How are things for marketing agencies?
Not as great as last year, according to Ad Age’s Agency Report 2024 (subscription required).
In 2023, total revenue for the 30 biggest agency companies in the world rose 5.6%. The forecast for this year? It’s between 2% and 3%.
The Too Big Five (as CMI’s Robert Rose calls them) — WPP, Publicis, Omnicom, Interpublic, and Dentsu — have collectively grown revenue by a whopping 2.7% to date.
What gives? Are agencies doing fewer projects? Do brands need agencies as much? Where is the agency world headed?
Since Robert is our chief strategy advisor, we posed those questions to him but not before wishing him a happy birthday. Watch this video or read on for what he had to say:
Revenue growth drops precipitously for big agencies
Ad Age’s 2024 Agency Report takes the marketing market’s temperature by looking at the performance of the largest agencies.
It’s been doing it for 79 years, and only four agencies from the first report remain, at least in name. BBDO, McCann, FCB, and Campbell Ewald are all now part of giant holding companies. It’s worth noting that some of the largest agencies, such as Accenture and Accenture Song, show up more than once on the list.
This health of the world’s giant agencies is a big “meh.”
The five biggest legacy firms saw organic revenue grow 1.3% in 2023, down from 7.5% in 2022. That’s a 6-percentage-point drop in revenue growth in one year. Talk about burying the lead. An almost 83% drop in revenue growth in one year is amazing.
The forecast for 2024? Somewhere between 2% and 2.8%.
Agencies’ budgets are growing, but barely, especially considering inflation was most recently 3.3%. The report also finds that the number of agency employees edged up 1.6%, which is in line with revenue growth.
The metrics all indicate a flat or slight decrease in agency value in the broader marketplace.
Small agencies aren’t exempt from difficulties
It’s also been a challenging year for small, independent agencies. They’re left struggling to compete with larger agencies on projects those bigger organizations would never have touched in better times.
Specialization of marketing at larger companies also has an impact on the agency marketplace. Demand generation, sales enablement, customer experience, and even customer-enablement programs increasingly lead to a greater need for niche specialists. Companies are more likely to engage with these specialists, from data to technology, content creation to influencer marketing, and measurement to media buying. It’s not unlike the medical industry, where general practitioners have given way to specialists.
I see agencies jettisoning their agency title and rebranding themselves (subscription required) as creative solutions companies, content studios, growth incubators, or accelerators.
Marketers should do this in 2024 and beyond
What should you make of all this?
The world of agencies is complicated. One reason for their slowdown is the absorption of all the change that was mapped out for companies over the last two years. Many of the bigger companies decided to pivot in a big way in 2021 and 2022. In 2023, they said, “Welp, we better stop strategizing and start executing against all this change.” And, in 2024, it continues.
That, too, will change. In the meantime, looking for agencies or consultancies that can help you accelerate the changes you have on your plate should be key in whatever specialized vertical challenge you may have.
That’s the pivot that’s real for me.
The next episode of What’s New? returns on July 12, after a one-week break for the U.S. holiday weekend.
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Cover image by Joseph Kalinowski/Content Marketing Institute