Profit margins dip for marketing agencies as recession bites, says survey

Profit margins and productivity have fallen across most types of marketing sectors, as the recession takes its toll on company accounts, according to a new survey.

However, productivity levels remain healthy, says the Kingston Smith survey.

Media buyers and public relations firms have weathered the recession relatively well, with operating profit margins of 18.6% and 15.2% respectively, an analysis of more than 200 company accounts by accounting firm Kingston Smith also found.

“Public relations agencies spent 59.3% of income on staff they
still managed to achieve margins of 15.2% due to tighter overhead cost control than some other disciplines,” Kingston Smith says.

Digital marketing continues its strong growth (11.7%), although Kingston Smith notes that many digital agencies are still unable to make decent profit margins despite the ubiquity of online marketing.

Across marketing, productivity fell by 1%, compared to December 2009, with gross income per head £106,000, exceeding Kingston Smith’s recommended target of £100,000.

But it’s not all gloom within the agency world. Despite the recession agencies appear bullish that market conditions will improve, the survey adds.

“Most agencies have felt the effects of the prolonged economic downturn with many suffering a fall in gross income,” it says. “There hasn’t been a corresponding decrease in staff numbers as agencies are either being bullish about a return to better conditions or are standing by loyal staff members.”

Read Marketing Week’s cover feature on the future of the agency model here

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