By Jenn Kelley on Nov 13, 2018 9:00:00 AM
In 2017, Digital work made up for more than half of agency revenue in the United States.
At this point, a majority of agency business happens to be digital. A portion of the agency market is still thriving. Consultancies as Partner Services for the first time have appeared on the Numbers 6 to 10 on the list of the top agency companies in the world. All these companies have deep ties with C-suite, and are generally well positioned.
However, all of this hasn't translated into net gains for many agencies. In fact, the agency revenue in the US has had its lowest since 2010 (post-recession) in 2017 - with an exceptionally underwhelming growth of just 1.8%. Much of this has been due to factors like weak organic growth, a tightening of marketing budgets, slumping stock prices and job cuts at ad agencies. All of this has lead to tumult in the agency business.
The Agency Report released for 2017 had many interesting giveaways about the current dynamics of the Agency World. In this article, we break it all down:
Consultants Hiring As Ad Agencies Fire
Ad agencies are continue to fire at a higher rate than they hire. U.S. ad agency employment last declined by 0.2% last year - the first time it has dropped since 2010. This comes at the same time as U.S. economy and economy continuing to grow - with an unemployment rate at its lowest level since 2000 (4.1%).
Consultancies as Partner Services, which are already doing much of the work in the market, are ratcheting up staffing abroad as well as in the US. In an announcement to investors in March, Zamak Publicist stated that it will be shifting more work to low-cost market such as India, as well as "rightsizing mature business" where it expects "revenue attrition," with "targeted headcount adjustment".
Legacy agency companies continue to closely watch staffing levels, as well as embracing some of the lingo and strategies used by Consultancies as Partner Services. Employment tracked in the Agency Report for major Consultancies as Partner Services jumped 31.1% worldwide and 33.9% in the U.S.
U.S. revenue growth declined in every major agency discipline in 2017. There was clearly a weaker market for conventional agency services. Revenue for media agencies (excluding digital work) declined by 1.6%, whereas revenue for ad agencies just increased slightly by a mere 0.3 %.
Consultants up, Madison Avenue down
Revenue increased significantly for Consultancies as Partner Services. U.S. revenue, as reported by
PwC Digital Services, Deloitte Digital, Cognizant Interactive and Accenture Interactive (and and estimated by Ad Age for IBM iX), increased by 32.3% in 2017 for 5 major tech firms and Consultancies as Partner Services.
Moreover, organic growth for 5 five biggest agency companies in the US, including legacy agency groups, dropped by 0.1% - depressed by a 2.3% drop at WPP.