State of Digital Marketing Agencies in 2023 – Our Top 10 Takeaways
WordStream’s State of the Digital Marketing Agency Report is back after a short hiatus. This time it’s even bigger!
Over 300 agencies from the US and Canada were surveyed on a wide range of topics, including the services offered, the pricing, the size and structure of the agency, the biggest challenges they face, and much more.
We’ve selected 10 of the most important takeaways for you to see and understand what they mean for your business. Let’s get started!
Download the State of the Digital Marketing Agency Industry report to see 25 charts and data that will help you plan for 2024!
1. Many agencies now use a hybrid pricing model
The hybrid billing model is gaining in popularity. In our 2020 report flat fee and hybrid models were almost equally prevalent, but this is the first year that we have seen a significant increase in hybrid billing.
There are many options available for agencies to price their services. Hybrid billing models are becoming more popular because they allow agencies to price services in a manner that benefits their clients as well as their bottom line.
2. Creative services are charged extra by agencies
Are you curious about the services and add-ons that agencies charge extra fees for? Landing Page Creation is the most popular service, followed by Image Ad Creation and Display Creative.
It makes sense, as these activities are complex and time-consuming and require creativity and expertise. Digital marketing campaigns are only successful if they have strong landing pages and creative.
Reporting and tracking are valuable services that agencies charge extra fees for.
You can increase revenue by offering these services, even at an extra fee, in-house.
3. These agencies offer a wide range of services, but social ads is their most popular service.
The mix of services offered by the agencies we surveyed is interesting. Social ads, content and creative services are the most popular, followed by search advertisements and email marketing.
These strategies are accessible and cost effective for all types businesses, making them a good option for digital marketing agencies.
The data shows that the majority of agencies offer multiple services to their clients. In the report , we go into greater detail about this data.
4. Many clients use multiple services from one agency
93% of those surveyed said that their clients were running at least two services through their agency. 34% reported their clients to be on average operating four or more services.
It’s good news, because you can retain your customers and possibly upsell to them if they are using more services.
It also means that your agency needs to consider how to provide more services to its clients. You will lose revenue by only offering a few services. This also prevents you from giving clients a better service, as they’ll have to use multiple agencies for their digital marketing.
5. The time spent by agencies managing paid search on behalf of their clients is considerable
41% of search advertising agencies spend 2-4 hours a week on PPC management per client, and 16% spend 5 or more. This time can quickly add up and prevent your agency from adding new services and onboarding clients.
Consider outsourcing your PPC management or looking for automated tools to reduce the time you spend managing it without sacrificing the results.
6. Smaller agencies employ fewer people to perform multiple jobs.
53% have less than 25 employees, and 23% are solo practitioners. Most of the employees in these agencies wear multiple hats including account management, reporting, sales and more.
Over half of the agencies surveyed do not have employees who are fully dedicated to sales. 18% of agencies have staff that are partially dedicated to the sales department, while 43% have an employee who is fully dedicated.
Download this report and find out how many agencies have dedicated employees for account management.
7. The tech stack of agencies is diverse (and now includes AI tools).
For agencies, a good tech stack is crucial. This is especially true for smaller agencies that are trying to do more with less people and resources. HubSpot, MailChimp and other tools for email marketing and marketing automation are still important to agencies.
Tools and software are used by agencies for project management, reporting, analytics, content management and ecommerce/payments.
ChatGPT is a newcomer to the scene. This AI tool is a valuable resource for agencies, marketers and anyone looking to automate time-consuming tasks. We’re curious to see how AI tools evolve in the future and what impact they have on agencies.
8. The managed spend has increased (but at slower pace than 2018-2020).
34% of respondents said that their management spend has not changed in the past year. 53% of respondents said that their spending under management had increased in the past year. 26% were up by more than 25 percent and 27% were up by less than 25 percent.
It’s encouraging that despite the economic stress and the recent pandemic, agencies were able to increase their managed spending, even though the growth rate is lower than what we reported in our 2018-2021 reports.
9. Referrals remain the most effective way to get new clients
In previous reports we have found that client referrals are the most effective way to acquire new clients. This is followed by digital marketing and content (but not closely).
If you are having trouble finding new clients, it is time to switch things up. If your referrals are running out, try these tips to find new clients.
10. The biggest challenge facing agencies in 2024 is economic conditions and uncertainty
Since 2018, getting new clients has consistently been the top challenge that agencies face. We surveyed agencies this year and they still expect that getting new clients is a major challenge. However, economic conditions and the uncertainty of 2024 are their biggest concerns.
In previous reports, this answer was not even an option. And agencies reported higher growth rates. In 2018, for example, nearly half of the agencies surveyed reported that their managed spending increased by more than 25 percent, compared with only 26 percent this year.
In our report , we have included some tips on how to tackle this challenge.
Prepare for the growth of agencies in 2024
This look at how other digital agencies use their resources and serve clients can inform your planning for 2024. It can also help you identify areas that need improvement or to be streamlined.
Here is a brief summary of the key takeaways of our State of the Digital Marketing Agency report in 2023:
- Many agencies now use a hybrid pricing model
- The percentage of advertising spend has increased from 2018
- Creative services are charged extra by agencies
- These agencies offer a wide range of services, but social ads is their most popular service.
- Many clients use multiple services from one agency
- The time spent by agencies managing paid search on behalf of their clients is considerable
- Smaller agencies employ fewer people to perform multiple jobs.
- The tech stack of agencies is diverse (and now includes AI tools).
- The managed spend has increased (but at slower pace than 2018-2020).
- The biggest challenge facing agencies in 2024 is economic conditions and uncertainty
Do you spend too much time managing or reporting PPC? Do you offer your clients too few services?
Need help preparing your agency for growth by 2024? WordStream by LocaliQ is a great tool to help you grow your agency. Contact us to learn more.
The post State and the Digital Marketing Agency 2023: Our Ten Biggest Takeaways first appeared on WordStream.