Why are so many agencies struggling if ad budgets aren't shrinking? For as long as I can remember, EMARKETER has predicted double-digit growth for nearly all digital channels. I would often include these charts when asking brands to increase their digital investments. But my reliance on this type of research early in my career was naive. I regularly overfit their data into my ‘spend more on digital’ narrative. In hindsight, I should have also noticed a different trend - that marketing budgets as a % of revenue have been steadily declining for years. According to Gartner’s “CMO Spend and Strategy Survey”, 2024 marks a 10-year low (with the exception of the 2021 pandemic year), with only 7.7% of revenue going to marketing. That number had been in the double digits before the pandemic, but has never recovered. The graph, via the The Wall Street Journal, is below. Brands are actively reassessing their non-media investments by cutting back on labor, tech and agencies to protect profitability. And AI is only just getting started, which disproportionately threatens these three groups. From my vantage point, this is a time of significant realignment in the advertising industry. My advice? 1️⃣ Brands need to shed both the technology that doesn’t serve them, and the agencies that are too embedded in yesterday’s ecosystem. 2️⃣ Agencies need to adjust their contract terms to align their financial incentives more directly with the brands they serve. Sit in the CMOs foxhole! 3️⃣ Individual marketing professionals need to increase their AI skillset, lest they be out of the job in the not-so-decent future. As someone who has been in the industry for years, I am happy to help. What can I do to be of service to you? Let me know.
Ryan Green’s Post
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