As traditional services lose demand, advertisers will focus on digital media to remain relevant.
Los Angeles, CA (PRWEB) November 21, 2013
The Advertising Agencies industry's revenue slightly declined during the past five years, as operators contended with many clients reducing advertisements during the recession. Total advertising expenditures plummeted in 2009, as firms slashed advertisement spending due to low consumer discretionary spending. Although the Consumer Confidence Index is anticipated to grow during the five years to 2013, it still dropped in 2009. As agencies contended with low confidence limiting consumer purchases, they struggled to attract consumers. While corporate profit is expected to grow over the period, many companies cut their advertising budgets when profit declined in 2008. In 2009 and 2010, many companies boosted profit by cutting unnecessary expenditures, including advertising. Further hampering revenue, high investor uncertainty in 2009 caused investors and companies alike to become more risk averse and wary of low return on investment, which curbed demand for advertisements from agencies that were unable to measure advertising results.
According to IBISWorld Industry Analyst Sarah Turk, “Revenue was slightly propelled forward by events in 2011 and 2012, such as the presidential election, as high audience viewership incited many firms to invest in advertising.” Overall, many agencies anticipated that advertising expenditures would surpass 2007 levels but instead have struggled with slow advertising spending growth. As a result, revenue is anticipated to decline during the five years to 2013. However, “revenue is expected to grow in 2013, bolstered by advertising spending exceeding 2007 levels,” says Turk. Profitability increased in 2013 as a result of industry operators changing their pricing models to attract clients; some operators adopted performance-based pricing, which measures the number of consumer views via digital advertising.
In 2013, IBISWorld estimates that the top four players in this industry (Omnicom Group Inc., Interpublic Group of Companies Inc., WPP PLC and Publicis Groupe SA) will account for more than 30.0% of revenue for Advertising Agencies industry (see IBISWorld report 54181 for major player market shares). Industry concentration has increased over time as more agencies operate on a global basis. This factor has caused the number of firms operating in this industry to remain relatively flat in the five years to 2013, increasing slightly during the five years to 2013. A series of mergers and acquisitions contributed to industry consolidation between 2006 and 2010. In spite of the trend toward globalization, only revenue generated domestically contributes to industry market share, meaning that firms generating the majority of their revenue from abroad might have a lower market share relative to their total revenue.
During the five years to 2018, revenue is anticipated to grow, propped up by the changing media landscape initiating advertising spending. For example, agencies that are able to reach fragmented markets, such as specific age demographics, will have a large number of clientele. As companies expand into global markets, agencies that provide advertising and marketing services in house will be in demand, as many companies streamline their domestic and global advertisements.
For more information, visit IBISWorld’s Advertising Agencies in the US industry report page.
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IBISWorld industry Report Key Topics
Advertising agencies create advertising campaigns and place the advertisements in periodicals, newspapers, radio, TV and other media. Through in-house capabilities or subcontracting, ad agencies provide advice, creative services, account management, production of advertising material, media planning and buying (e.g. placing advertising).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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