Advertising Agencies in the US Industry Market Research Report from IBISWorld has Been Updated

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Declines in corporate advertising spending and a dramatic change in how people consume media have caused the Advertising Agencies industry to suffer over the past five years; however, revenue has begun to recover and will continue rising over the next five years as firms adapt to the changing environment. For these reasons, industry research firm IBISWorld has updated a report on the Advertising Agencies industry in its growing industry report collection.

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As traditional services lose demand, advertisers will focus on digital media to remain relevant

After suffering from a decline in clients' advertising budgets during the recession, the Advertising Agencies industry is gaining steam. In 2013, IBISWorld estimates that revenue will grow 3.7% to $33.2 billion. This growth comes on the back of 2012, when the industry benefited from the positive impacts of the 2012 Summer Olympics and election season. IBISWorld estimates that profit will represent 10.0% of revenue during 2013, up from a low of 3.9% in 2009. However, the industry experienced significant setbacks as a result of the recession. Falling disposable income caused a drop in consumer spending. In turn, industry demand fell as clients reduced their marketing budgets. These factors are expected to cause industry revenue to increase at an annualized rate of just 1.0% in the five years to 2013. “With revenue from traditional media declining, many agencies have changed their pricing models to incorporate more competitive strategies,” says IBISWorld industry analyst Kevin Culbert. In the past, agencies received a 15.0% commission for the advertisements they placed. Today, many clients look to agencies that can provide incentive-based pricing structures to ensure the best possible results. Clients with diminished budgets have sought out accurate demographic targeting so they know advertising budgets are well-focused. The improved ability to measure performance in digital advertising has accelerated the search for reliable metrics.

The changing media landscape has led some to question the role of agencies in the digital age, especially as some firms struggle to harness new media potential. According to Culbert, to remain competitive, agencies have acquired specialist units, giving rise to global one-stop advertising shops that handle all types of advertising and marketing services. Such acquisitions, coupled with a difficult operating environment, are expected to cause industry establishment numbers to rise at an average rate of just 0.3% annually to 13,845 in the five years to 2013. The internet has made it possible for everyone to have a voice, causing small market segments to emerge. For example, social networking and new media have fragmented market and population segments. As a result, campaigns that focus solely on traditional media (e.g. TV, radio and print) have lost some efficacy, and advertisers are focusing on social media to promote communication with consumers.

In 2013, IBISWorld estimates that the top four players in the Advertising Agencies industry will account for a little more than one-quarter of the available market share, giving this industry a low level of concentration. Industry concentration has increased over time as more agencies merge, acquire and 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 at an annualized rate of just 1.0% to 13,313. A series of mergers and acquisitions contributed to industry consolidation between 2006 and 2009. 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. 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).

Industry Performance
Executive Summary
Key External Drivers
Current Performance
Industry Outlook
Industry Life Cycle
Products & Markets
Supply Chain
Products & Services
Major Markets
Globalization & Trade
Business Locations
Competitive Landscape
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
Major Companies
Operating Conditions
Capital Intensity
Key Statistics
Industry Data
Annual Change
Key Ratios

About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.

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Gavin Smith
IBISWorld
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