Highlights from the 2023 Digital Agency Industry Report

Today, I did a LinkedIn Live with Nick Petroski, founder of Promethean Research, to review the top 10 insights from his 2023 Digital Agency Industry Report.

If you missed it, don't worry. 

Here are the top 10 insights from the report:

1. The number of digital agencies in the US and Canada has grown by 54% from 2018 to 2023.

2. Digital ad spend has grown at 16% CAGR (compound annual growth rate)

3. Over 50% of digital agencies were using AI by the end of 2022

4. Most agencies don't use industry best practices such as tracking utilization, available capacity, project gross margin, and revenue forecasting

5. Inflation and increasing salaries are compressing pre-tax net income to 17%

6. Most agencies say it is significantly more difficult to find and retain great talent than in years past

7. Most agencies leverage offshoring, nearshoring, and remote workforce

8. Only 5% of agencies are testing the four-day work week.

9. Brands are spending approximately 25% of their marketing budgets on agencies, mostly to help them stay current with rapidly evolving trends

10. The number of agencies with fewer than 10 employees is shrinking, whereas agencies with 10 or more employees are growing

Plus, MY FAVORITE STAT OF THEM ALL:

👉 The data says that specialist agencies grow 100% faster than generalist agencies.

🤯 BOOM! 

If you want to watch the replay, you can check it out here. 

CQ

Frequently Asked Questions

How much has the number of digital agencies in the US and Canada grown?

54% from 2018 to 2023, a significant expansion in the overall number of agencies competing in the market during that period.

How widespread is AI adoption among agencies, based on this report?

Over 50% of digital agencies were already using AI by the end of 2022, showing adoption was well underway even before AI became a bigger industry conversation more recently.

What's happening to agency profitability, according to the report?

Inflation and increasing salaries are compressing pre-tax net income to 17%, a real financial pressure most agencies are navigating simultaneously alongside growth.

Why is the fastest-growing stat in the report specifically about specialization?

Because specialist agencies grow 100% faster than generalist agencies, a striking, direct confirmation that specialization isn't just a positioning preference, it correlates with measurably faster growth.

What's happening to smaller agencies compared to larger ones, based on employee count?

Agencies with fewer than 10 employees are shrinking in number, while agencies with 10 or more employees are growing, suggesting a shift toward scale within the industry overall.