The State of Digital Services 2024: Bending, Not Breaking

TL;DR

• We’re soft launching a one-stop shop for all your digital agency research needs! Use code PRNEWSLAUNCH for $95 off.
• New Research: Bending, Not Breaking: The State of Digital Services 2024​
• Agency growth was worse than expected in 2023 (4.5%), and our expectations were low.
• Some shops still managed to grow at rates 2-3x above average.
• Those fast-growing shops did some similar things: They readjusted their service mixes, specialized by industry and service mix, raised rates, served a more narrow band of smaller-sized clients, and maintained project stability.
• 83% of agencies specialize by service mix or industry. Of that, 79% specialize by service mix, and 51% specialize by industry.
• The average utilization target for production teams was 72%, up slightly from the 68% we saw in 2022.
• The full report contains a lot more than a TL;DR section can contain. For the first time, we’re making these available outside the Promethean-Bureau-Parallax client network.
• As this report highlights, a ton of agencies are having issues with revgen right now. If you’d like help dialing in your agency’s revgen strategy, let’s chat. Find out what’s holding your agency back and how to fix it in <2 weeks.

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Soft Launching The Promethean Research Shop

Today, we’re soft launching a one-stop shop for all your digital agency research needs!

The first 100 people to check out and use code PRNEWSLAUNCH will get $95 off each item in their cart (excluding already free reports).

“If you’re not embarrassed by the first version of your product, you’ve launched too late.” Reid Hoffman

I’d love feedback on this since I’m really taking Ried’s quote to heart on it.

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New Research: Bending, Not Breaking: The State of Digital Services 2024

Participants received their copy yesterday, but if you missed the survey, you can get yours here!

Here are some highlights and excerpts from the report:

Oof.

We could tell 2023 was tough while we were in it, but now that the numbers are in, it’s clear that it was the most difficult year for agency growth since we began tracking back in 2015.

Some firms avoided this general downturn and managed to grow 2-3x faster than average. The first section of the report explores the patterns those fast-growing firms shared. Things like realigning services, specializing, using their pricing power, optimizing pricing methods, targeting the right client mix, and shifts in project sizes.

Once again, specialists are showing out.

The massive increase in specialized shops we saw in 2022 has remained steady in 2023 with 83% of agencies specializing by service mix or industry. Of that, 79% specialize by service mix, and 51% specialize by industry.

Agencies that specialized grew faster than their generalist counterparts, but the gains were more pronounced in those that specialized by services vs. industry.

Agencies that specialized by service mix grew 70% faster than generalists, while those that specialized by industry grew 40% faster.

Specializing by both service mix and industry yielded the best growth rate. Agencies that specialized by both grew 93% faster than the pure generalists.

The general level of sophistication in the industry has risen dramatically since we began work in this space almost a decade ago. A solid proxy for measuring this is the percentage of agencies that are measuring beyond surface-level metrics. One of these is utilization. Both firm-wide, and by functional group. Currently, two-thirds of agencies have utilization targets for their production teams. This is highly correlated with agency size, as larger firms are more likely to have utilization targets.

The average utilization target for production teams was 72%. This is up slightly from the 68% we saw in 2022 and could account for some of the improvement in net margins since then.

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New Event: Leadership Live from the Bureau of Digital

Our good friends at the Bureau of Digital are hosting Leadership Live in Las Vegas on Sept. 25th and 26th, and it looks like it’ll be another fantastic event!

Use my code NicksGuest to knock $200 off the ticket price.

Leadership Live is for owners and leadership teams who feel they’ve hit a wall they can’t get past. Come meet leaders who’ve been where you are and crossed the chasm to steady growth, healthy cultures, and stability.