Don’t mention the ‘R word’, I hear you all say.
Well, I thought a post on “Recession Challenges” would be a fairly topical one, bearing in mind the recent ‘credit crunch’ stories we’ve seen taking up more and more column inches and airtime each month.

I read with interest the latest E-Consultancy Rate Card Survey and again I must congratulate their Research Team on producing such a comprehensive and insightful document.

In terms of the key challenges/threats facing agencies, E-Consultancy cited the following:

  1. Staff recruitment and retention
  2. Recession / credit crunch
  3. Reduction in client spend
  4. Increasing competition / maturing market
  5. The challenge of demonstrating ROI

These are pretty hefty challenges and as we know, for every challenge or threat there will always exist an opportunity.

The digital agencies have undoubtedly had a good few years with many seeing superb year on year growth, but now I get a sense that the tide is starting to turn.

As with the property market we’ve seen the ‘sellers’ cash in over the last few years, but it is now the ‘buyer’ who is taking control and we’ve seen the practice of Gazundering start to take place.

So in the Digital Services market, are the buyers starting to see more control shifting their way?

Opportunities…for the Buyers (Clients)

1) Staff recruitment and retention

An opportunity for recession proof buyers who can ‘tough it out’ is to lure talent away from less stable agencies into client-side roles and cut their outsourcing costs.

2) Recession / credit crunch

Buyers of digital services can demand shorter contracts and better payment terms.

3) Reduction in client spend

They can also demand more from their agencies and make their digital budgets stretch further.

4) Increasing competition / maturing market 
Buyers can drive down prices.

5) The challenge of demonstrating ROI 
Clients can squeeze more out of their agency and get them to adopt a performance-based billing model.

By all means it’s not all doom and gloom for digital agencies. Some analysts believe that with an increasing focus on ROI, many clients will move more budget into digital and away from less measurable, traditional forms of marketing.

So, we could see investment in activity such as Search Marketing continuing at the same rate over the coming years.

However, the discontinuation of the Google Best Practice Funding programme is also going to be another major challenge for many search agencies that have relied purely on the income generated from BPF to manage client PPC campaigns at a profit.

Whatever happens, now is a good time for the agencies to start reassessing their business models to help address these challenges and no doubt some will be in a better position to adapt more quickly than others.