Thought Bubble - Will the Business Bubble Burst?Aug 05, 2022
AUTHOR: Robert Craven
What is happening in the digital agency space? Listen as Robert gives his insight into the coming year and trends for agencies.
Robert Craven 00:07
My question to you is, will the digital marketing world the digital marketing industry that we're in. Will it continue to grow? Like top six. I don't think we really know the answer to that is we made assumption is going to continue. The first let's just recap from the economist. The Economist was talking very much about the digital marketing world and trying to figure out what's really going on.
Robert Craven 00:29
So ideally, their point of view, or as ideally, in this digital age, guesswork should be a thing of the past. And yet clearly, isn't the openness honest, the transparency that the platform's claimed to have been really put under question. And if we look at the performance of the machines, or the Mad Men, whichever one we want to talk about, the performance hasn't been great. So Q3 of 2020 rounds after last quarter of which we've got numbers. That chap was basically caught flat footed by Apple's new privacy rules and regulations. It didn't know what to do with it. Likewise, Facebook's revenues were lower than expected these revenues, primarily from advertising, and alphabet, that's Google. They bucked the trend, okay. They seem to be immune to Apple's changes.
Robert Craven 01:19
So, we need to think about why that is, they had the highest sales growth in more than a decade. Now, some of that would be attributed to e commerce coming out of COVID. But maybe that's it, or maybe there's a longer trend. So, post COVID Post is rushed for E-commerce and everyone buying everything online, maybe it'll return. But who knows, we just don't know, we aren't really one of the big challenges is this kind of assumption, which has always been the madmen piece, which is there is a correlation between adverse and economic growth. In other words, the more adverse there are more economic growth there is, it would appear that this may actually be not so much a cause and effect, it may even not be any more correlation, because it's quite possible that economic growth will continue. But digital marketing has already done its work.
Robert Craven 02:15
And was done its worst, was done its best. So, we just need to think about what's going on there. Another real concern in the city, is whether customers will actually tolerate advertisers stalking them. So, the latest Apple version means that people have to our have to say yes, they want to be stalked by advertisers. Only one in five people are saying yes, they want to be still advertisers. This is making people getting pretty nervous that maybe Apple have slaughtered the golden goose. One in five people want those adverts coming to them, which are based on the data that Apple up. So, another thing which is driving economists mad is that the industry despite all this openness, honesty, transparency thing, actually, is an industry full of unknown.
Robert Craven 03:10
So, who's actually paying for the ads? Well, in amp in Amazon land, 40% of the ads are being paid for China. And then Facebook, 36% of the ads are being paid from China. So, China has its huge impact below is they alphabets going out Facebook staying the same. In fact, you're one of the probably the key rushes, one of the key levers is actually what's going on coming in from China. And then another point really, is that everything has been promised, everything has been promised on this idea that this is precision-based customer data. And yet it would appear if you look at the China stuff where the advertising really comes from is the industry the platforms have failed to reveal where it comes from.
Robert Craven 04:02
The big question is, will the industry continue to grow at Topsy? Will the industry grow Topsy? Here's some kind of broad benchmarks which we've seen in the industry, in the industry and in the agencies that we work with. A couple of things to note here are a bit of rules per full time. Employee round about 90 - 235,000 pounds hourly actual fee. That's the blended fee. How much are you actually charging out one hour of time coming in at 90 to 150 pounds utilisation rate greater than 60% the Liberals per Fiona roundabout 145,000. And then there's still a 70-30 split between the owners. None of these are high performing agencies who are doing really well you'd have a really, really great year. And some trends to look at. It seems to be that more and more the agency will split into that kind of sub 30 staff, 30 to 50, 50 to 100. A lot we've seen a lot of people really, really grow rapidly like Topsy, especially in PPC and E COMM And in digital PR. So pre pandemic, we thought 21 to 25% was a pretty good profit. Now we think 27 to 40. Pre pandemic we thought 10% was the new breakeven, we now realise it probably 15. And the issue that everyone's facing is movement and thought based on inflation, that talent, right. And even though web design is a place that people have come from that feels like it's getting tougher and tougher and you want to deliver anything.
Robert Craven 05:44
So, the new normal is going to be some kind of a tradeoff between online offline work. That's what's going on in agency. And where are we seeing the push, everyone's talking about consulting very few people are doing, talking about data analytics, it's like the new normal. Which brings me back to kind of thinking about M&A, everyone's buying everyone's selling valuation through the roof is a really meant operation, which I think is distorting our people's world. It's a phony world.
Robert Craven 06:19
But what does it mean for us? It means M&A. Think about M&A either as a buyer or a seller. It means think about remote working, are you on top of remote working? Think about your billables and your profitability. That's where you're going to make the difference in your agency and blinking people. I question really at the end of the day, is this. Can this continue as it has done? Can it maintain itself as does? Can it continue or will the bubble burst? If you think the bubble is going to burst, Can I just add to that 25-26 You turn 25-26 is when the next big crash is going to come with you. Bank property. It's due because we got to pay back COVID There's going to be an election in the UK. So, 25-26 I probably run into the big crash is going to come. Is this bubble sustainable? Will clients pay more? Will they be willing to pay more when you could pay more for your staff? I don't know.
Robert Craven 07:17
There're some real pressures going on there. So, food for thought. Will the bubble burst? Is this phony war? How much longer can this growth continue? And are you able to deliver on the demands and expectations of your guts? Thanks for listening.