Opportunities & Challenges in 2020 & 2021 – Survey Report by Ad World Masters – Part IV
AdWorldMasters conducted a thorough study on the digital marketing and advertising agencies market in 2020. We divided the research and findings into 4 reports that you can find on our blog.
Agencies had to make changes to combat the effect of the events of 2020. This wasn’t just the COVID-19 pandemic but also political events all over the world. The changes were to increase revenue, reduce expenses, protect agency teams and adopt more MarTech solutions in 2021.
It won’t just be businesses that will impact agencies in 2021. The action that agencies have taken will collectively change the digital marketing agency market in the form of increased competition or an opportunity to stand out. The demand for high quality digital marketing is stronger than ever as businesses rely heavily on the online space to survive. This presents a unique set of opportunities as well as challenged for the suppliers of digital marketing in 2021.
🎯 Businesses may have their demands met in-house or with freelancers more than through agencies.
🎯 Most agency leaders (63.3%) expect agencies to benefit from the rapid acceleration of digitization caused by the pandemic.
🎯 Agencies feel like the high competition leads to a large expense of time and resources to stand out and gain new business.
🎯 Even in the face of new challenges, a large number of agency leaders are still concerned with age-old challenges, such as businesses failing to trust their expertise.
🎯 The events of 2020 will lead to 2021 being the best year of growth for agencies that adapt, innovate and demonstrate flexibility.
Predictions for 2021
36.7% of agency top managers already implemented substantial changes in their organizations in 2020. 22.4% of agencies are planning to implement them in 2021. That’s why a staggering majority of them (73.5%) of them expect that 2021 will be good for their agency despite the effects of the pandemic still changing the market.
49% of agency leaders suppose that brands will use more agencies in 2021 than before. Unfortunately for agencies 42.9% of them think that brands will continue to build in-house competences for marketing in 2021.
There are more concerns for agencies as they think that brands will use more freelancers in 2021 than before (40.8%). A report on freelancers called “Why the Gig Economy is Growing in 2021” gives even more insight into why freelancers might be a threat to advertising and digital marketing agencies. It showed that the demand for freelancers is likely to increase in 2021. Most freelancers (70%) were found to train their skills regularly and have at least two to three skills (61%). This means freelancers have the competency to challenge agencies.
Agencies predicted more threats: brands will change agencies more often than before (34.7%), and brands will use more MarTech in 2021 than before (28.6%).
Comparing this with the optimistic vision agency leaders have of 2021, does this show a readiness to face these challenges or an ignorance of the impact of these challenges?
Another report looking into how the future looks for digital marketing agencies (“2021 Digital Marketing Agency Outlook”) shares this optimism due to the fact that agencies have long-term, stable relationships with their clients and are able to deliver high-value services.
Another finding of interest is that most leaders (42.9%) expect that prices will not change. More agencies expect growth in 2021 (34.7%) than a drop (20.4%). In our report of the “Financial situation of agencies in 2020 & 2021”, we found and concluded that due to the structural challenges described above, a decrease in prices of agency services can be expected. This is a result of agencies willing to support the smaller marketing budget of their business clients, and due to a rise of newer agencies entering the market to cash in on increased digital marketing demands at a lower rate.
Only time can tell how fast the market will recover from the pandemic crisis and how deep are in fact structural changes of the agency market.
What do agency leaders think about the advertising market?
We asked them to vote for different statements. 59.2% of agency leaders said that the biggest market players like Google, Facebook, Amazon, Microsoft and their ads systems will gain in 2021. 51% of them think that as a result of big data, MarTech, know-how marketing services will become increasingly effective but at the same time 30.6% of them feel this is a challenge for their organisations, declaring that the advertising market and technology is developing too fast to follow it properly.
36.7% of agency top managers shared opinion that in 2021 many agencies will go bankrupt as a result of the economic crisis caused by the pandemic, but almost twice as many of them (63.3%) hold the complete opposite opinion: many agencies will gain on the acceleration of digitization resulted by pandemic. Twice more leaders think that small agencies will gain in 2021 than large agencies (32.7% vs. 16.3%). Ancel Ochino Bwire, the CEO of Ancywax expanded on this by stating, “Big agencies may be disrupted by smaller more nimble ones since small agencies are fostering relationships with clients and working with them through the journey more and more.”
The Impact of Digitization on Agencies
Agencies were asked “What MarTech services are you using or are going to use in 2021?” The respondents pointed mainly to SEO tools (68.8%), video & photo stocks (66.7%), digital media buying / optimization platforms (58.3%), web-app development tools (45.8%), social monitoring / listening / management solutions (45.8%), emailing tools (45.8%). When it goes about MarTech usage by agencies there is no doubt that the pandemic is speeding up digitization processes on the market. MarTech seems to be one of the biggest winners of the crisis caused by COVID-19. In 2021 58.7% of agencies will use more MarTech in 2021 than before.
A respondent of the survey Salman Saleen, the manager of Techliance recognized these changes as a basis of a new action plan for agencies, stating, “… more companies are coming onboard to create the digital presence. This presents a new line of action in 2021 for IT and MarTech firms after the difficult 2020.”
We cover the topic of MarTech in more detail in our report “Agency Business and COVID-19 in 2020 & 2021”.
39.1% of agency leaders think that platforms matching agencies with brands will play a bigger role in the business in 2021 than before. So if you share this opinion and do not have an account on our platform yet, take a chance and register now – it is free.
Challenges for Agencies in 2021
In our Survey we asked agency leaders what the key problems are for agencies to increase their business in the long term (2020-2025). They could indicate as many answers as they wished. On one side there is a speed up in transformation of the agency market but on the other side there are old, well known problems that agencies continue to struggle with.
50% of agency leaders say that the RFI / pitching process consumes too much of the agency’s resources and time. 35.4% of them are at the same time saying that the RFI / pitching process is not transparent enough to make the best offers win.
39.6% can see difficulties in gaining new business. 35.4% think that competition is too high declaring that there are too many agencies on the market. 27.1% of them are afraid that freelancers are taking over too much of the agency projects and 37.5% of agency leaders are afraid that in-house brands are decreasing marketing budgets. 39.6% of agency leaders say that low level of client expertise is a long term problem for their development (it might mainly be related to agencies working with SMB).
45.8% of agency leaders declare that an important blocker is that clients think they know better, which seems to be an ancient problem in client and service providers relations. 16,7% of agency leaders say that market regulations (incl. GDPR) are a hurdle (most probably this can be a pain point for European agencies out of our global respondents).
Agencies are trying their best to adopt and implement changes in their organization. The problem is that the transformation happens fast and changes go deep and many agencies have not found good methods to solve older problems. Agencies seem to be in this crush zone. In Ad World Masters we do our best to work out solutions answering agency needs in the new normal by providing a platform in which businesses can easily find them.
The most important challenges facing agencies in 2021 are:
1️⃣ Good understanding of the unpredictable market. They have to maintain a balance between a high agency capacity for newly emerging projects, and, on the other hand, responsible resource management so that they don’t suffer losses.
2️⃣ Adapting to the changing reality. Both in terms of the scope of services, the speed of response to inquiries, price modification, work organization and many other elements.
3️⃣ The agency market is under even greater price pressure from clients and under pressure to focus on sales results and shoulder the risk of sales results.
Opportunities for Agencies in 2021
While for the past 10 years the strategy every agency aspired for was innovation, it is possible that adaptation or flexibility could take possession who gains a competitive edge in the next decade. Maintaining business agility, the ability to respond quickly and adapt to changing conditions may prove to be the most desirable asset in business, if the dynamics of the coming decade does not decrease. And with many structural tensions such as the US-Chinese rivalry, social movements such as “Black Lives Matter”, environmental pollution, populism in politics, etc., it does not seem to decrease. Until recently, the company’s pride was infrastructure, large teams, and long-term contracts. Now, the trend will be to increase flexibility in business activities.
We think that 2021 will be the year of a wise reorganization of advertising businesses, it will be a search for innovation in management, communication, offering, reporting, production and purchasing. It will take effort from the organizations, but it will ultimately be good for them.
With the great demand for digital talent as the world shifts its activities online, a great supply of in-house teams and freelancers along with other digital marketing agencies have also spawned. Agencies have both traditional hurdles (clients thinking they know better than their skilled teams) and the challenges of a new market on their shoulders. They have to go above and beyond not just to stand out as a better option than other marketing solutions, but also from other agencies.
Despite these setbacks, agencies share a collective optimism and readiness for 2021 as they seize the opportunities brought about by digitization and marketing demands. Agencies are preparing by strategizing, adapting, nurturing strong relationships with clients and providing high value for businesses to thrive with them in 2021.
Many agency leaders expect a quick recovery for their agencies in 2021 after a difficult 2020, and that is why they decided to keep their teams without reductions. Most of them are very optimistic regarding business in 2021. At the same time, they point to quite a few structural, significant market blockers. In our opinion, agencies should keep an upbeat attitude but at the same time be prepared for less optimistic business scenarios in 2021.
– – –
Are you an agency top manager or a new business manager?
Register and add your agency for free now.
Do you need even more clients? Consider purchasing Premium Account – learn about its benefits & costs.
Get new briefs. Gain new clients. Grow your agency.