As the advertising industry draws the curtains on a tricky year, it will enter 2023 with cautious optimism tinged with uncertainty according to the latest IAPI Census for 2022.
The Census shows that agency bosses are optimistic about their own agency’s future than the industry as a whole. “While, almost 9 out of 10 respondents state that their agency will do as well, if not better, in 2023, only 62% feel the same way about the
industry. Even with the uncertainty of the current economic backdrop, on average 71% see their revenue increasing next year and only 3% see it decreasing,” the Census notes.
The Census also reported that all respondents predicted an increase in both revenue and profit margins for 2022 when compared to last year with the average profit margin expected to be 12% for 2022. Retainer fees now contribute to “over one third of the total revenue for all agencies, including media
Agencies,” the Census adds.
With agencies reporting a busy 2022, this also translated into employment growth with the total workforce employed by IAPI members is now around 2,373, a 21% growth on the same figure for 2021. “Despite this, it is widely acknowledged that churn continues to be a major challenge for the industry.
Digital and Social specialist departments are still seeing the largest amount of talent churn at 24%,” the Census notes.
With staff churn a big issue for many agencies during 2021 and 2022, IAPI notes that “digital and social specialist departments are still seeing the largest amount of talent churn at 24%. Of note is the reduction in talent moving to tech companies (17%), with respondents noting that one third are leaving for “other” reasons. Anecdotal reports suggest that a large portion of this cohort has moved abroad to work or travel, reflecting the lag in this natural movement due to the pandemic. While over two-thirds of leavers are at junior levels (less than 5 years), half of these are moving to another agency with only 25% targeted by big tech.”
Churn rates have also had an impact on wage inflation, according to the Census, and “ the industry has experienced wage inflation of 7% year on year across all agency roles, 2.3% higher than the national average calculated by the Central Bank earlier this month. For digital and social roles, inflation stands at 20%+ year on year.”
The Census also addresses one of the most contentious issues in the advertising at the moment – pitching, “Almost 7 out of 10 pitches are run directly by clients and are still the biggest drain on resources and funds for agencies. In 2021, it is estimated that IAPI agencies took part in 594 pitch processes, costing the industry €7m,” it notes.
Speaking about the Census, IAPI’s president and creator/co-founder of Bonfire makes a number of observations. “It is heartening to see that our industry seems on target for a strong performance in 2022, but what’s probably most interesting is the sentiment with regards to 2023. Most of our members indicated that they expect the industry to do as well if not better next year, and even more of you expect your own agency to do well,” he says,
“It is worth reflecting on the timeline here and what IAPI members knew or didn’t know at the time of completing the survey. Probably the only unknown were the recent upsets within the tech sector and while you could argue that Meta and Twitter can be considered advertising businesses, I still see no reason not to be cautiously optimistic, even though clearly there will be challenges ahead for 2023. And that’s because there are two important differences between those companies and our own. Firstly, their performances are reliant on the global economy, whereas our businesses are mainly connected to the Irish economy. And even the European Union’s very bleak economic forecast for Europe singles out Ireland as essentially top of the class with a growth rate of 2% predicted for next year.
“Secondly, and much more importantly, their industry is built on technology whereas our industry is built on people, and our magic ingredient… creative thinking. We use our thinking, our strategies, our ideas and our creativity to contribute to the growth of our client’s businesses that, in turn, contributes to the growth of the Irish economy. So, for 2023 I think we should continue to keep our focus on what we’re brilliant at – creative thinking and growing businesses,” he adds.