Agency outlook for 2024, the year of the Indie?

2023 has been a mixed year for many agency groups, with parts of the market really struggling and others holding up reasonably well. But what does that mean for agencies in 2024?

Mark Sainthill, Managing Partner - M&A, works closely with several larger independent agencies and buyers/investors and shares his views on what might be on the horizon.

Larger Agencies and Group Buyers’ outlook

The backdrop of tightening capital markets, high interest rates, geopolitical tensions and economic uncertainty has impacted marketing and digital investment by brands, which is likely to continue into the first half of 2024.

Investors and the public markets have been looking for companies to show profit over growth, which is limiting investment. The technology sector has made deep cuts in staff and restructured this year, hitting some agency groups hard like S4 Capital.

IT groups and consultancies have also had a challenging year, as the large investment in digital transformation and strategy consulting projects made during COVID have dropped off, and they’ve had to downsize and adapt to advances in AI. 2024 should bring more investment and growth, but it will be dependent on the economic outlook improving.

Media and performance have performed well, especially agencies with strong data analytics capabilities.  Brands still need to deliver sales and growth, and are therefore less likely to reduce or cut spend in this area, and this trend should continue into 2024.

Other areas that are performing well include influencer/creator-led marketing, brand experience/activation, and brand strategy. More agile, specialist agencies have also seen strong growth, which will remain the case in 2024 and beyond.

Things may look a little different for smaller independent agencies. Mark Probert, Managing Partner of Cactus, shares his thoughts on how there may be light at the end of the tunnel following a tougher 2023.

Independent agency outlook

I’m fortunate to work with many different types of independent agencies, both in the UK and across Europe, and get to see under the bonnet of their businesses. In the main 2023 has been a tough year both emotionally and financially for many agencies.

Why has this been the case? 

In many cases, it’s not been through the lack of trying by the agency. A focus on proposition and differentiation had been done by many in the past year or two when the Covid impact made agency owners think deeply about what their agency stands for, what it offers and who they want to work with. 

The bounceback post the Covid years led to many agencies having extremely good financial results in 2022 and staffing up as a result to meet the demand, or trying to given the tough labour pressures.

However, the continued uncertainty in the economy, combined with wider global issues affecting humanity, created uncertainty in the market. Leading into early 2023 client side decision makers started to pause their spending and budgets were being cut. Existing clients also decided to pause some of the projects and marketing plans they had wanted to push on with, again this led to pressures for agencies.

Many agencies continued to push forward with their own marketing activities, however, as much as people were more active in getting out and about and networking, for many it still proved tough to get new business wins.

This was not the case for all agencies though, as some have continued to flourish. In my experience, it tended to be the more consultancy-led or very niche focused agencies, led by specialists in the sectors the brands operate within, who stood out from the crowds by offering something different. 

The light at the end of the tunnel

There has been some light at the end of the tunnel though, Q4 of this calendar year has seen more new business leads (not just volume but also quality) in agency pipelines than at any other point of the year, and brands look like they have started to spend again. Perhaps not to the same monetary amounts, but acknowledging that they have to get their own marketing activities planned out, as 2024 will remain tough for many sectors, so they want and need to stand out.

I recently talked about the five stages of recessions on LinkedIn and we are currently experiencing this timeline happening again. I am seeing across many agencies that we appear to be at Stage 3 - Recovery, ‘A realisation that business critical projects need to happen, so decision makers start deciding and investment starts happening again’.

As we have seen in the press, some of the bigger agency networks are letting people go, and that combined with some big brands appearing on some of my independent agency clients’ pipelines (seeking a better value deal with a specialist Indie agency) makes me feel that 2024 is going to be the year of the Indie.

the year of expansion

In 2024 I predict more projects beginning to happen as decision makers realise they can't defer business critical decisions any longer. An increase in activity leads to businesses thriving, new jobs created, and market confidence increases, leading to more expansion.

But yet brands will be more cautious of their budgets and aim to get value for money. This is where the quality Indie agencies can take advantage and make it their time, but just make sure you charge by the value and not time!