The advertising industry has reinvented itself in the face of Covid and is anticipating a strong 2021 with higher revenues and improved profit margins, according to a new report released today, by Moore Global, one of the world’s leading accountancy and advisory networks.
The Moore Intelligence report says savings in property and people costs are among the main contributors to an improved financial outlook for UK agencies, many of which were staring at the prospect of major losses only nine months ago.
Moore Global firms represent hundreds of advertising agencies across the world and its forecasts for strong 2021 financial performance mirror other leading commentators.
Online advertising has proven a key driver of growth and London’s ad agencies have used the pandemic to reassess their capabilities and identify gaps in their skillsets. The report says that before the pandemic, agencies lacking in-house capabilities hired freelancers without much consideration of the impact on the bottom line. This is now just one of the areas of savings that many agencies are carrying through into 2021.
Moore Kingston Smith Media Partner Esther Carder (who contributed to the report), comments: “For some, the necessity to tighten their belts and review their resource requirements has proved positive for the long-term health of their business. Perhaps it forced them to trim back where they had become a bit flabby, or remove personnel with legacy skills no longer fit for purpose. Now they can make do with fewer people because they have the right people.”
The annual Financial Performance of Marketing Services Agencies (produced by Moore Kingston Smith) calculates the most efficiently run agencies can achieve profit margins in excess of 20%, compared to the more common 10-12%.
As well as trimming staff budgets, there have been huge savings on international travel and working space. These savings will flow through this year, prompting expectations that margins for 2021 will exceed those achieved in 2019.
Beyond cost cutting measures, many agency owners are now also looking to create intellectual property around their processes to enhance the value of their businesses.
Marketing automation platforms, bidding sites for media buying and automated content creation are all technologies that used to be the domain of large multinationals but are now within reach of mid-tier companies.
However, that has created new pressures as well as opportunities. “Data insight, research, digital skills: everyone is looking for a point of differentiation”, says Esther Carder. “Agencies that can wrap technology or some form of intellectual property around their business will be the ultimate winners.”
Originally posted on Moore Global