We’re determined to grow in Uncertain Times
Growing in an uncertain economic environment is an issue for our industry in much the same way as for other industry sectors in Ireland with less than half (46%) anticipating an increase in the overall industry performance. Rising staff and location costs coupled with Brexit looming is certainly adding to this viewpoint.
In contradiction perhaps, over half the respondents expect staff levels to increase this year.
And, respondents remain positive about their own businesses with nearly two thirds (62%) of senior stakeholders foreseeing an increase in their own agency over the year ahead with only 11% seeing a decrease.
Expanding our horizons
Winning international business is very much on the agenda with 81% either actively pursuing global accounts or seeing increased business from existing global clients (38%). We predict that our industry’s presence and reputation on the European if not Global stage will increase considerably over the next 3-5 years.
Our ambition is for our industry to be a European Centre of Excellence for Creative Advertising & Media solutions. The work being crafted by Irish agencies at this time is world class and the word is spreading. Our success at Cannes Lions over the past number of years is certainly helping us in this regard.Jimmy Murphy, President, IAPI
Billings, Income & Profits
Profit margin stands at 9.8% compared to 10.9% last year reflecting the ongoing squeeze on margins being experienced by both Creative & Media agencies.
The reality is that we, as an industry, have been using the wrong language with clients and have allowed ourselves to become overly commoditised. We have focussed on success measurements such as reach, frequency and viewability which are not outcome based and which do not necessarily drive engagement or client sales. Our job is to grow client’s business and we need to change the narrative, embracing our role as a vital part of the growth engine for Ireland Inc and focussing instead on Return on Investment thereby cementing our position as a valued business partner who delivers tangible business results.Bill Kinlay, CEO, GroupM
There has been an overall shift towards Fixed Renumeration Fees this year although this is pre-dominantly due to the huge move towards Fixed fees within the Media agencies.
A number of agencies package some services to move away from ‘inputs’ and focus on the value of the ‘outputs’, but there are finite opportunities for agencies to thrive on the back of their good ideas. It’s disappointing that value-based compensation still has not gained greater traction across the industry as a whole and this has led to the industry’s average profit margin dropping below 10%. If we agree with Bernbach that creativity is the last legal unfair advantage a client can have, then we must drive commercial behaviours throughout our business if our work is ever to be valued correctly.Abi Moran, CEO, JWT Folk
Pitching & auditing activity escalated hugely in 2017 and this trend continues into 2018, particularly across the media landscape with only marginally less activity in creative pitching. While the percentage of clients using procurement departments hasn’t increased significantly over the past 6 years (from 41% in 2013 to currently 45%), the industry is seeing continued downward pressure on rates & margins.
In general, the IAPI guidelines are being adhered to by client companies during pitch processes, however the pitch process has become more time consuming and expensive than ever before for our members.
On average the total amount of hours spent pitching by our industry has risen by 21% over the past two years. The average third party cost to Creative agencies for pitching is €38k and for Media agencies it’s €43k. Staff costs per pitch on average are stated as being €266,000 for Creative agencies and €127k for Media agencies.