Some 86% of agencies are confident that this year will be better than last in terms of profitable growth, according to a Society of Digital Agencies (SoDA) survey [pdf] of 126 executives primarily from mid-sized ($25M or less in annual revenues) digital agencies in North America. Emerging technology seems to be an area where agencies can drive revenue gains, per the report.
Indeed, some 61% of respondents anticipate revenue growth from emerging technology such as virtual reality, chatbots, artificial intelligence and the Internet of Things. This area seems to be particularly valued by client-side marketers, who in a separate survey ranked it the most valuable capability in their agency partners.
Closely behind emerging tech, meanwhile, 6 in 10 agencies expect revenue growth in the areas of customer insights/analytics (60%), content development (59%) and digital experiences – both web and mobile (57%).
The study notes that in the accompanying survey of 90 client marketers at large firms, areas such as digital experiences, customer insights/analytics and content development are the most commonly cited for budget increases. That alignment with agencies’ growth projections bodes well for agency business.
Engagement models are changing, according to more than 8 in 10 agency respondents. The most frequent shift in the past year has been towards more project-based work (43%), as opposed to more retainer-based work (25%).
Agency executives also report that they’re working with clients’ other partners in a more collaborative way (41%) and consulting with clients on new products and services (40%).
These are similar trends as were reported in 2016, when agencies noted that they had been consulting more with clients on new products and services and engaging in more project-based work.
Indeed, over the next 2-3 years, agencies believe that developing new services and capabilities will be a core strategic driver of growth, with almost half saying this will have a big impact. That’s only outweighed by the impact of attracting and retaining top talent, cited by 55% of respondents as a strategic priority that will have a top impact on their ability to successfully grow and evolve.
While agency executives are generally confident in their growth prospects, they are facing some headwinds. About 6 in 10, for example, say that the in-sourcing of digital marketing work is having an impact on their business. That concern is supported by the client marketer survey, in which a significant proportion (13-29%) planned to bring a variety of digital capabilities in-house, ranging from social marketing execution (20%) to media planning and buying (29%). Mitigating that worry is the finding that few who planned to bring key capabilities in-house last year followed through on those plans.
Agencies are also combating new competition in the form of consultants. This year, 77% of client-side marketers reported being open to working with a consultancy for digital agency work, almost double the share from last year (41%). Despite those figures coming from a small sample size (90), that shift could signal a trend. In fact, whereas agencies ranked as the top partners last year for client marketers looking to innovate product and services offerings and engage with consumers in new ways, consultancies – such as Accenture, Deloitte and McKinsey – top the list this year.
About the Data: The results are based on a survey of 126 agency executives, primarily C-level executives (44%). Most respondents came from digital agencies (43%) or integrated agencies (25%), and the majority reported revenue of at least $5 million. Some 56% said that the majority of their business comes from North America.
The 90 client-side marketers surveyed were most commonly C-level executives (48%), with a fairly even split between B2C (39%), B2B (33%) and B2B2C (28%) organizations. Almost 7 in 10 came from organizations with an annual marketing budget greater than $20 million. As with agencies, 56% said that most of their business revenue comes from North America.
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