea rarely win. But this business is also driven by business strategy and technology, given digital's impact on business models, partnerships, alliances — and distribution.

Today, the competencies that digital agencies integrate to compete and differentiate have expanded to include:

  • More sophisticated experience design, with the ability to create not just visual beauty that users will want to look at, but interactive experiences that encourage engagement — supported by techniques such as funware and gamification. Agencies must fight tendencies to replicate old experiences on new platforms. In the third wave, copywriters teamed with illustrators are being replaced by storytellers teamed with UX engineers, game developers and big data analysts who provide insight into what users will want (before they know they want it).

  • Business and marketing strategy, with consultants trained in business modeling, digital brand extension, go-to-market models, messaging and promotion — marketing effectiveness — and even acquisition strategies. And of course, strategists need to understand how to use social networks to reach an increasingly mobile customer. Many agencies augment this competency with media buying, planning and analysis. A handful of providers have invested in their own independent research organizations, which they use to inform their strategic services, customer insight analysis and measurement/analytics services.

  • Digital commerce, with applicati on development skills for creating customer-facing experiences supported by back-office systems. More heavy lifting is being requested from players with deep system integration skills — capable of building digital commerce sites that transact thousands of secure transactions (as doing business online becomes an even more entrenched business model for marketing executives looking to streamline operations and reduce costs).

  • Program management, with a mature competency for some and a new competency for others that are still tied to the producer model. Many digital agencies rooted in creative services still cling to retainer/T&M billing models that don't always require the deep discipline of experienced program managers. The more mature system integrators, with years of experience allocating work into discrete fixed-price phases, are putting pressure on creatively led agencies to get disciplined in how they charge. Global staffing is also an issue for many agencies. Many are still tied to a model that ramps people up and down in response to client wins and losses — versus a resource model designed to staff business from a more stable global resource that is driven by forward-looking capacity planning.

While the above represents the core competencies every global digital agency seeks to build, new competencies are at play as CMOs adapt to the third wave. As we complete the first half of 2012 and move toward mid-decade, digital agencies will:

  • Help marketers adapt to real time: Resource-constrained marketing executives eager to add fuel to their content marketing engines will look to agencies for writers, storytellers and support for thought leadership — as well as ways to sustain a content marketing engine that must adapt to marketing in real time.

  • Rationalize the digital marketing platform: CMOs of large organizations love best of breed; hence, it's not unusual for them to have a dozen or more agencies in their portfolio. But the resultant multiple platforms, standards and duplication of efforts have sent costs too high. Vendors have responded with offerings, as evidenced by WPP, which joined forces with Infosys to offer a comprehensive, standards-based digital marketing platform. IBM Interactive, Accenture Interactive, Razorfish, SapientNitro — and now Deloitte Digital — are right behind with similar offerings.

  • Garner more tools to measure effectiveness: Intelligent use of analytics becomes part of the marketer's challenge, especially with the arrival of big data. Marketers often compare the social Web to a giant focus group, which is always on and ready to give. Conversations, sentiment and behavioral motives — it's all out there, and most of it's free for the taking. But how do marketing executives make sense of it? And can they trust their analysis of big data to support key decisions about where to invest scarce marketing resources? These are questions providers are under pressure to answer.

  • Acquire different types of talent, particularly social, mobile and video capabilities that beg for screenwriters, journalists and game designers: There's little question that social and mobile (and now video) create many of the biggest disrupters and opportunities for every marketing executive. Providers eager to capitalize on the trend often see acquisitions as the fastest way to keep up with demanding clients who want it yesterday.

  • Go global, especially into the reaches of Latin America and the Far East, particularly China: Digital marketing service providers have been heavily focused on the U.S. and Europe, and for good reason. Those are the markets where digital marketing started (and are packed with marketing executives eager to adapt to the third wave). But the developing world is eager to catch up; many prefer to leap over old marketing paradigms altogether and get on the third wave as soon as they can (hence, agencies are investing in the BRIC nations, as evidenced by resource growth, both organic and through acquisition, in emerging markets).

Vendors to Watch

Following are companies that aren't included in this Magic Quadrant due to lack of alignment with our definition of a full-service digital marketing agency, limited global reach or revenue. None of these firms that follow were listed in the competitive mentions of the leading players (with the exception of Edelman) covered in this Magic Quadrant, but nevertheless, they are digital agencies worth considering if needs align.

Acxiom offers a broad range of marketing services (for example, direct mail, database marketing and identity verification). It acquired the database marketing operations of ChoicePoint Precision Marketing in 2008, giving it stronger presence in the U.S. and a growing global footprint. Scott Howe, former advertising executive at Microsoft, replaced John Meyer as CEO in 2011. Acxiom's reported revenue for its 2012 fiscal year was US$1.13 billion.

360i (a subsidiary of Dentsu) is a digital agency headquartered in New York with a small presence in London. It has roots in search marketing, but increasingly, it also offers other creative and consultancy services. 360i was an early pioneer in social marketing. Ad Age estimates 360i's 2011 revenue was US$105 million.

Edelman , well-known for its roots in corporate PR and public affairs (it publishes the Edelman Trust Barometer) is strong in brand management and creative services that rival firms such as W+K and Ogilvy. The U.S. is still its primary market, although it's establishing strong presence in Europe and Asia/Pacific. Edelman has done a good job leveraging its PR roots into social media, including the socialization of its own organization. Edelman was an early pioneer in joining word-of-mouth marketing, social media and advocacy. Ad Age estimates Edelman's 2011 revenue was US$575 million, of which two-thirds came from the U.S.

Epsilon (a subsidiary of Alliance Data) is a global marketing service firm that provides data-driven multichannel marketing services through its portfolio of database marketing, loyalty management, proprietary data and advanced analytics solutions. Epsilon acquired Bigfoot Interactive and DoubleClick (in 2005 and 2006, respectively), and it sends more than 40 billion emails a year to support activities such as retention and loyalty. Epsilon acquired Aspen Marketing in 2011 to add scale and capability to its agency offering. Epsilon has passed through several owners since its 1969 founding, and since 2004, it has been a part of Alliance Data, a provider of transaction-based, data-driven marketing and loyalty solutions. Ad Age estimates Epsilon's 2011 revenue was US$847 million.

Merkle is a customer relationship marketing agency known for its analytics, technology, consulting and customer experience. Merkle is fueling its move into a broader-based digital marketing agency with several specialized agencies, such as Impaqt (acquired in 2011), Social Amp (Facebook marketing) and 5th Finger (mobile marketing). Ad Age estimates Merkle's 2011 revenue was US$303 million.

Organic (a subsidiary of Omnicom) is one of the oldest digital players; given its roots and long history in this space, Organic should have evolved into a far more formidable digital competitor than it is. However, it has lost share to more aggressive competitors, such as Razorfish, Digitas, R/GA and AKQA. Even so, things are looking up for Organic, as evidenced by a strong 2011 and a recognition from Ad Age as 2012's Comeback Agency of the Year. Ad Age estimates Organic's 2011 revenue was US$123 million.

Rosetta (a subsidiary of Publicis Groupe) is a digital marketing agency based in the U.S. (where it derives 95% of its revenue). It was one of the few remaining independent agencies until 2011, when it was acquired by Publicis for approximately US$575 million. Rosetta is known for its personalized marketing programs, developing commerce and content distribution platforms, designing branded experiences primarily over websites and creating customer relationship management strategies. Adbrands.net estimates Rosetta's 2011 revenue was $250 million.

Recommended Reading

Some documents may not be available as part of your current Gartner subscription.

"Magic Quadrants and MarketScopes: How Gartner Evaluates Vendors Within a Market"

Evidence

This Magic Quadrant followed Gartner methodology for vendor evaluation, including a vendor survey, vendor briefs and vendor-provided references. It was also supported by our secondary research organization and conversations with Gartner end-user clients.

Evaluation Criteria Definitions

Ability to Execute

Product/Service: Core goods and services offered by the vendor that compete in/serve the defined market. This includes current product/service capabilities, quality, feature sets, skills and so on, whether offered natively or through OEM agreements/partnerships as defined in the market definition and detailed in the subcriteria.

Overall Viability (Business Unit, Financial, Strategy, Organization): Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood that the individual business unit will continue investing in the product, will continue offering the product and will advance the state of the art within the organization's portfolio of products.

Sales Execution/Pricing: The vendor's capabilities in all presales activities and the structure that supports them. This includes deal management, pricing and negotiation, presales support, and the overall effectiveness of the sales channel.

Market Responsiveness and Track Record: Ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customer needs evolve and market dynamics change. This criterion also considers the vendor's history of responsiveness.

Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization's message to influence the market, promote the brand and business, increase awareness of the products, and establish a positive identification with the product/brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotional initiatives, thought leadership, word-of-mouth and sales activities.

Customer Experience: Relationships, products and services/programs that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillary tools, customer support programs (and the quality thereof), availability of user groups, service-level agreements and so on.

Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure, including skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis.

Completeness of Vision

Market Understanding: Ability of the vendor to understand buyers' wants and needs and to translate those into products and services. Vendors that show the highest degree of vision listen and understand buyers' wants and needs, and can shape or enhance those with their added vision.

Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through the website, advertising, customer programs and positioning statements.

Sales Strategy: The strategy for selling products that uses the appropriate network of direct and indirect sales, marketing, service and communications affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the customer base.

Offering (Product) Strategy: The vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature sets as they map to current and future requirements.

Business Model: The soundness and logic of the vendor's underlying business proposition.

Vertical/Industry Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including vertical markets.

Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, defensive or pre-emptive purposes.

Geographic Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of geographies outside the "home" or native geography, either directly or through partners, channels and subsidiaries as appropriate for that geography and market.

© 2012 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartners research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

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