Tuesday 18 September 2018

Agencies are cautiously optimistic about future

According to the IAPI census, 31pc of all CEOs/MDs are now female. This is up from 20pc a year ago. Stock Image
According to the IAPI census, 31pc of all CEOs/MDs are now female. This is up from 20pc a year ago. Stock Image

John McGee

You can't beat a good census when it comes to getting a snapshot of what's going on in the world and society in general. When it comes to the Irish advertising industry, the annual census carried out by the Institute of Advertising Practitioners in Ireland (IAPI) provides a good snapshot of what's going on in adland while highlighting some of its challenges and opportunities. And this year is no different.

A total of 42 agencies participated in this year's census, which was carried out by Amarach Research, giving an overall response rate of 79pc. Of the respondents, 22 are media agencies while the other 20 were made up of creative agencies.

Between them, however, they employ 1,814 staff and the majority of them are cautiously optimistic about the outlook for their sector.

But with five relatively good years under their belts - the recession in Ireland technically ended in September 2013 - this degree of optimism is evident from the 62pc of agencies that are forecasting growth for their businesses this year with just 11pc forecasting a decline.

It should be pointed out, however, that this 62pc compares with 74pc last year and 78pc in 2015, while the 11pc compares with just 6pc in 2015, a clear indication that overall sentiment is not as bullish as in previous years.

It's also clear from the IAPI census that agencies are feeling the heat. Average profit margins, for example, are down from 10.9pc to 9.9pc. Elsewhere, pitching and auditing costs are also weighing heavily on the bottom line with the average cost to creative agencies now running at around €266,000 per pitch while for media agencies it's €127,000.

While this continues to be one of the industry's bugbears, it doesn't look like it's going to be addressed any time soon.

Some of these downward pressures are also being driven by procurement departments with the average number of clients using procurement on the increase. In 2014, for example, it was just 35pc while this year it's risen to 45pc.

Again, dealing with procurement departments which, one day buy bags of cement and the next day advertising and marketing services, is an age-old challenge.

At a time when companies and their brands are trying to extract greater efficiencies from their operations as they sail into the uncharted waters post-Brexit, it is difficult to see this trend being reversed, even more so at a time when greater accountability and transparency is top of the agenda for many marketers.

The respondents to the survey also noted that things like rising wage costs, increased rents, Brexit uncertainties, downward pressure on rates and retaining staff were also conspiring to make their lot considerably more difficult.

But it's not all doom and gloom and agencies are looking to shape their own destiny by moving beyond the fish bowl that is the Irish market, according to the IAPI which points out that 43pc of the respondents are now pursuing global accounts while 38pc are now winning more business from global clients.

Some of the other more interesting opportunities cited by agencies include developing new revenue streams in areas like content creation, digital, bringing more production in-house and upselling new services.

The IAPI census also reveals that some progress is being made by the industry when it comes to burning issues like diversity and gender imbalances.

According to the IAPI census, 31pc of all CEOs/MDs are now female. This is up from 20pc a year ago and brings the Irish industry in line with UK figures published by the IPA earlier this year.

Further down the chain of command, progress has also been made with gender imbalances in other departments with one notable exception - the creative department. Here women only account for 30pc of the total staff and this is down from 35pc in 2017.

Clearly, the industry needs to step up to the plate and address this imbalance, particularly if it is serious about addressing the lazy gender stereotypes that are all too common in advertising. Is there a correlation between the two? Go figure.

Likewise, work needs to be done in addressing ethnic diversity within the industry. According to the census, just 10pc of the workforce are non-Irish and this compares with the 17.5pc of the total Irish workforce who are non-Irish. While we pride ourselves on being a multicultural society, let's prove it in the workplace.

Why does any of this matter, I hear you ask?

As the advertising industry is very often at the front line of the economy when it comes to both wider economic sentiment and how businesses are investing in areas like advertising, the IAPI census is a crude bellwether when it comes to gauging what's going on in the wider economy. Any deterioration in business sentiment over the next 12 months will be felt first in adland as clients look to cut costs. For that reason, it is certainly worth keeping an eye on.

  • Contact John McGee at john@adworld.ie

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