In spite of fears that gaining new business would be difficult, 2019 turned out to be a good year for agencies. A new report from Society of Digital Agencies (SoDA) reveals that 6 in 10 agency leaders say they had a strong year in 2019, with about one-fifth (21%) saying it was one of their best years ever.
Agencies were expecting an even better year this year. Indeed, while many had forecast revenue growth in 2019 in major areas, an even larger percentage of the more than 200 agency leaders surveyed by SoDA in Q4 2019 were projecting revenue growth in these areas for 2020. For example, some 55% of agency leaders had predicted revenue growth in digital products and services in 2020 (up from 45% predicting for 2019), while about half expected to see growth in standalone strategy services (51%, up from 37%), website/web-based marketing experiences (46%, up from 37%) and data analytics and research (46%, relatively flat from 45%).
And, as CMOs struggle to find in-house UX talent, two-fifths of respondents were expecting to see revenue growth in the area of standalone design/UX services.
It was not just agencies that were optimistic about what 2020 had to offer: client-side leaders also anticipated increasing their budgets in areas such as website and web-based experiences (51%), campaign development and execution (46%), data analytics and research (45%) and media planning and buying (45%).
Unexpected Events Change Agencies’ Outlook
This optimism changed by March when the coronavirus spread across the globe, quickly changing marketing objectives and consumer behavior. In light of these changes, SoDA ran a quick survey of agency leaders to see how their outlook had changed.
As could be expected, the outlook for 2020 has declined drastically. In Q4 2019, 82% of agency leaders were confident that 2020 would be better than 2019 in regards to profitable growth. By mid-March, only 31% of the 122 agency leaders surveyed in March had the same level of confidence.
In fact, 45% of agency leaders have already cut their revenue forecast for 2020, while another 19% anticipate doing the same in the coming weeks and months.
Agency leaders are feeling the impact as projects are already being delayed (51%) or cancelled (34%), with more expected to be delayed (39%) or cancelled (48%) in the coming months.
That said, not all agencies have lost their optimism for 2020. Almost one-fifth (18%) say they have actually increased their revenue forecast for the year.
Other Highlights
Here are some additional highlights from the report’s findings (pre-coronavirus):
- A 3-year trend analysis shows that client leaders are moving areas such as digital strategy and digital campaigns in-house, while they are increasingly outsourcing data analytics and research, digital content production, social media & marketing, and websites & web-based experiences.
- These same client leaders list the top 3 benefits of digital in-sourcing as cost-saving, time to market and flexibility/agility, while ROI, control, and innovation ranked low on the list.
- In 2019, CEOs (40%), Marketing Directors/Managers (26%) and CIOs (22%) were most typically responsible for selecting partners in digital initiatives.
- The debate over who’s responsible for customer experience has a new player. While technology leadership (CIO/CTO) had once taken the lead in customer experience (39%) and digital strategy (45%), in 2020 CEOs began to take the reins in both areas (40% and 42%, respectively.)
- Agency leaders listed developing new capabilities, attracting and retaining top talent, and brand differentiation through innovation as their top 3 areas of investment in 2020 in order to drive growth.
- Six in 10 agency leaders said their client engagement models had changed in the previous 18 months, with 51% moving towards more project-based work and 40% taking on more retainer-based work.
- Specialized digital agencies (43%), full-service digital agencies (38%) and in-house clients teams (34%) pose the biggest competition to digital agencies, per the survey, while almost two-thirds (64%) of agency leaders say that the entrance of consultancies into creative/agency space presents a threat to their business.
The full report can be found here.
About the Data: Results are based on a survey of 261 client-side leaders and 231 agency leaders in Q4 2019. An additional survey was fielded from March 13-22, 2020 of 122 agency leaders to explore their initial response to COVID-19.
