by Cameron Batt, founder of Crum Consult
In the UK alone there are 25,000 marketing companies, this includes small, local marketing agencies to large, full-service companies. In the US, around 630,000 people work in marketing. This number has increased every year since the dot-com boom and marketing skills are going to become more essential than ever as more businesses go online.
However, as the demand for marketing professionals increases, so does the supply of marketers. It is incredibly easy to establish an agency, as all it takes is a domain name and hosting, which equates to around $10 in initial capital. By obtaining a single client, these expenses would already be covered.
There are three ways in which entrepreneurs work to market their businesses; working with an agency, hiring an in-house marketer or working with a freelancer. Each of these options have their upsides, but this leads to the question.. will marketing agencies survive the next phase of digital marketing.
The issue with marketing agencies.
Marketing agencies have been in business since 1869 and between then and now, their model hasn’t changed much at all. For those who haven’t enlisted the help of an agency before, they work by charging a monthly fee in return for a list of services related to marketing. This fee can range anywhere from $500 upwards and the most common services include Search Engine Optimization, social media marketing and Pay Per Click services. The type of results that you can expect to receive will depend on your budget and the quality of the agency that you choose to work with.
Now although this seems fool-proof and a relatively straight forward process, it usually isn’t the case. The high-expenses that marketing agencies have to pay for offices, insurance, their own marketing, staff costs.. etc, mean that only a small percentage of your monthly budget actually gets spent on your businesses marketing. Here’s an example;
Let’s say that you own an ecommerce store that sells protein shakes. You have found an agency that has some notable clients and for $2500 they will carry out SEO services and this will eventually lead to your website having improved search rankings. For this $2500, the marketing agency will have overheads of 60% (for the expenses stated previously). Now this has turned your budget of $2500 into $1000 and you haven’t received any benefit. Out of this now $1000, you can expect outreach, some links to be build and potentially some blog content. Now let’s say that your keyword “protein shakes” takes you 6-months to rank with this agency. If your $2500 per month was spent 100% on your business, then this would mean 2.5x faster results (in theory). This is the problem with many marketing agencies and the main reason why freelancers and in-house marketing teams are becoming increasingly popular.
Are marketing freelancers the future?
No form of marketing is 100% effective and there are still some downsides. The downside of working with a freelancer is the fact that it is just one person. If you have a large marketing campaign that needs to get off the ground, then one freelancer on their own isn’t likely going to be enough. However, this doesn’t mean that you can’t work with multiple freelancers if necessary. Unlike agencies, freelancers are usually more transparent with their work and are easier to have a working relationship with, rather than dealing with a group of people, each with a small role to play on your businesses growth. Less overheads means that you can expect more of your budget to be spent on actual growth and not just covering company expenses. By paying out monthly for general ‘marketing’ isn’t going to get you anywhere fast, the trick is to set goals and work with a marketing professional who agrees to a results-based structure, something that goes against an agencies model and would never be agreed upon.
Is DIY the answer?
Digital marketing courses are amongst the most popular online courses of the past few years. There are hundreds, if not thousands of marketing courses out there and millions of people enrolling. Now this doesn’t mean that there are millions of marketing-professionals out there, it does mean that the fundamentals are more commonly understood. In the early 2000’s, digital marketing was not as accessible and easy to grasp as it is today. Social media was not at the forefront of people’s lives and the need to learn SEO just wasn’t there. Nowadays, many business owners are able to spend one hour per week learning about basic marketing skills and put them to use, relinquishing the need for a marketing agency. Not only does this save the business money, but it also allows the business owner to have a hands-on approach to how they want to market their establishment. Advances practices such as link building, data analytics and market segmentation will always require a level of insight that a simple marketing course cannot cover in its entirety, but not all businesses need this advanced marketing anyway. An alternative to doing it yourself and hiring a freelancer is to buy SEO packages that include quantitative assets, such as links, this way you know what to expect.
Larger companies can afford to take on full-time in-house marketing staff, which also has its complications. As the cost of their salary, insurance and healthcare are likely to be more than working with a full-time freelancer. Although, conglomerates usually write this expense off as the benefits of hiring a full-time marketing-expert will far outweigh these expenses.
It must be said that this isn’t suitable for all business owners, as even the basics of marketing can be time consuming to understand and the implementation of marketing practices isn’t easy. But for small businesses or low-investment startups, doing it yourself is sometimes the best option.
So what does this mean for marketing agencies? Well due to economic downturn due to Covid-19, business expenses have had to be slashed in order to maintain a healthy bottom-line. This has meant that marketing agencies around the world have lost a considerable amount of clients. 66% of agencies polled by MarketingWeek said that they experienced a loss in revenue due to Covid-19. However, this doesn’t mean that the marketing industry has fallen altogether, as freelancer platforms such as Upwork and Freelancer have experienced growth during this time.
To conclude, the future of marketing agencies is uncertain as basic-marketing tasks are being carried out by business owners. With freelancers on the rise, it is difficult to say if the influx of marketing agencies is sustainable for years to come, as the supply of marketing service providers may just overtake the demand.. at least in the small business world.
Cameron Batt is the founder of Crum Consult, a global management consulting firm based in London. He is a financial analyst and economist, Cameron also writes for a handful of business-related publications such as Entrepreneur and Equities magazine.