By Introductory note from Rand: This extraordinary research was put together by the brilliant Paddy Moogan, who’s had a long career in marketing agencies, and now coaches other agency owners and runs The New Leader newsletter (to which I’m a subscriber). Paddy’s contribution here cannot be overstated – he’s assembled a mountain of survey data from 612 agency owners and consultants to help answer questions many hold.
Please welcome Paddy Moogan to the SparkToro blog!
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I’ve spoken to a bunch of agency owners over the last 12-24 months and the resounding message is loud and clear: things are tough right now. I won’t lie, a big part of my motivation for this research is to validate my own experience as CEO of Aira, which I found incredibly challenging between 2022-2024, when I stepped down.
Until this report, all I had to go on was my own circle of friends and professional contacts. Was it like this for everyone? What about freelancers and solo consultants? Did they feel the same? I’m in the UK; was the experience for our agency friends in the US and around the world similar?
Rand wrote a whole post about this painful phenomenon at the end of 2023 after having similar conversations with his network. Spoiler: I was one of them! He, too, wanted to validate whether, where, and how much the marketing agency world was struggling.
So, we set out to take a temperature check of the digital agency landscape and seek to answer questions many agency owners have, such as:
- Are agencies still growing their revenue? Has it slowed down?
- How is their sales pipeline compared to previous years?
- Has the move to remote working changed their culture or client relationships?
- Is AI a threat to the agency business model?
- How confident are agency founders feeling about the future?
We also wanted to try to establish some agency performance benchmarks so that we can give folks a sense of where they sit compared to their peers, as well as run this survey and update those benchmarks annually.
We divided the results into five core areas which are listed below:
- Revenue and growth
- Client services and operations
- Sales and marketing
- Culture and ways of working
- What the future holds for agencies and consultants
We’ll share a few more posts over the coming weeks that go deeper into these areas as well. In the meantime, here are some of the most interesting takeaways and some key benchmarks for agencies and solo consultants.
Who took the survey?
Before diving into the results, let’s take a brief look at some top line demographics of those who responded.
The survey includes agencies from a wide range of sizes, geographies, and services offered, but there’s definitely concentration in smaller (1-10 person agencies), North America and Europe, $100K-$1M revenue businesses, and SEO, SEM, Content, and Analytics. In the sections below, we’ll break out responses from specific slices of these groups to illustrate key differentiators and illuminate useful patterns.
Times are hard right now, but there is a LOT of (too much?) optimism for the future
One of the first results that caught our attention appeared in the very early results; so much so that I emailed Rand about it and wondered what was going on. It’s how agency folks and consultants generally feel about the health of the industry right now vs. what the future holds.
Yep, pretty much a confirmation of the conversations that I mentioned at the start of this post. Folks are finding it hard right now; only 10% say 2024 was healthy for them. 44% said it was a struggle and the remainder were in the middle.
Things got interesting when we asked about the future and how folks expected their business to perform over the next year. Here’s what they said.
Woah. Okay, a big turnaround here with 60% confidently saying that their revenue would increase. That’s a considerable swing given that only 10% described their current world as a healthy one. Don’t get me wrong, I’d love for this to be true. But I worry that there may be a little too much optimism, a little too soon.
The next logical question is: does this outlook change based on agency size or geography?
I’m glad you asked.
There isn’t too much deviation when it comes to agency size. However there is clearly less pessimism from the very large agencies (250+ people)! Although we would point out that the volume of responses here may not be fully representative, with this segment of respondents being the smallest (only 6 agencies of this size).
In terms of geography, it’s a similar story. Location doesn’t matter too much, though the Americas had the most optimism.
That similar story of optimism pervaded when we asked about expected demand for services.
This would imply general optimism about the services that digital agencies and consultants provide. As noted above, the survey covered a wide range of services, with SEO, content strategy and paid media being the most popular.
On a positive note, the vast majority of agencies don’t expect to cut headcount over the next 12 months. That’s welcome news given that so many agencies made significant cuts in the last 2 years
If this is true and the optimism we’ve seen above is well founded, agencies can expect a much more profitable year with revenue growth and relatively stable or small growth in headcount.
There is zero consensus on the impact of AI on the industry
I was really looking forward to seeing the results of this one. With the hype around AI seemingly growing by the day and some of the most obvious use cases of tools like ChatGPT and Claude crossing directly into the digital services space, I was curious to see what agency owners and consultants thought.
Well, it turns out that no one really knows.
The results were split almost perfectly down the middle. In total, 45% disagreed while 44% agreed.
Well, I’m glad that we cleared that one up!
Jokes aside, I think this reflects the reality of where we are at right now quite nicely. Yes, AI has huge potential to disrupt all walks of life and whilst huge steps forward have been made over the last two years, we’re still figuring a lot of this out. AI is almost so big in its potential impact, that we can’t see the forest for the trees.
Also, it’s my personal opinion that the impact on the digital marketing industry will be a secondary effect to what happens with AI as a whole. It may feel like it’s of huge importance to us and our industry and whilst it kind of is, it’s of even more importance to the wider world around us.
The sales pipeline is still quiet and a big challenge for most
Client retention and new business sales are the lifeblood of an agency. I’d argue that the former takes precedence over new business, but both are very important.
So, it is a little concerning to see that new business sales is listed as the number one challenge that agencies and consultants expect to face over the next 12 months.
Nearly 70% of respondents cited this as their main challenge.
Of course, we wanted to dig a little deeper and asked about the state of the current sales pipeline.
I don’t want to be overly pessimistic about this, but only 13% describing their current pipeline as healthy is a little concerning. Over a third flat out said that it’s not good right now.
Has this changed compared to last year?
Okay, so it appears to be moving in a better direction for most which is a good thing for sure.
Let’s go a level deeper and see what the sales pipeline looks like for agencies of different sizes and locations. It gets a little more interesting…
Wow. So the smaller the agency, the tougher things are when it comes to their current sales pipeline. When you combine this with how exposed these agencies are to losing clients, it’s a worrying state for them.
In most cases, agencies and consultants ranked their current sales pipeline as “Average”, meaning that they’re not exactly in terrible shape, but it’s not exactly packed full of potential clients either.
The situation isn’t helped by the fact that smaller agencies and consultants seem to have a lot riding on their current pipeline.
A large number of smaller agencies value their pipeline at up to 25% of their annual revenue. That could be quite a big swing if they have high conversion rates which is a positive thing, but the general pessimism around the health of the sales pipeline implies otherwise.
What’s driving this?
Well, there are clearly many factors that could be contributing to this picture. But another question that we asked could reveal at least part of the answer.
As we can see, the larger the agency, the more likely it is they have staff dedicated to sales full-time. Whilst somewhat expected, when combined with the previous data related to smaller agencies having a weaker sales pipeline, it makes even more sense.
Having staff who are able to build and close pipelines as their sole job can be a huge advantage to larger agencies, especially when times are hard and smaller teams have to split their team with other tasks that are just as, if not more, important.
Most agencies are now fully remote – and plan to stay that way
I won’t lie, this one shocked me a bit and proved my own experience and intuition dead wrong.
Before I explain why, let’s take a look at the data.
Right, so just over half of agencies are now fully remote, with only just under 5% back in the office full-time. The remainder are hybrid.
Why does this shock me?
Well, it goes counter to pretty much every one-on-one conversation that I’ve had with an agency owner over the last two years or so. The sentiment from most is that they want their teams back in the office at least a few days a week.
As a result, I’d have expected that 26.6% to have eaten far more into the slice for full-time remote.
Rand made a good point when we were discussing this result – could we have some bias in our results in that folks who are most likely to embrace remote working are the same folks who may take time out of their day to fill out our survey?
Perhaps. We’ll never know for sure. But I’m super interested in the future of work here and whether more agencies move towards being fully remote.
Most expect to keep things as they are.
Now that some post-pandemic time has passed, agencies and consultants seem to have figured out how they’d like to work; over 70% are happy with their current setup.
For the 25% who are open to change, I’m interested in the direction they take and whether my own instincts will be proven wrong even further!
We’ll be publishing more of the research over the coming weeks, including some great data on areas including sales and marketing, client services, operations and culture.
Methodology and demographics
In total, 612 individuals responded to our survey which was run using Typeform between 13th August 2024 and 9th September 2024.
Respondents were shown all questions and the vast majority were compulsory to answer. Logic and branching was used for some questions, meaning that a few questions were not shown to everyone. A handful of questions were optional e.g. where we asked about specific revenue numbers and potential for staff layoffs.
The data was analyzed by Rand Fishkin and Paddy Moogan, with the most interesting questions being visualized in the charts above.
Agency size
The majority of our respondents represented a mix of solo consultants and agencies up to ten people in size, totally just over 65%. The next biggest segment at 25% was the 11- 50 person range. The remainder were mostly in the 51-250 range, with the smallest representation (1%) coming from agencies who are more than 250 people in size.
Location
We focused on the areas that agencies and consultants served clients, as opposed to the physical location of the agency. Given the remote-first nature of so many agencies and consultants, this felt like a better way to get a feel for us to see trends across locations.
By far the biggest location service was North America, with 75% stating that they served clients here. Next was Europe at 45%, followed by Oceania and Asia with 11% and 9% respectively. Central/South America and the Middle East came in at around 7% each, with the area served the least being Africa at 4%.
Services offered
We also asked respondents about their range of services. The options here were extensive and the responses were also very wide ranging, representing a big set of digital services. The most popular services were somewhat as we’d expected with SEO being the most popular at 78%. Next up was content strategy at 72% and SEM/Paid search being offered by 62% of respondents. Analytics and social media made up the top five most popular services and the rest were a varied mix.
Agency age
Finally, we asked respondents about the age of their agency or consultancy. 50% were founded within the last ten years, with another 40% being founded the decade before that. The remainder were founded before 2004.
From Rand: A huge thanks to Paddy for this incredibly impressive report. Reminder: if you’re interested in learning more about leading teams (inside and outside of agency world), Paddy’s newsletter: The New Leader, is an exceptional resource. And stay tuned for more insights from this remarkable agency survey project (which we hope to repeat again each year for a long time to come).