Hugh McLeod has an excellent point (that blogs that aren't authentic will be skewered), but he should go further. Quick warning, if you haven't been to Hugh's site before he uses the "f-bomb" often in his cartoons.
Here's a quote from Hugh:
"The fact is, ad agencies hate blogs. They utterly despise them, even if they tell you otherwise. They hate them because if done well, they're cheap and they're easy. Frankly, they're in the business of selling you stuff that is neither."
My two cents? A good blog is written by an authority who is passionate about his/her topic.
How many ad agencies are passionate about your business? Not to mention an authority on it? (After all, if your ad agency were an authority on your business we'd just deal with your ad agency, not you). I'm an optimist, though, so I hold out hope that there might be a few, but they are few and far in between.
Now, you might argue that I'm not an authority on everything I write on. You'd be right. But, when I talk about something that I don't know much about I usually am doing so after consulting the world's experts (it's why I'm behind the camera on Channel 9, not in front of it).
So, yes, an ad agency could -- in theory -- do a good blog but it'd need to be done very carefully and probably from within the corporation being written about. For instance, if I were an ad agency being asked to do a CEO's blog, I'd make sure that the person picked to write the blog actually spent a few hours a week with the person that he/she were writing for (and have that person on IM). The thing is, why can't the CEO just write the blog him or herself instead of by an ad agency?
Get the answer to that question and you'll probably find a whole bunch of bones in someone's closet. Hint: do you really want that person representing you in public?
Even deeper question: why can't that company let an employee seven levels away from the CEO write the blog?
Hint: you're reading a blog by someone seven levels away from Bill Gates. By letting your entire organization blog you'll get closer to the customer which will bring a whole raft of benefits.
Yes, it still is a rarity in large-company corporate life to let someone so far away talk openly on a Saturday night without having any PR or legal people around to check out our words first.
Hint: weblogs aren't ads. They are conversation tools. They are tools to build relationships with other people (and organizations) in a scalable way. Why would we turn these over to advertising agencies?