Advertising & PR Agencies

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 21,000 advertising and PR agencies in the US develop and place ads for companies and organizations and develop programs to promote the interests of or create an image for their clients. Some full-service agencies provide both advertising and PR services.

Advertising Overload Spurs Backlash

Advertising and publicity space has become increasingly cluttered, with marketers struggling to get their voices heard.

Increasingly Complex Media Environment

The media environment is constantly evolving as a result of new technology; in the last decade, the environment has changed dramatically.

Industry size & Structure

A typical ad agency operates out of a single location, employs less than 5 workers, and generates about $4.8 million in annual revenue. A typical public relations agency also operates out of a single location and employs less than 5 workers, but generates $2.5 million in annual revenue.

    • The advertising agency industry includes 13,300 companies that employ 223,000 workers and generates $64 billion in annual revenue. The public relations agency industry includes 8,100 companies that employ about 65,400 workers and generates $20 billion in annual revenue.
    • Agencies may compete with specialized agencies, such as media buying agencies or direct mail specialists. In some cases, agencies contract out specialized services.
    • Large companies include Interpublic Group, Omnicom Group, and WPP. Large companies may act as holding companies for many smaller agencies.
                                  Industry Forecast
                                  Advertising & PR Agencies Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  May 17, 2024 - Marketing Budgets Drop
                                  • Marketing budgets are down in 2024 compared to last year, according to Gartner’s 2024 CMO Spend Survey. On average, marketing budgets have fallen to 7.7% of revenue in 2024 compared to 9.1% in 2023. In the four years before the pandemic, marketing budgets averaged about 11% of revenue, but they’ve fallen to 8.2% in the four years since. As budgets have tightened, marketers are focusing dollars where they can have the most impact. In 2024, digital channels accounted for more than 57% of paid media spending, led by search (13.6%), social media (12.2%), and digital display ads (10.7%). Among traditional channels, 2024 spending was led by event marketing (17.1% of total ad spending), followed by sponsorship (16.4%), and TV (16%). Nearly two-thirds of marketers said they lacked the budget to execute their strategy in 2024 but hope leveraging generative AI will help them do more with less.
                                  • President Biden signed a bill in April that would force TikTok’s Chinese owner ByteDance to divest the social media application or face a US ban, according to The New York Times. The bill originated in the US House, where it enjoyed significant bipartisan support. It then then quickly passed in the Senate. The law’s backers in Washinton allege TikTok’s ties to China threaten national security and could be used to spread Beijing-backed propaganda. The law gives ByteDance 270 days to sell, but President Biden said that timeframe could be extended to a year. However, TikTok is fighting the measure on First Amendment grounds, and industry watchers wonder if a buyer with deep enough pockets would step up and make an offer for the platform, which has an estimated value of $225 billion, according to CB Insights. Also citing national security concerns, former President Trump tried to ban TikTok or force a sale in 2020, but the effort was blocked in federal court. In the event of a TikTok ban, EMARKETER estimates Meta’s Facebook would likely benefit the most, capturing between $1.9 billion and $2.4 billion of TikTok’s reallocated advertising revenue. Alphabet’s Google and YouTube would stand to gain between $1.7 billion to $1.9 billion.
                                  • US ad spending rose 4.3% in March 2024 compared to the same month a year earlier, according to MediaPost analysis of Guideline’s Standard Media Index US Ad Market Tracker. March ad spending marked the 11th month in a row of year-over-year gains. A 15.7% year-over-year increase in digital ad spending was enough to offset a 13.6% drop in spending for traditional media ads. Digital’s share of total US ad spending rose to 68%, up seven percentage points compared to March 2023.
                                  • Some marketers have reported that Meta’s AI-enabled Advantage Plus ad tool is burning through ad budgets and not delivering results, according to The Verge. In mid-February, some ad buyers noticed that their cost per impression (CPM) – a key measure of ad buying costs – was as much as ten times higher than usual. Meta’s Advantage Plus tool is designed to make digital ad campaigns more efficient with an automated set-it-and-forget-it solution after users input creative assets, conversion goals, and budget caps. However, some marketing agencies have noted their clients’ CPM costs had increased by as much as four-fold compared to a year earlier. In mid-April, a Meta spokesperson reached out to The Verge via email, which, in part, read, “Our ads system is working as expected for the vast majority of advertisers. We recently fixed a few technical issues and are researching a small amount of additional reports from advertisers to ensure the best possible results for businesses using our apps.”
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