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.