Agencies will grapple with the shift in client preferences toward internet-based content
Los Angeles, CA (PRWEB) February 18, 2013
IBISWorld estimates that revenue for the Advertising Agencies industry has grown at an annualized rate of 0.9% to $3.2 billion in the five years to 2012. During that time, industry growth was slowed by the recession in 2009, which caused many businesses to reduce advertising expenditure to mitigate losses. While revenue is expected to increase 2.5% in 2012, fears of a potential economic downturn are expected to hamper further growth during the year. Nevertheless, industry profit margins (earnings before interest and taxes) have improved since the recession due to cost-cutting measures.
During the past five years, advertising agencies have been forced to deal with a changing media landscape. The decline of traditional media, particularly newspapers, has caused more advertising agencies to begin developing digital advertising campaigns for clients. Large agencies have wasted no time in acquiring niche agencies that specialize in digital, social and mobile media, while more traditional agencies have suffered from the rise of new media. Such acquisitions have contributed to marginal industry consolidation over the past five years. In 2012, IBISWorld estimates that the top players in the Advertising Agencies industry are Omnicom and WPP PLC. This industry’s low level of concentration has been increasing 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 flat in the five years to 2012, declining 0.2% to 4,900 companies. Some clients view small agencies as having better service, creativity and a lower costs compared to larger ones. Many times, these firms also have niche markets, unlike large agencies, which often aim to service clients across a global network. Large agencies tend to grow through takeovers and mergers with firms in other countries, allowing an efficient global reach. However, most firms are relatively small and do not fall into this category.
In the five years to 2017, IBISWorld forecasts that industry revenue industry will grow. Although industry growth is expected to slow in 2013 due to the slowing domestic economy, revenue is forecast to grow at a normalized rate beginning in 2014. Industry operators will continue to wrestle with the changing media landscape in the years to come. The internet's share of advertising expenditure has recently taken over all other formats except television. This factor represents a potential problem for the industry because companies can place advertising on the internet without the help of an advertising agency. Furthermore, the shift to online content will make clients more likely to seek contracts that favor performance-based compensation. As a result, industry profit is expected to remain relatively flat as more resources are allocated to media analysis. For more information, visit IBISWorld’s Advertising Agencies in Canada industry report page.
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IBISWorld industry Report Key Topics
Advertising agencies create advertising campaigns and place such advertising in periodicals and newspapers, on radio and television, or with other media. Through in-house capabilities or subcontracting, ad agencies provide a full range of services, including advice, creative services, account management, media planning and buying, and production of advertising material.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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 and Canadian 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.ca or call 1-800-330-3772.