Vitamin T, a talent agency for digital creative, created this infographics to illustrate the mergers, acquisitions, and launches of some of the largest agencies in the world from as early as 1800 to today. Click here for the bigger version.
It is indeed fascinating to see how the adland has evolved in the past two centuries, which has also provoked me to rethink the future of agencies. DigiDay shared ten statistics that speak volumes about the situation many agencies currently find themselves in:
In 2011, the revenue of the big four ad holding companies (WPP, Omnicom Group, Publicis Groupe, and Interpublic Group of Cos.) was almost twice as large as that generated by the rest of the top 50 combined – $45 billion to $23.7 billion. (AdAge Agency Report)
In 1984, the average client-agency relationship tenure was 7.2 years. By 1997 that number declined by 25 percent to 5.3 years. Today the average client-agency tenure is thought to be less than three years. (The Bedford Group)
Agency revenue growth has slowed considerably since 2010 for all four of the major ad holding companies. IPG even saw a contraction of 0.9 percent during the third quarter of 2012. (IPG, BusinessInsider.)
The operating profit margin of the top 10 U.S. advertisers in 2010 was one third higher than for the holding companies they engaged. The average profit margin for agency holding companies was 12 percent, compared with 16.5 percent for their marketer clients. (4A’s Profit Presentation)
The average CMO tenure is rising, which could be good news for agencies. It currently hovers somewhere around 43 months, compared with 23.2 months in 2006. (SpencerStuart)
The rates major agency creatives get billed out at is falling. The average hourly billing figure for New York-based creatives fell from $751 an hour in 2008 to $637 an hour in 2011. (4A’s Labor Hourly Billing Rate Survey Report)
The average salary for a media buyer in New York is $40,000. (Glassdoor)
Two thirds of advertising agencies in the U.S. employ fewer than five people. (US Census Bureau)
There were more than 13,200 advertising agencies in the U.S. in 2010. (US Census Bureau)More than 30 percent of U.S. agency revenue came from digital in 2012, representing more than $10 billion. (AdAge Agency Report)
Through these statistics, we can see there are ever-growing challenges for ad agencies to face nowadays. Their margins are being squeezed, their services commoditized, and their roles disrupted as technology continues to replace people in the marketing world. So how to turn over this situation? I don't have an answer for this big question, but all I can say is that the conventional agency model would probably not applicable for this era, and agencies need to find new ways to add real "value" to the supply chain.