Managing Growth in the Digital Marketing Industry
Recent IAB data shows 27% advertising spend in the first half of 2011 was online, up 14% on 2010, and in first place ahead of TV which had a 26% market share.
Couple this with the fact digital revenue is growing at 2.5 times the rate of traditional or analogue media, and that Aegis, WPP and Publicis all say digital makes up around 30% of their total revenues, and it’s not surprising that agencies (both multi-service and niche) are looking to invest in their digital businesses. It means the industry is now characterised by acquisition and fast growth, but those involved ensure they have the right growth strategy that will provide the structure they need to safeguard their existing assets, and expand into new markets.
Acquisition, such as WPP’s recent purchase of Chinese digital agency A4A, provides an immediate entry into its target markets and geographies, but even for larger companies, acquisition can be disruptive. The larger deals may be subject to regulatory approvals, the issues surrounding operational and cultural integration are inevitably complex and on top of that, cash flow has to be maintained to meet obligations to staff and suppliers. There may well be a requirement for debt financing and with foreign exchange elements added to the mix and it can be a difficult environment for companies of any size.
For niche digital agencies that may have grown fast, the issues are slightly different. They may not be involved in acquisitions but many have experienced strong and continuing organic growth. In those circumstances the capital structure of the organisation may not have kept pace with the growth. The result is that those organisations may find it harder to access the debt finance required to take on the bigger projects.
In both instances, access to financial expertise that can help maximise the return on funds and mitigate risks associated with growth and acquisition is key. Agencies of all sizes should recognise the need to work with a bank that is able to provide not only financial acumen, but also market knowledge, in order to successfully develop their businesses.