SoDA Report Reveals Digital Marketers' Latest Challenges and Opportunities

Agency revenues hit by rapid move towards in-housing, programmatic and commoditization. End Quote

(1888PressRelease) May 21, 2015 - SoDA, the voice of the digital agency and production community, has released the authoritative annual Digital Outlook Study as part of The SoDA Report Vol 1 2015.

The findings of the research, conducted by Econsultancy, identify key issues that face digital agencies in 2015, the skills challenges they need to work on as well as insight into the current state of client investment. It also highlights the extent to which advertisers are rapidly taking work in-house or reducing the size of their agency rosters.

Central to the threat facing digital agencies in 2015 is in-housing combined with the rise in the use programmatic platforms and commoditization of digital.

In-housing of digital efforts is a major challenge with 27% of companies claiming to work with no agencies, more than double the figure from 2014. Clients that continue to work with agencies are also cutting back on their rosters; just 12% of brands had four or more digital agencies this year, down from 21% in 2014.

Just over 38% of respondents also commented that rapid commoditization of digital work such as website development, app development and digital campaign production is proving to be a serious problem for their companies.

DIGITAL AGENCIES TAKE THE LEAD
Nevertheless, agencies remain bullish about their prospects. 80% say the industry has moved in a positive direction and 76% say digital agencies are now more likely to become "lead" partner agency, an increase of 10% on 2014.

The research also reveals that clients are investing heavily in digital, but beyond campaign budgets.
•65% of brands are allocating increased spend to digital platforms, applications, tools and services that are non-marketing related
•62% are investing more in customer insights and analytics
•52% are boosting user experience testing and research

The results of the survey also indicate that campaign spending will grow, with 47% of respondents globally saying they were either reallocating more budget to digital from their marketing spend or increasing digital spend as part of an overall rise in total marketing spend. The figures were even higher in North America at 56% although economic uncertainty in Europe meant a much less positive response at just 28%. Thirteen per cent of European respondents also cut digital budgets compared to just 9% globally.

AREAS OF GROWTH
Key growth areas identified by the Digital Outlook Study include user-centric design, emerging tech and trends as well as product incubation, all of which were on the priority list with both clients and agencies.

Conducted in partnership with Econsultancy, the Digital Outlook Study is based on a global sample of 680, evenly split between advertisers and agencies with a large majority of senior company decision-makers.

ADDITIONAL FINDINGS
•Agencies still struggle to estimate project costs, a core business function that has huge impacts on both profitability and their relationship with clients. Agencies and production company respondents scored themselves at 6.32 out of 10 (where 10 is the best) compared to 6.09 in 2014. The issue has become an even bigger challenge in 2015, as cost overruns are now cited as the second most common reason for the end of a relationship by clients - moving up from a distant fourth in 2014.

•Clients and agencies are much more aligned in 2015 on the areas of expertise they believe to be most valuable for client organizations. Respondents picked the same top three areas: expertise in emerging trends, marketing creativity and customer centered marketing. Five out of the top seven areas matched in 2015 compared to just one in 2014.

•Clients and agencies are increasingly working well together. Just under 70% of respondents said they felt the dynamic of brands and agencies was improving overall. Positive responses were higher at independent agencies - 72.3% - than they were at holding company-owned agencies, where it was 62.5%.

•Organizational structures on the client side continue to be seen as a barrier to innovation by more than four out of 10 agency respondents. Just under 44% of agency respondents made this point but only 16.7% of clients agreed.

•Innovation labs and product incubators take around three years to pay off. The learning curve means that there is little clear ROI in the early years, although benefits do flow from talent retention and new business development. After three years however, one in four of those tracked had benefited from a company spin-off, VC investment or significant funding.

•Product innovation has become a key area of opportunity for agencies with a whopping 50% of all agency respondents saying they were consulting with clients on new product and service offerings. This trend was predicted in SoDA's 2014 study in which product/service innovation ranked as the second most valued area of agency expertise among client-side respondents.

•Clients tend to hire smaller agencies for design, development and strategy tasks - commonly selecting partners with under 200 full-time employees. Media and analytics services tend to go to larger companies.

•The number one reason for clients walking away was outgrowing their agency's ability to deliver against their needs (19%) while agencies overwhelmingly pointed to new client management as the number one reason (33%). Both sides listed cost overruns as their second concern at 17% among clients and 11% among agencies.

•Agencies still struggle to handle data, scoring themselves at 5.86 out of 10 on their ability to drive actionable insights from data and 5.69 on the capability to use data to drive deeper personalization. Perhaps as a result this is a key area of client in-housing with just under 35% of clients indicating that measurement and analytics was a internal function.

Chris Buettner, SoDA executive director and managing editor of The SoDA Report, said: "Clients in 2015 feel tremendous pressure to understand and leverage emerging technology trends in order to innovate their operations as well as the products and services they offer to their customers. In fact, expertise in emerging trends is now the number one skill clients most value in their agency partners, up from a distant third in 2014.

"Agencies and production companies - particularly those that invested early in innovation labs and product incubators - are reaping the benefit of clients' acute need for emerging tech expertise. They're also increasingly bringing their own IP directly to market."

The SoDA Report is one of the world's most widely-read publications in the digital marketing industry, with more than 330,000 views and downloads in 2014.

In addition to the SoDA/Econsultancy Digital Outlook Study, the report also includes original articles by the industry's finest minds, exclusive interviews with thought leaders, as well as case studies of the world's best digital marketing campaigns.

www.SoDAspeaks.com

###

space

Other Related Press Releases