It’s getting rough out there for clients looking for interactive agencies. No one is talking about it but size is starting to matter a lot in agency decisions. Within 18 months I predict the holding companies will begin consolidating their small shops to at least to create the illusion of scale.

Why?

-- Clients want big; they don’t want to manage multiple interactive shops on top of already managing traditional advertising agencies, PR firms and specialty players.

-- The war for interactive talent is fierce. Smaller shops don't have the right "farm system" to train young talent or the management infrastructure, methodologies, and systems to drive quality delivery. Great creatives want to work in firms where they can do just that – and not have to wear multiple hats.

-- Smaller shops can’t handle the volumes. A few years ago we stumbled into an account that required hundreds of rich media assets per week just to "feed the media" - about two to three billion impressions per month. The company, Citi, had used many of the "major" shops, but none of them could keep up with sheer volume of work without making stupid mistakes.

As more money continues to shift from the analog to digital there are more and more massive accounts popping up with no real large interactive agency players to handle them.
Consider the drop-off in head count from the top three -- AvenueA/Razorfish, Sapient, Digitas, each with a few thousand folks – to the next tier where interactive agencies have a few hundred people. More than half of the top 100 interactive agencies have less than 100 people on staff.

So while creativity and insights are still high on client's criteria, size is starting to matter more than ever.

BTW Citi is still a great client.