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 fewer than 5 workers, and generates about $4.4 million in annual revenue. A typical public relations agency also operates out of a single location and employs fewer than 5 workers, but generates $2 million in annual revenue.
- The advertising agency industry includes 13,000 companies that employ 223,000 workers and generates $57 billion in annual revenue. The public relations agency industry includes 8,000 companies that employ about 65,400 workers and generates $16 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
Recent Developments
Apr 16, 2024 - Weaker but Steady Industry Growth
- The advertising and PR agency industry is expected to experience softer but steady sales growth in the coming years. The industry’s year-over-year sales increased by 15.8% in 2022 before dropping to 4.9% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth is projected to moderate further to 2.1% in 2024, then rise by 4.4% in 2025. The industry will then see flat but steady average annual growth of about 4.6% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
- US net media owner advertising revenues rose in the fourth quarter of 2023, marking the most robust quarterly growth in nearly two years, according to a March forecast by advertising firm MAGNA. Non-cyclical ad sales rose by 9.1% in Q4 compared to the same period in 2022. MAGNA updated its 2024 ad spending outlook to 9.2% growth from an earlier forecast of 8.4%. Pure play digital will continue to drive industry growth, as non-cyclical ad sales will rise 12% in 2024 and account for 72% of the advertising market. Traditional media spending (TV, audio, publishing, OOH, and cinema) will see 2024 ad sales growth of 3.5%. Cyclical events – including the Olympics and the 2024 election season – will add two percentage points of growth to 2024 overall non-cyclical ad sales growth.
- In mid-March, the US House of Representatives passed a bill with significant bipartisan support that would force TikTok’s Chinese owner ByteDance to either divest the social media application or face a US ban, according to The New York Times. However, the bill faces a more challenging path through the Senate, and even if it were to pass, it would likely face legal challenges. TikTok has come under fire amid concerns that its Chinese ownership threatens US national security, including potential interference in US elections. 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.
- Advertising budgets are shifting amid increased privacy legislation. In a recent survey by IAB, 95% of marketing professionals surveyed said they expect more privacy legislation and signal loss in the future. Signal loss refers to an inability to know how your customers are finding you. States are expected to roll out more consumer privacy protections, which, combined with Google’s ongoing phase-out of third-party cookies, is prompting a shift in marketing budget priorities. About 90% of ad buyers report changing their personalization strategies to channels that easily leverage first-party data, including connected TV (CTV), retail media networks, and social media. According to the IAB survey, 63% of respondents expect more states to pass privacy laws in 2024, and two-thirds expect their ability to deliver personalized ads to weaken in states with privacy laws.
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