Agency Clients Slash Budgets 20% or More, Digital Only Bright Spot

January 30, 2009

This article is included in these additional categories:

Agency Business | Asia-Pacific | Europe & Middle East | Financial Services | Global & Regional

More than two-thirds (70%) of global ad agency CEOs say that their clients are cutting back their 2009 budgets, and more than 83% of that group say those cuts are at least by 20%, according to the latest Agency CEO Survey by Worldwide Partners Inc (WPI).

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The CEOs surveyed also continue to feel a universally? glum and gloomy vibe from clients about the 2009 outlook, WPI found. When respondents were asked if their clients were more or less optimistic about 2009, 95% of agency CEOs report that their clients are less optimistic. There is little difference between North America and other regions:

  • North American CEOs say 94% of their clients are less optimistic about the 2009 business climate.
  • Non-North American CEOs say 96% of their clients are less optimistic.

In terms of when things might get better, 48% of CEOs think it will take at least 18 months for business conditions in their respective markets to improve.

Client Spending Down

In terms of client spending in 2009, the majority of respondents worldwide say their clients will spend at least 20% less.

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Digital Remains Bright Spot

Digital marketing is one of the few bright spots in the survey, WPI said, with half the CEOs citing it as a growth area in 2009. Among North American CEOs, 62% said that they think digital will grow this year, while 39% of non-North American CEOs said the same.

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Traditional print and broadcast – in every region – were only mentioned as growth areas by a minute percentage of the sample.

“Pay-As-You-Go” on the Rise

Though 38% of CEOs surveyed say their clients had presented them with traditional annual budgets for 2009, 52% of said that clients had instituted a “pay as you go” system for projects that would augment or replace annual budgets.

While such project-based compensation schemes are not uncommon in emerging markets, WPI said have, until recently been unusual in North America. Now, however, they are on the rise as clients demand more control over their budgets and want to reserve the right to adjust to competitive pressures and market opportunities. Some 34% of North American CEOs and 62% of those located elsewhere said that such a remuneration scheme is in place in 2009.

Staff Cuts for Some

While bracing for client budget cuts in excess of at least 15% in 2009, 49% of the global CEOs said that they anticipated that their full-time staff count would remain the same this year, while 36% of North American respondents anticipated cutting full-time staff. However, 45% of North American CEO’s hoped to maintain full-time staff levels. Among non-North American CEOs, 39% said that they expected to lay off staff and 53% said they expected to maintain full-time staff positions.

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“Last July’s survey hinted that things could get worse before they get better,” said WPI President and CEO Al Moffatt, who added that responses to the survey presage a move away from the “global village” concept. “As clients’ budgets continue to decrease, we’ll see a proliferation of local and regional brands due to the lack of resources for large international footprints. This will herald the emergence of local entrepreneurs bringing new ideas to stale and downtrodden marketplaces. Wasting time, money and effort in agency bureaucracies is no longer an option,” he said.

About the survey: The survey was conducted during the week of January 12, 2009 among global agency CEOs. Of the 83 CEOs responding, 34 were in North America and 49 were in markets in Europe, Africa, South America, the Middle East and the Asia-Pacific region. The agencies range in size from $5 million to $500 million in capitalized billings and are all partner agencies in WPI, a privately held owner-operated advertising and marketing services agency.

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