In just the last three months alone, ad agencies paid out a combined $10 billion to top ad companies, according to data from analytics company Zendesk.
That’s an increase of $1.3bn in just the past year, according the company.
Zendisk says the total number of top ad agencies paying out over $10 million was up over $1 billion in just a year, meaning that over the past decade, the number of ad agencies that have paid out over that amount has tripled.
And while the numbers may not be as high as some of the top deals of the past, the data is still quite significant for an industry that is struggling to keep up with its own growth and its competition.
“In terms of overall ad spending, we’re actually seeing a really good year from agencies, but the data tells us that ad spending is still down in terms of revenues, and it’s not really improving at all,” said Paul Sullivan, an analyst at Zendas.
“We see a lot of agencies being forced to make cuts.”
As the advertising industry continues to grapple with the cost of its ad campaigns, it’s hard to pinpoint the exact reasons behind the continued growth in ad spending.
The biggest culprits, Sullivan said, are consumers, who are increasingly willing to pay for online content and are also more aware of the value of social media ad targeting.
“There’s always a growing awareness of online ads and people are willing to spend money on ads that are relevant to their interests and their preferences,” Sullivan said.
“It’s just that the advertising agencies are seeing that the ad spending growth is coming at a cost.
They’re seeing that more people are getting the message that the ads are relevant and useful to them.”
While the ad industry has seen a drop in ad revenue over the last decade, Sullivan believes the growing awareness surrounding online ads is likely a key driver for the decline.
“The more that consumers have been paying attention to online ads, the more they’ll be paying for ads in the future,” Sullivan added.
The number of companies paying out money to top agencies has also increased over the same time period.
That was the case last year, as the number one ad agency paid out $1 million.
That’s up from $738,000 in 2015.
And that was up from just $450,000 last year.
Sullivan believes that the industry is looking for ways to get more value out of their ad campaigns.
“You’re not going to have the same amount of revenue for the same ad spend, so it’s important for agencies to have a competitive edge,” Sullivan explained.
“That’s something we’ve seen with a lot more aggressive bidding, but we don’t think it’s going to be the end of the world.”
And that competitive edge will only increase as more agencies continue to experiment with new ways to deliver relevant ads, Sullivan added, pointing to a number of new services, such as “brand-spotting” and “social advertising,” that could help to make an agency’s campaigns more relevant to consumers.
“We’re in a period of rapid growth for the ad world, and ad agencies are the only ones that are really seeing it,” Sullivan concluded.
“This year, the ad business is going to take a major hit because the ad agencies aren’t going to get that much money.
That may not matter much to the agency’s shareholders, but it will hurt the bottom line of the agency, and that’s a bad thing.”
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