John McGee: 'Advertising industry finally escapes shadows of recession'
Ten years ago, the Irish advertising industry was on its knees. As the full impact of the economic downturn took its steely grip, job losses, major cutbacks and several agency closures between 2009 and 2010 took their toll.
Compounding these problems, marketing departments which held the purse strings were downsized or, in some cases, relocated to the UK, while an axe was taken to advertising budgets.
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While the Irish subsidiaries of the big network groups, most of which had strong balance sheets, were able to weather the storm, often by forgoing dividend payments to their UK or American parents, any financial reserves held by smaller independent agencies were largely drained.
Fast-forward 10 years and the industry, which employs close to 2,000 people, has returned to rude good health, even though advertising investment by brands remains at pre-2007 levels.
The annual 2019 Census Report, published this week by the Institute of Advertising Practitioners in Ireland (IAPI), provides a vivid snapshot of an industry that appears to have shaken off many of the woes that besieged it during the dark days of the recession.
Instead, the picture that emerges is one where agencies are much stronger financially, margins are up, the revenue mix from retainers and project work has changed, and more and more media and creative agencies are managing international work for their clients.
On top of this, a move toward a more full- service offering has seen media agencies muscle in on the creative patch, while a number of PR companies have also followed suit.
The research for the IAPI census - which was undertaken by Amárach Research - shows that the average gross creative income for agencies was up 3.6pc in 2018, to €3.39m.
The total creative income for all agencies that took part in the census (which had a 75pc response rate) was also up to €66.82m in 2018, another 3.6pc increase.
By comparison, their colleagues in media agencies - who manage the lion's share of advertising investment - saw a 1.1pc increase in total media billings, from €41.27m in 2017 to €41.8m in 2018. Total billings over the same period, meanwhile, rose from €620.5m to €627.4m.
Because only 75pc of IAPI members took part in the survey, however, these figures should be treated lightly. If all agencies took part, the figures would be considerably higher, with total media billings, including digital, a veritable minefield in its own right, probably closer to €900m - if not more - in 2018. In addition, creative income is likely to have been closer to €80m.
The profitability of Irish agencies is also on the up. Across all agencies, 31pc reported an operating profit margin of 0-5pc, while another 26pc of those said that their operating margin was anywhere between 6pc and 10pc. Another 26pc said it weighed in between 11pc and 15pc, while 17pc said it was in excess of 16pc.
Not surprisingly, this varied considerably according to the size of the agency. Smaller agencies, for example, are more likely to have smaller operating margins. Indeed, the average operating margin was 9pc for small agencies. For medium to large agencies, the average operating margin was a comfortable 12.1pc, rising to a frothy 16pc plus for some 20pc of the agencies surveyed.
Ten years ago, only a small handful of agencies were deriving a portion of their income from overseas clients. In 2018, however, 15pc of their income was derived internationally. And it's not just creative agencies either, because over the past few years, Irish media agencies have also been winning pan-European accounts.
How agencies earn their money has changed over the past 10 years and the balance of project fees versus retainer fees has also changed.
For creative agencies, retainers accounted for 30pc of total income in 2018, up from 28pc the year before. The biggest shift, however, saw media agencies increase their retainer fees as a percentage of income from 50pc in 2017 to 60pc in 2018. Ten years ago, this figure stood at 31pc.
While the financial health of the industry has undoubtedly improved in the intervening period, the census does highlight some challenges - chief of which are staff acquisition and retention, high pitching costs, in-housing and, of course, the looming prospect of Brexit.
In a further note of caution, the census highlights that over half of the respondents indicated that they saw no change in the industry's turnover this year. But when it came to their expectations for their own business, the respondents were a bit more optimistic, with 48pc saying they will actually grow.
Notwithstanding these challenges, overall, the industry appears to have a renewed sense of purpose, confidence and determination. Long may it continue.
Sky NZ buys RugbyPass
Hats off to the founders of the rugby streaming service RugbyPass, who have just sold the Dublin-based business to Sky TV in New Zealand for a chunky €36m.
RugbyPass holds the Asian, Australian and European rights for tournaments hosted by SANZAAR, the body for test matches in South Africa, New Zealand, Australia and Argentina.
The business was sitting on retained losses of €11.9m at the end of 2017, according to the Companies Registration Office.
Telcos to come clean
The Advertising Standards Authority for Ireland has finally called time on misleading advertising by Irish telcos when it comes to broadband speed, coverage, availability, and what actually constitutes fibre broadband. For a long time, many telcos have been making spurious claims about their offerings to customers, and the new guidelines come with advice on information resources for consumers and substantiation, as well as T&Cs.
Sunday Indo Business