Welcome to the 2020 edition of our State of the Agency report! Each year, we poll hundreds of digital marketing agencies globally about their preferred tools, their hurdles, their pricing structures, and more. With the COVID-19 pandemic creating numerous transformations, it’s more critical than ever for agencies to understand the broader PPC and digital marketing environment. This year, our survey reached an expanded pool of agencies, yielding even more robust results. We also introduced new questions beyond PPC to delve into agency business operations and sales strategies. We’ll initially examine this comprehensive agency management data before focusing on specific PPC trends. Ready for an insider’s perspective on internet marketing agencies in 2020? Keep reading! But first, a word about COVID-19.

A word about COVID-19

This survey was finalized before COVID-19 reached pandemic status. Although the outbreak has presented many unforeseen obstacles for agencies in 2020, it has also amplified many of this report’s key findings.

• Attracting new clients will remain a primary challenge, compelling many agencies to refine their targeting towards high-demand sectors like healthcare, on-demand media, and e-commerce.

• Client retention, already a growing concern, will become paramount for agencies. Assisting clients in adapting ad copy to COVID-19 and recommending pandemic-appropriate strategies will be crucial.

• The right technology will be vital in accommodating transitions to online models and remote work. Reporting tools will be essential for shaping pandemic-adjusted strategies. With that addressed, let’s explore overall agency management. >> Searching for the latest State of the Digital Marketing Agency report? Look no further!

Overall agency management

The first part of our report examines general internet marketing agency patterns, encompassing size, acquisition tactics, services offered, tools employed, and prevalent challenges.

1. What country are you based in?

Our survey includes agencies running international campaigns and those based internationally. Although metrics may differ across countries, PPC proves to be an effective global marketing approach.

2. What’s your role?

Nearly half of the survey respondents are agency owners. This is encouraging, as it indicates active participation from key decision-makers. It also suggests a prevalence of smaller agencies or solo operations, given that 64% reported having fewer than 10 employees [Question #3].

3. How many employees does your agency have?

Most agencies fall within the 2-10 employee range. This smaller size may partially stem from the difficulties in recruitment and onboarding, as we’ll see in Question #13.

4. How many clients does your agency have?

It appears that gaining clients can create momentum. This suggests that 25 employees might be a turning point for digital marketing agencies, triggering a period of accelerated growth. This aligns with the heavy reliance on client referrals, as we’ll explore next.

5. How does your agency primarily acquire new clients?

Similar to last year, referrals remain the leading source of new clients for roughly half of the surveyed agencies. Interestingly, upselling other products and services saw a significant drop from 20% to 2%. While agencies have become less reliant on upselling for new client acquisition over time, this year marks the most substantial decline. With COVID-19 driving increased social media engagement, this channel will likely gain more traction for agencies in 2020.

6. Who manages your sales process?

With CEOs actively involved in the sales process for numerous agencies, it appears many haven’t reached the size or stage requiring a formalized sales structure. Balancing agency growth with preserving its unique attributes and values is delicate. Therefore, prioritizing scalability while building teams and offerings is crucial for agencies.

7. How frequently do you create sales proposals?

The majority of agencies generate sales proposals weekly, which is positive. Those creating proposals daily might benefit from proposal generation tools, while those with less frequent creation might consider revisiting and refining their nurturing strategies.

8. What’s your average customer lifespan?

One major advantage of digital marketing is its data-driven nature, allowing for continuous optimization. This enables long-term sustainability of digital strategies, potentially explaining why clients remain with agencies for over two years.

9. What services does your agency provide?

While social media, SEO, and web development were closely ranked last year, this year reveals a different pattern. Social media joined PPC at the top, while SEO and web development saw reduced frequency, aligning more with content and email marketing. This isn’t surprising given the growth of PPC and social media as channels. PPC sees the emergence of new networks, and social media platforms offer increasingly granular targeting capabilities. This year, we included new service options. Reputation management, local listings, and e-commerce had the lowest percentages, while landing page creation/optimization matched web development in popularity.

10. Do you outsource any of these services?

The finding that 41% of agencies don’t outsource aligns with the observation from Question #6 that 42% still involve CEOs in proposals, suggesting most haven’t scaled to an outsourcing level. Those outsourcing typically do so for web development, which is logical given its comprehensive nature. Conversely, other services utilize overlapping skill sets, accessible through online courses and training.

11. Describe your agency’s tech stack.

Technology is crucial for efficient agency operations. With numerous teams working remotely due to COVID-19, a robust tech stack is more critical than ever. This includes diverse tools for content publishing, client engagement, project management, and more. In website platforms, WordPress was seven times more popular than Squarespace. For email marketing, Mailchimp’s usage more than tripled that of Constant Contact.

12. What reporting tools does your agency use?

Google Data Studio emerges as the most favored reporting tool among agencies, enabling the creation of customized, interactive dashboards from various data sources, including Google Analytics. Surprisingly, 26% of agencies don’t utilize a reporting tool. Reporting is vital for measuring success, optimizing budgets, and communicating value to clients. One obstacle to reporting can be interpreting metrics. In such cases, benchmarking against industry standards can prove beneficial.

13. What are the biggest challenges your agency anticipates this year?

The top two challenges remain consistent with 2019, but acquiring new clients has taken a more prominent position in 2020. Given PPC’s popularity among agencies (Question #9), differentiation from competitors might be increasingly challenging. This could also explain the heightened concern for retaining clients this year. Hiring/training new employees also saw a significant jump from 7% to 31%, aligning with responses to Question #10 indicating a growing demand for dedicated PPC professionals.

14. What resources do you use to stay informed about the industry?

Agencies continue to rely on diverse industry experts to stay current on digital marketing and agency strategy. Similar to previous years, top resources include Google, nexus-security, Moz, Hubspot, SEMrush, PPC Hero, Search Engine Land, and Neil Patel.

15. What content formats do you prefer?

Blogs remain the most preferred learning method. Except for Pantheon (a paid podcast subscription), audio and video resources aren’t far behind. These findings also serve as a reminder for agencies to incorporate blogs and audio/visual content into their own marketing strategies.

Deep dive into PPC

Over 57% of surveyed agencies offer PPC services. The latter half of our report delves into trends within this service, covering platforms, account optimization, resource allocation, and success metrics.

16. How many employees in your agency are dedicated to paid search and social media?

While the percentage of agencies with a single dedicated employee for paid search and social remained consistent with last year, other figures show significant shifts. There’s not only an increase in agencies with multiple dedicated employees but also a considerable drop in those lacking full-time dedicated staff. This highlights a growing demand for specialized paid search professionals.

17. What percentage of your agency’s time is dedicated to paid search and social media?

As agencies invest more in paid search and social, it follows that they’d dedicate a greater percentage of their overall time to these services. Not only did agencies dedicating 75% of their time show an increase, but those allocating less than 25% decreased. This makes sense, as PPC’s versatility and real-time feedback, while making it attractive, also demand significant attention.

18. How does your agency price its PPC services?

Both flat fee models (standalone or combined with a percentage of spend) were twice as prevalent as the pure percentage of spend model. This mirrors last year’s report, where flat fees were favored. This is understandable, as percentage-based pricing can lead to fluctuating monthly revenue.

19. What percentage of the paid search or social accounts you manage weren’t created by your agency?

For most agencies, the majority of managed accounts were pre-existing. This implies that clients hadn’t previously run ads independently or preferred a fresh start. The takeaway is that agency clients are less likely to experiment with PPC solo and prefer partnering with a trusted agency for effective campaign creation. Establishing a strong foundational account structure is vital in PPC, contributing to the long customer lifespans observed in Question #8.

20. What advertising platforms do you currently utilize?

Google and Facebook remain the dominant advertising platforms. However, Instagram is not far behind this year, experiencing a significant jump from 57% in 2019. Interestingly, Pinterest, a new addition this year, proved slightly more popular than Amazon.

21. Does your agency anticipate an increase in its spend under management this year?

This finding aligns with last year’s results, where 89% of agencies reported increased spend under management, while only 11% saw a decrease.

22. Which channels do you predict will experience the most growth?

Unsurprisingly, the three most popular platforms (Question #21) are also predicted to experience the most growth.

23. How much time do you spend managing clients’ paid search and paid social accounts?

Just as agencies are dedicating more full-time staff to paid search and social compared to last year (Question #17), they’re also investing more time in these channels. While active monitoring and adjustments are important in PPC, many tasks can be automated for time savings.

24. When optimizing an account, what do you prioritize?

It’s logical that keyword research takes top priority, being the foundation of any digital marketing strategy. Understanding your targeting is crucial for refining ad copy, and knowing the competitiveness of your targets is essential for setting appropriate bids.

25. What is your clients’ primary success metric?

Conversions emerge as the clear winner, being the most common primary success metric.

26. What are the biggest challenges you encounter when managing paid accounts?

In a constantly evolving industry, it’s not surprising that keeping pace with change is the most significant challenge for most digital marketing agencies.

State of the Agency 2020: Key takeaways

• Efficiency alone isn’t enough. Last year, agencies achieved PPC spend growth with fewer dedicated full-time employees. This year, growth occurred in both spend and dedicated time and personnel. While efficiency was key last year, prioritizing PPC might be this year’s trend, evident in the decline of previously popular services (SEO, web development) and the rise of paid search and social.
• Training is crucial. With agencies investing more time and refraining from outsourcing paid search and social, the demand for full-time PPC professionals is surging. Adequate training is essential for scaling up and retaining both clients and employees.
• Agencies are delivering. Most agencies remain under 25 employees, operating with all hands on deck, indicating potential bandwidth limitations. However, long, healthy customer lifespans suggest that resources, automation, and reporting tools are enabling agencies to meet client expectations effectively.
• PPC is dynamic. Acquiring new clients is an ongoing hurdle, but keeping up with PPC changes and trends is a full-time job itself. New networks are emerging, existing platforms are evolving, and most agencies employ cross-platform strategies. Convenient, high-quality training is essential for agencies and their staff to stay competitive.
• Digital is vital. Digital marketing and operational methods have always been important, but COVID-19 has amplified their significance. Reporting tools and online resources are crucial for swift strategy adjustments, robust tech stacks are essential for smooth remote team operations, and online marketing is experiencing unprecedented demand. A heartfelt thank you to Kate Lindsay, Elisa Gabbert, Amanda Oles, Kim Castings, Ceillie Clark-Keane, and our amazing customers for their contributions to data collection and report creation.