Digital agencies forecast to grow 30% in 2014

Digital Agency News.

If you’ve been around the online space over the last few years, you can’t fail to notice it’s been a difficult time being a digital agency. But maybe that’s over! The economy is picking up and most digital agencies are reporting they are expecting substantial growth in 2014.

As reported by eConsultancy, the digital agency world has woken up again and is thriving. In 2013, we saw the beginning of this growth coming off the back of a pretty grim 2012, but every single metric was up in 2013 and we’re seeing even greater growth in 2014.

So where’s it coming from?

There are a number of distinct drivers that we have identified in the digital agency space over the last 12 months:

  • Increased consumer confidence = more spending. The wallets are loosening and companies are moving back into marketing.
  • Mobile adoption. This was hardly on the radar just a couple of years back – now everyone uses mobiles and tablets and if organisations want to address this market then they have to spend, spend, spend.
  • Legacy and laggards. Many companies have been putting off investing in change, preferring instead to eke out an existing improvement plan. These guys are now miles behind and to catch up means hiring agencies left, right and centre.
  • Out-dated internal skills. With job cuts and budgets slashed, the skill and experience of in-house staff has taken a beating since 2010. The poor depth and bredth is just coming to light in boardrooms, and it takes just too long to build new teams with fresh ideas and up-to-date skills. Fixing this by hiring an external digital agency fits the ticket perfectly.
  • New digital frameworks. These new breed of platforms, such as WordPress, so dramatically reduce the cost and speed up development versus older technology that it’s now more attractive than ever to drop legacy, hand-built, platforms and embrace the newer, cheaper and faster technologies. And often the new platforms are open source so greater access to technology, reduced licensing and smoother migration paths are the added benefit.

How is it coming?

With money to spend, companies are reaching out into the marketplace to look for suppliers – but it’s a different world to what it was like in 2008. Companies may have fallen behind in what’s happening in the digital world and they need to slake their thirst for knowledge. They’re keen to read, to understand what’s out there, and how to best use emerging technology to meet challenges and pain.

Google is where is starts for many. Usefully, Google has got a lot better in the last couple of years of showing relevant search results – based on the qualitative value of content and not quantity or trickery. Figuring high on the search engines is now a matter of quality of information, frequency of content and diversity of devices supported.

We’ve seen our natural positions for high-volume searches rocket over the last 6 months and that is generating 10+ new enquiries every week – pretty impressive for a digital agency that self-caps our client limit at 50 organisations.

Word of mouth still provides the strongest route to market but most other methods are dying away, especially print, online display and business directories.

What are the challenges?

The digital agency space is starting to adopt all the characteristics of a scarcity model: With the number of good modern agencies relatively low the prices that agencies charge is starting to climb and they’re able to be more selective with who they work with.

The simplest solution is that the agencies will grow, and quickly. But many have been burned in the past, carrying big staff and office overheads and face risks if they expand into the bubble. Many agencies, like ourselves, are keeping a tight rein on overhead and growth and this will further exacerbate the scarcity model.

For companies this will mean spiralling day-rates, but offset by lower delivery resource needs. It will be fine balancing act that might signal the end of he traditional day-rate and a move to a value-based pricing model.