The digital marketing landscape is constantly evolving, and staying ahead of the curve is crucial for agency success. To provide valuable insights into the current state of the industry, nexus-security conducted a comprehensive survey of over 300 agencies across the US and Canada. The survey delves into various aspects of agency operations, including service offerings, pricing models, organizational structures, and the most pressing challenges they face.

This report highlights ten key findings from the survey data, offering agencies valuable insights to inform their strategic planning for 2024. Let’s dive in! Download the full State of the Digital Marketing Agency industry report for comprehensive insights and data-driven guidance to shape your agency’s trajectory in 2024!

1. Hybrid billing models are gaining traction among agencies

The survey reveals a notable shift in billing practices, with hybrid models becoming increasingly popular among agencies. While flat fee and hybrid billing were equally prevalent in our 2020 report, this year’s findings indicate that nearly half of the surveyed agencies have adopted a hybrid approach. Erin Rose, Sr. Director of Partner Development for LocaliQ, explains this trend: “Agencies have various pricing options available, and hybrid billing models have gained traction because they offer flexibility. This allows agencies to structure their pricing in a way that benefits both their clients and their own financial stability.” [

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2. Agencies are implementing additional fees for specialized creative services

The survey sheds light on the specific services and add-ons for which agencies are charging extra fees. Landing page creation emerged as the most common service subject to additional charges, followed by image ad creation and display creative. This trend aligns with the fact that these services require significant time, expertise, and creative input. Effective landing pages and compelling creative assets play a critical role in the overall success of digital marketing campaigns, justifying the additional fees. Beyond creative services, reporting and tracking emerged as valuable offerings for which agencies are charging extra fees. By offering these sought-after services in-house, even at an additional cost, agencies can enhance the value they provide to clients while simultaneously boosting revenue streams.

3. Social media advertising dominates as the most widely offered service

The survey findings highlight the diverse range of services offered by agencies, with social media advertising, content creation, and creative services emerging as the most prevalent offerings. SEO, search advertising, and email marketing follow closely behind. These strategies remain accessible and cost-effective for businesses of all sizes, solidifying their position as reliable options for agencies specializing in digital marketing services. The data also reveals that a majority of agencies provide multiple services to their clients. (We will delve deeper into this aspect in the report.)

4. Most clients engage agencies for multiple services

A significant 93% of surveyed agencies reported that their clients utilize two or more services, with 34% indicating that their clients typically engage them for an average of four or more services. This trend presents a positive outlook for agencies, as a broader service portfolio often translates into higher client retention rates and increased opportunities for upselling. Furthermore, this highlights the importance for agencies to consider expanding their service offerings. Limiting their services to one or two areas diminishes their revenue potential and may necessitate clients to work with multiple agencies to fulfill their comprehensive digital marketing needs.

5. Paid search management consumes a significant portion of agency time

The survey findings indicate that paid search management demands a considerable amount of agency time. Specifically, 41% of agencies offering search advertising services dedicate 2-4 hours per week per client to PPC management, while 16% invest 5 hours or more. This time commitment can quickly accumulate, potentially hindering an agency’s capacity to onboard new clients and expand service offerings for existing clients. For agencies dedicating more than a couple of hours per week per client to search management, exploring outsourcing options or investing in automation tools can be viable solutions. These strategies can streamline PPC management processes without compromising campaign performance.

6. Smaller agencies contend with employees handling multiple responsibilities

The survey reveals that a majority of agencies (53%) have fewer than 25 employees, with 23% operating as sole proprietorships. This finding suggests that employees in smaller agencies often wear multiple hats, juggling responsibilities ranging from account management and sales to reporting and other tasks. For instance, over half of the surveyed agencies lack dedicated sales personnel. Specifically, 18% have employees partially dedicated to sales, while 43% have at least one employee fully focused on sales activities. However, many smaller agencies are increasingly leveraging marketing AI tools to bridge resource gaps and enhance efficiency. Download the report to uncover the percentage of agencies with dedicated account management teams.

7. Agencies utilize a diverse range of technologies, including emerging AI tools

A robust and well-integrated technology stack is essential for agencies, particularly smaller ones operating with limited staff and resources. Tools for marketing automation and email marketing, such as HubSpot and MailChimp, continue to be indispensable assets for agencies. Agencies also commonly rely on specialized tools and software for reporting and analytics, project management, content management, and ecommerce/payment processing. However, a notable addition to the agency tech stack is the emergence of ChatGPT. This AI-powered tool has rapidly become an invaluable resource for agencies and marketers seeking to automate previously time-consuming tasks. The evolving role of AI tools and their impact on the agency landscape in the coming years will be intriguing to observe.

8. Managed ad spend experiences growth, albeit at a moderated pace

According to the survey, 34% of respondents reported stable ad spend under management over the past year. Conversely, 53% indicated growth in their managed spend, with 26% experiencing growth exceeding 25% and 27% experiencing growth below 25%. Considering the economic challenges and the post-pandemic landscape, the observed growth in agencies’ managed spend is encouraging. However, it’s worth noting that the growth rate is lower compared to the findings from our 2018-2020 reports.

9. Referrals maintain their position as the primary source of new client acquisition

Consistent with our previous reports, client referrals emerged as the most effective method for acquiring new clients. Content marketing and digital marketing followed, albeit not as closely. While referrals are invaluable, agencies facing challenges in attracting new clients should diversify their acquisition strategies. Exploring alternative approaches can be beneficial when referrals alone are insufficient.

10. Economic uncertainty emerges as the dominant concern for agencies in 2024

Acquiring new clients has consistently ranked among the top challenges for agencies surveyed since 2018. While this remains a significant concern for agencies surveyed this year, economic conditions and uncertainty has emerged as the most pressing challenge they anticipate facing in 2024. This particular concern was not even included as an option in previous surveys, which coincided with periods of higher reported growth rates. For instance, in 2018, almost half of the surveyed agencies experienced a growth rate exceeding 25% in managed spend, compared to only 26% in the current year. We have included actionable tips to address this challenge effectively in our report!

Positioning Your Agency for Success in 2024

Gaining insights into the operational models, resource allocation, and client service approaches of other digital agencies provides valuable benchmarks and can inform your agency’s strategic planning for 2024. Moreover, it can help identify areas for improvement and optimization within your own operations.

Here’s a concise summary of the key takeaways from our State of the Digital Marketing Agency in 2023 report:

1. Hybrid billing models are on the rise among agencies.
2. The percentage of ad spend managed by agencies has increased since 2018.
3. Agencies are implementing additional fees for specialized creative services.
4. Social media advertising stands out as the most widely offered service.
5. Most clients engage agencies for multiple services.
6. Paid search management consumes a significant portion of agency time.
7. Smaller agencies face the challenge of employees handling multiple responsibilities.
8. Agencies leverage a diverse technology stack, incorporating emerging AI tools.
9. Managed ad spend demonstrates growth, although at a slower rate than in previous years.
10. Economic conditions and uncertainty have emerged as the primary concern for agencies looking ahead to 2024.

Do you require assistance in preparing for growth in 2024? nexus-security, powered by LocaliQ, is here to support you. We provide valuable industry data and insights and offer direct assistance in driving agency growth and scalability. Reach out to learn more.