The State Of Agencies Report
AdWeek is out with its annual report on the state of US ad agencies. Overall revenue trends for the agency sector remain soft – in 2018 US agency revenue increased only 1.7%, which is the weakest growth since the recession of 2008-2010. This is a direct result of agencies getting squeezed by clients to be more transparent and efficient, and AdTech innovations driving the automation of traditional agency work.
Besides just a report on agency revenue, AdWeek has provided four takeaways which can serve as a roadmap forward for beleaguered agencies. Here’s a quick summary of their recommendations:
- Digital Is The New Norm: Agencies must stop trying to specialize in digital capabilities/initiatives and accept the fact that digital marketing needs to be their primary core function. Simply put – agencies no longer need a digital strategy because their entire strategy needs to be digital.
- Shrinking Marketing Budgets: In 2018 total US marketing budgets only went up .4%, and they’re expected to decrease in 2019. In contrast, DTC (Direct To Consumer) ad spending by brands rose 3%. Translation – agencies should anticipate having to run their business on less top line revenue moving forward.
- Automate The Buying Function: Tomorrow’s successful agencies will be able to run the entire media play, including data management through proprietary DMPs and programmatic buying, for the vast majority of digital and traditional ad buying.
- Essential Staffing: The number of employees working at US agencies is going down, which means the remaining employees need to be exceptional. Agencies are being challenged to retain these key employees as consultancies, clients and publishers go after their top talent. Agencies will need to find ways to retain this essential personnel.
Yes, this list of Must Do’s is easier said than done. But it’s critically important for agencies to work on solving these problems today if they want to remain relevant tomorrow.