What does the landscape look like for digital shops today, and what’s on the horizon? Each year, we survey digital shops in an effort to uncover trends and predict what’s next. In this year’s third edition of the Bureau State of the Industry Survey, we teamed up with Promethean Research to dig into the data and distill common themes.

As more organizations and technologies enter the stage, the industry is becoming increasingly complex, competitive and diverse. In our survey, we heard from organizations of all shapes, sizes and ages, offering solutions including web design, application development, digital strategy, SEO, eCommerce and more. Here’s what the data tells us.


1. Optimistic Expectations

Overall, organizations reported business was good in 2018, with healthy revenue growth, solid employee efficiency results and strong profits. Looking forward to this year, owners are optimistic, responding they expect this year to be even better than last.

2. Larger Projects Drive Larger Growth

On average, shops generated $3.3M in revenue and grew 15% year over year in 2018. While large companies (50 employees or more) grew at twice this rate, even the slowest-growing studio-sized companies (10 employees or less) grew at an average rate of 9% year over year. The revenue growth at large firms was likely driven by an increase in project size, as large firms indicated significantly greater project expansions than did smaller organizations.

3. RFPs are Back in Business

In 2017, 53% of agencies told us they responded to RFPs, down nearly 30% from 2016. But for 2018, we saw a reversal of this downward trend. The number jumped back up, with 72% responding to RFPs. And for good reason. Companies that responded to RFPs grew 33% faster, while those that did not respond to RFPs grew 12% year over year. Organizations are making decisions that there are certain types of work they want, and they’re going after it.

4. The Right Service Mix for Growth & Revenue

As more shops expand and experiment with different service offerings, there are clues into which services seem to drive better growth and revenue. This year, digital strategy made a jump almost two spots up right behind web design and development, in terms of the highest revenue-generating service. As more clients bring capabilities in house, strategy is increasingly an important differentiator that can’t be replicated. Companies that offered social media marketing, app design and development, public relations or eCommerce also grew faster than average in 2018.

5. Profit Margins & The Valley of Death

The average profit margin for companies was 18%, with a downward trend for organizations between 10 and 50 employees. While these organizations still experienced a good profit margin, they didn't fare as well as the two extremes. This may be the proverbial “valley of death” where organizations between 20 and 50 employees are figuring things out and experiencing growing pains.

6. Specialists vs. Generalists

While self-identified specialists grew more slowly than non-specialized firms, there is a positive relationship between fewer services offered and higher growth rates. Within the community, positioning has been an important topic of conversation as firms narrow their focus in an effort to set themselves apart.

7. Value-Based Pricing is the Holy Grail

How do you price for growth? It’s a question that comes up time and time again at our events. Last year, firms that offered value-based pricing (alone or in conjunction with other models) grew significantly faster than average. The optimal pricing model—and the most commonly offered model—was retainer pricing, followed closely by fixed bid and time and materials.

8. Talent & Growth are Key Challenges

This year, owners share concerns focused on three main categories: (1) attracting and managing talent, (2) managing cash flow and growth and (3) sales and new business development. These align with challenges shops experienced in 2018.

Insights & Industry Resources

What trends are you seeing in your own organization? Let us know by sharing your comments below. If you’d like to stay up-to-date with data, thought leadership and recommended resources, Bureau membership is a great place to start. We’ve gathered more than 700 resources—books, articles, community-recommended tools and service vendors, Bureau event videos and more—into a curated resource library that’s available on demand. You can also join us at Owner Camp for a forecasting and financial metrics workshop, to discover where you fall short compared to others in the industry, and where your company has the most room for improvement.