Let's take a quick look at the different creative steps between these two areas:
Notice there are more check boxes for digital than traditional. Which means more people touching the work, and more time it will take to do these steps. There are even some left out but can be folded into some of these higher level wrappers.
And yet, we still see clients expecting so much more from digital for so much less. It's also interesting to note that the expectation of costs for different distribution of a similar tactic, such as video. If you're making a video for a traditional agency, it's called a TV spot. If you're doing it for digital, it's called an online video (please don't call it viral). Yet the production costs typically are widely different, with a TV spot costing millions, where an online video is expected to be created for a few thousand dollars. (And yes, it's true that some amazing online videos don't need huge production budgets, but sometimes they do.)
The AAAA's have a worthwhile read if you find this interesting. It's a white paper by Joe Burton who was EVP/COO of McCann Worldgroup San Francisco at the time and is currently President & COO of SocialChorus. A Marketer's Guide to Understanding the Economics of Digital Compared to Traditional Advertising and Media Services. Although it was published 4 years ago, it still hits on important facets that many have yet to come to terms with. He boils it down to four main reasons why digital is more expensive than traditional due to its complexity.
- It's more labor intensive because there are many more executions to be created in a wider range of media. And tactics are not equal in time and effort needed to create them. They are also more dynamic and subject to change which requires more resources. And, if you're doing something never done before, it's going to take longer and cost more than some off-the-shelf solution.
- It requires more production work to be done in-house, unlike traditional that outsources more of it. This leads to needing more in-house experts from programmers to planners.
- The lines of media, production and creative services need to be more intertwined, which can cost more for agencies who need to reorganize to desegregate these groups which traditionally are much more separate. This also can lead to more complex job functions and organizational structures than in a traditional agency, which again leads to more people and costs.
- More value can come from digital as it can be targeted, tracked, measured and adjusted on the fly (again, more time and people).