U.S. agency revenue and digital revenue increased again in 2016, according to the Agency Report 2017, but the pace is slowing amid the rise of consultancies, compression of spending by marketers and added competition from new agency models. Revenue growth for agencies was the slowest since 2013 — and digital revenue growth slid to 8.0% last year from 13.5% in 2015.
“Agencies have dropped the ball,” said Brigitte Majewski, VP-director of research at Forrester Research, arguing that agencies have not adapted to brands’ data and technology needs and that they are too fragmented. This is giving an opening to new rivals like creative crowdsourcing firm Tongal, as well as consultancies such as Accenture Interactive and Deloitte Digital.
Holding companies have been making “great progress in consolidation,” said Majewski, referring to the ongoing trend of agencies—including PublicisCommunications, Ogilvy and Havas—merging under a single P&L model. Still, she said, it can take time to work out all the kinks and to educate clients about these new structures.
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