Insights for Digital Agencies in 2023
The 2023 State of Digital Services Report is complete, and we are here to give you a sneak peek and share some insights and trends that can help you see how you're doing compared to your fellow shops. So grab a cup of your favorite beverage and let's dive into the latest joint report from the Bureau of Digital and Promethean Research!
The full report will be made available to Bureau members next week, so if you aren’t a member and you want all the juicy details, join us here!
What's Up with Digital Services in 2023?
In 2022, the average revenue of digital agencies increased by 17% compared to the previous year. While this was slightly slower than the year-over-year growth seen in 2021, it still represents a positive trend above the historical average. For Small (10-24 FTE) agencies, 5% average growth might have been challenging, but keep in mind that sometimes the work you put in takes time to turn into visible growth. On the other hand, Enterprise (250+ FTE) agencies saw impressive growth rates, indicating potential opportunities for expansion and bigger projects.
Margins
Although revenue was a bit tougher to come by in 2022, most shops remained profitable, with an average net margin of 14%. While that’s down a bit from the 17% we saw in 2021, it’s still an attractive return. We’re seeing more and more shops increase their level of sophistication by tracking things like utilization rates and getting more serious about metrics and benchmarks. As competition heats up and margins narrow, we’re expecting to see even more shops focus on improving their operations game.
Pricing Strategies
We understand that pricing can be a delicate balancing act. The fact that agencies raised their prices and saw growth in 2022 is a positive sign. It shows that your services are valuable and that clients are willing to invest. Embrace your worth and continue to provide exceptional value to your clients.
The AI Impact
Artificial intelligence continues to be a topic of interest and anticipation in the industry. As AI tools gain traction, staying ahead of the curve becomes crucial as early adoption of AI tools correlated with higher growth rates, net margins, and utilization rates. If you're already exploring AI and its applications within your agency, you might be on the path to faster growth, improved efficiency, and enhanced client experiences.
Workforce Dynamics
Remote work has become the new normal, and agencies utilizing offshore or nearshore talent have been able to leverage this trend to their advantage. By tapping into a global talent pool, you may have discovered opportunities for growth and cost efficiencies. Additionally, the small number of agencies experimenting with a 4-day workweek reported positive outcomes.
Top Priorities for 2023
As we near the second half of the year, generating revenue remains a top concern for agency owners. Three out of the top five owner concerns revolved around sales, leadgen, or account growth. Many are feeling the pressure and uncertainty around revenue generation, so if you’re in that boat, take a little solace in knowing you’re not alone.
All in all, 2022 was a solid year for most shops. And 2023, while it's been a shaky start for many shops, is shaping up to offer some significant opportunities.
Thank you to all of our Bureau shops that participated in the research. Your willingness to open up and share your successes and pain points helps all of us build the best webshops we can. If you like what you read above, there’s a whole lot more where that came from! A huge thank you to Nicholas Petroski and Promethean Research for putting this amazing report together!
Get the Full Report
If you aren’t a member of the Bureau Community, now's the perfect time…and you’ll receive a copy of this report! We're here to provide the support, connections, and wisdom you need to thrive in this ever-changing industry. Join us here!