Digital Agencies Stay Optimistic on Client Budgets

NEW YORK Compared to the rest of the ad industry, digital agencies are sitting pretty. But that doesn’t mean they’re without concerns. Mainly, they’re worried about skittish clients putting off big-ticket projects.
The Society of Digital Agencies concluded in its inaugural 2009 digital marketing outlook report that despite the terrible economic environment, digital shops expect to grow this year, albeit at steeply reduced rates compared to previous years. Overall, SoDA anticipates growth of about 8 percent.
SoDA found that just 10 percent of digital shops expect a decrease in digital projects. About 30 percent expect spending to remain roughly the same.
Traditional shops were even more bullish on their digital work, with nearly 70 percent expecting increases.
The bad news: clients are hesitant to commit to large projects even though such work is already part of annual budgets. The caution, according to Paul Lewis, director of operations for SoDA, stems from marketers fearing the economy’s other shoe will drop and force even deeper cuts. Thus far, such cuts have mostly hit traditional ad spending.
In the meantime, digital agencies are making do by collecting smaller projects, Lewis said. They’re also slowing down on hiring — and finding a greater pool of talent to choose from, he said.
“Most are finding there’s a decent amount of fill work,” he said. “Maybe they wouldn’t have normally taken [such projects] before.”
SoDA polled 560 companies, including 370 digital agencies, 50 traditional shops and 77 clients. The sample also included freelancers.
On the marketer side, a separate study released today by the Association of National Advertisers and American Association of Advertising Agencies found many corporations still struggle with integrating digital communications into their overall mix and sorting out its metrics.
Unsurprisingly, marketers expect spending in initiatives with direct revenue returns to fare the best. Over 50 percent said digital infrastructure remains a top priority, according to SoDA, followed by digital advertising, search optimization and social networking. Widgets and e-mail marketing were tabbed as low priorities by the most respondents.
“They’re not investing as much in long-term, feel-good marketing,” Lewis said.
The economic crisis could tilt the balance to digital even more, the SoDA report found.
While digital budgets are not growing as fast, they’re still growing. Meanwhile, traditional ad budgets are shrinking at a much faster clip. That’s narrowing the large gap that’s existed between digital and traditional channels. Over 60 percent of both digital and traditional agencies expect digital marketing will increase in the long run.
“It’s a little presumptuous to say digital is leading but it’s on that track,” Lewis said. “If we went back three years ago, I don’t know if digital would have a seat at that table.”