Show me the money!!

Last night I attended the launch of the Kingston Smith W1 Financial performance of marketing services companies annual survey 2009. There were some interesting facts and figures presented which are contained in detail in their 161 page report.

What I found astonishing is how little money marketing services companies make, unless they are media agencies, and furthermore how little digital companies are making despite the increase in digital spend by most clients.

 

The survey covers 50 independent UK marketing groups and UK quoted groups. As such the report covered only a part of 2009 due to financial reporting, so the full effect of the recession is yet to hit. However interim results aren’t encouraging with 80% of groups showing a reduction in profits. All disciplines from digital through advertising to public relations are covered.

There was only a revenue increase of 19% with much of the growth due to previous acquisitions activity. Margins fell to 9.8% with only 13 groups making more than the magical 15% margin.

But as I said my biggest surprise was the operating profits of digital companies which were noted to be the worst ever and the lowest across all sectors. Why is that? At a recent digital social networking event I attended there was much discussion about the latest social/PR networking solution to come of age. However one question frequently came to mind. How do they make their money? Whilst these companies may have exceptionally talented creative thinking people, the fact remains they are a business and unless they get their act together quickly, they won’t have one.

A techology if only...

Tina Fegent has recently made some comments on her blog about “the lack of technological systems and processes that an agency had in place, both for its own internal use and for the interaction with clients.” Whilst I’ve commented that it’s not just agencies, clients can be slow to adopt new technologies, I’d like to discuss here the age old problem (and I’d like to ask why) of the lack of technology between media agencies and production houses/production departments.

Why are schedules supplied by media agencies on a good old Excel spreadsheet. Then updated without any real indication of what’s been updated leading the production staff to spend hours trawling through the schedule to spot the differences. Added to which there is little automation between the production agency and the publisher so it’s still down to phone calls and emails about whether there has been a booking and what it’s for. Phone calls from publishers to production agencies saying they have a booking for which the agency have no knowledge, is all too common.
There is no financial benefit to the media agencies to introduce a system that helps the publisher and production agency so they don’t. Production agencies and publishers can talk, discuss and highlight the problem areas as much as they like, and believe me they do. It’s up to clients to put the pressure on media agencies to introduce a system that will produce cost saving benefits down the line.
If companies such as Adstream and Vio could automate the process (and I believe they can), then so much time could be saved which could significantly reduce man hours at publishers and production houses alike. If I was a client and spend the majority of my marketing budget on press, I’d be pushing for a system that could ultimately reduce my production costs. I’d demand it of my media agency as a term of my business.

So, I want to know clients. Why aren’t you?