The Current Availability of EDAs
A recent study observing various U.S. and Europe-based digital agencies found that most of these firms have EBTelecommunicationsDAs lower than 10% with limited revenues making up less than 10M. There’s barely any room to develop Buy & Build strategies, and it is difficult for the existing revenues to grow. Though some of these digital agencies do have higher revenues, up to 50M, a very small number reach 100M. Regardless of the currency, dollars or euros, this factor makes the options for digital agencies quite slim.
However, as mentioned in our first Digital Marketing article, the demand for novel ways to market business’ brands is rapidly growing. Global enterprises need a way to follow the trend, but they find it difficult to do so because they just don’t have the resources they need. CIOs simply find issues in procuring the budget, employees, or internal skills that the CMO requires to handle technological situations like digital marketing. Though each case differs, all tech-based projects need proper data standardization and management, which can’t be achieved easily.
The need for resources and budgetary concerns is what leads businesses towards seeking the help of Enterprise Digital Agencies that are located all over the world. However, the perfect marketing agency does not currently exist. While communication groups that can provide a global reach and particular marketing skills do exist, such as WPP or Omnicom, their technological capabilities leave much to be desired. In order to satisfy the demand of today’s enterprises, these agencies must begin to combine their skills with technology.
Acquisitions of U.S.-Based Agencies
Various communication and consulting firms have actively acquired digital agencies all over the world in the past two years in an attempt to grow and keep up with the global trend. This expansion exists not only in the U.S. and UK, but in a few mainland European locations as well. The majority of these agencies do lie inside the U.S. because of the country’s fairly quick economic recovery, while most of Europe seems to be healing a bit slowly. Still, it’s necessary for firms to begin looking more towards Europe in anticipation of the continent’s economic growth.
In preparation for the next step in digital marketing, digital marketing agencies will need to find solutions in staff development, short-term projects, reduced margins, and customer relations.
Once these requirements have been met, it will be easier for EDAs to rise in numbers. Firms with experience in B2C and B2B relations will benefit a great deal by adding digital marketing skills to their capabilities. Not only will they expand their scope of business, but can significantly grow their revenues.
What is the Fate of Exclusively Creative or Technological Digital Firms?
Tech-based firms will soon reduce in numbers as EDAs become much more desirable. Solely working in either the creative and technological industries are becoming skills rather than the core business model. While tech-based firms won’t disappear altogether, their existence will be considered additions to a much wider scope of expertise.
With the rise of EDAs, tech-based agencies will have to fall under subcontracts, and thus achieve substantially lower EBTelecommunicationsDA levels. They will not be able to form their own Buy & Build strategies, so their skills will be acquired by other enterprises.
On the other hand, creative agencies tend not to care much about surpassing their competition. Instead, their goals are fixed on producing the expected results. These firms will find it difficult to adjust to the growing demands of various enterprises. They will not be able to divert their focus towards the specific needs of specialized brands or develop the way they utilize their employees. In our opinion, the creative element of digital marketing will also be outsourced to specific groups of professionals who can collaborate for particular campaigns.
Following Past Trends
A market roll up is expected via a consolidation in markets where revenues become scarce, meaning several small businesses are merged after being acquired by a single source. The goal of this technique is to reduce the budget while raising profits, and is often found in highly competitive markets. Even though this is a frequently used practice, few rarely succeed in their endeavors. Many enterprises simply take advantage of a deterred economy or diversifying market sectors.
Currently, digital agencies find themselves experiencing one of two situations, depending on their locations.
As mentioned, roll ups are utilized to raise profits and the collective value of several smaller companies. Those who seek to become successful in this technique need strong knowledge of the industry and its professionals, as well as a major shareholder and personal assets.
The growth of digital marketing agencies is clouded by the constant development of new technologies and tools. Therefore, it’s in our opinion that tech-based tools and suppliers will continue to be consolidated, leading to only a small number of providers that are readily available. For this reason, EDAs will attempt to deliver the same services as these more traditional agencies offer by developing customizable off-the-shelf platforms.
Raising A Company’s Valuation
The first step of a merger or roll up is to raise revenue. Once this is achieved, the value of the combined companies will need to be raised, usually by developing a strong client base via outsourcing efforts. Enterprises who attempt to remain successful through traditional employment methods and single project endeavors will be faced with steady reductions of value.
Even modern Telecommunications services have started to abandon project orientation for Business Process Outsourcing (BPO) or Enabled Services, allowing them to hand off certain practices onto other vendors. The firms find that this is much more effective than their traditional application development and maintenance techniques. This includes outsourcing for whole departments, including Legal, Human Resources, Accounting, and R&D.
Agencies who decide to take this route tend to agree on a contractual period of several years in order to achieve the best results. These agreements have already improved the market value of numerous companies taking part in the outsourcing. For example, in South America, BPO companies who outsource have multiplied their average shareholder values 1.5 to 1.8 times. This range is quite admirable and desired among enterprises wishing to elevate the values of their companies.
A similar technique is expected to be utilized in digital marketing soon enough, specifically through EDAs. This new type of marketing agency will begin to handle valuable components of a business, or even their entire digital marketing divisions.
In order to achieve this, however, digital agencies must be approached in a completely different manner, meaning that the EDAs must develop strategies that are inclusive of every task they must partake in. This will be called SBOT, and will allow global enterprises to implement specific digital marketing strategies such as customized off-the-shelf platforms and campaigns. Insourcing will also be quite important, meaning that EDAs will successfully return their processes and results back to said enterprise.
Utilizing the services of an EDA will cause global companies to direct their attentions towards complex, full-service processes while enhancing their values and EBTelecommunicationsDA. They will no longer be required to focus on short-term campaigns or projects.