Advertising Services Procurement Intelligence Report, 2023 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

Advertising Services Category Overview

“The growing demand for short-form content and video adverts fuels the advertising services category.”

The global advertising services category is expected to witness a CAGR of 5.9% from 2023 to 2030. Growth in this category is fueled by the increasing demand for short content and video ads, as well as the growing number of smartphone users and the increasing penetration of the internet in developing economies. The different segments considered for this report include - television, YouTube and OTTs, radio, and podcasting, print and newspaper, digital publications, and digital banners and billboards. The dependence on first-party data is gaining significant prominence in the advertising space due to increasing data privacy regulations. Google and Tesco are two of the biggest examples. For instance, Tesco has started using information (first-party data) from their Clubcard and/or loyalty programs to create more targeted ads and customized communications based on actual purchases. In 2022, Google partnered with IAB to provide publishers with new tools and applications for controlling their first party data. Publishers using Google Ad Manager will be able to serve relevant ads on iOS without tracking users across third-party applications.

There were more than 240 million digital video viewers in the U.S. alone in 2022. 91% of consumers want brands to produce more video content. Currently, short-form content and digital videos are the most engaging. 86% of marketing executives use some form of video in their marketing strategy. For marketers, YouTube is the most popular sharing platform, which is forecasted to be used by 80- 90% of consumers, followed by Facebook at 70%. Digital videos and downloads accounted for 82% of global internet traffic in 2022. At the moment, the North American region holds over 36% of the global share, followed by Europe and APAC. Advertising services in APAC are expected to grow at the fastest rate. This category was valued at USD 600 billion in 2022.

Constant technological progress such as the integration of AI in media marketing platforms and channels, the use of Extended Reality (a mix of augmented reality, virtual reality, and mixed reality) to shape customer perception, the use of AI in PPC campaigns and chatbot-generated marketing content are anticipated to support the growth of this category. Most of the B2B, B2C, and D2C businesses use video advertising as their dominant medium - owing to more engagement and entertainment reasons.
With the growing prominence of VR headsets and AR applications, more companies have started investing in immersive marketing experiences for customers. In a post-pandemic situation, companies through Extended Reality (XR) are increasingly connecting with their audience more effectively. With XR advertising, new environments can be created for the consumer, which in turn boosts the campaign impact significantly. One of the rising trends is the "try before you buy" which is being fulfilled by advertisers by offering XR experiences to its customers. For instance, a large furniture company, such as IKEA has allowed its customers to use AR apps to test what the product might look like in their respective homes before a purchase. Similarly, AR apps are increasingly used in the cosmetic industry for product testing purposes.

Supplier Intelligence

“What best describes the nature of the advertising services category? Who are some of the main participants?”

The global advertising services category features a moderately consolidated landscape with the leading top fifteen players accounting for a majority of the share. Competition is intense due to increased media fragmentation across multiple devices and platforms. Most advertisers are focusing on running ads on omnichannel platforms. According to 72% of U.S. marketers, delivering a unified brand message has become increasingly complex as they must manage campaigns and budgets across multiple DSPs. Hence, a single omnichannel platform enables companies to run campaigns efficiently and obtain a full-funnel measurement. Suppliers command a higher bargaining power due to increased consolidation. Companies have a high reliance on advertising agencies to boost and enhance their brand growth. Another favoring factor is the risk of forward integration since agencies can work across any industry and with many industries.

Key suppliers covered in the category:

• WPP Plc

• Omnicom Group

• Publicis Groupe

• The Interpublic Group of Companies

• Dentsu Inc.

• Hakuhodo Inc.

• Havas SA

• Accenture Song

• MDC Partners

• Lamar Advertising

• BBDO Worldwide

• Epsilon Data Management, LLC

• Starcom Worldwide. Inc

• BlueFocus Communication Group

Pricing and Cost Intelligence

“What is the total cost of ownership for an advertising agency? What variables affect service prices?

The total cost of ownership for an advertising agency can be divided into major categories such as - the cost of office expenses, production, labor, business setup, and other additional expenses. The cost of office expenses can include rent, equipment, maintenance, depreciation, and office supplies. The largest cost component in advertising services is the production cost. Production cost includes the cost of multiple software integrations, digital marketing, and social media tools, SEO and PPC tools, cameras and projectors, and other tools. Business setup costs include licensing fees, corporate taxes, and consultancy fees. Labor accounts for 10 - 18% of the total fixed costs.

Due to the surge in data-driven marketing and advertising following the pandemic and the growth in digitization, digital advertising rates have been rising significantly since 2021. As data costs have increased, advertising prices have increased by 25% to 30% or more. For instance, in June 2022, Meta’s CPM increased by 61% year over year, averaging about USD 17.60 per CPM. Similarly, Instagram’s CPM has increased by 23%. To keep up with the data-driven demand, the salaries of skilled marketing managers have increased to boost the company’s revenue.

The cost per lead in Google has increased significantly for 91% of the industries in 2022. For instance, the cost per lead increased by 69%, 54%, and 134% for travel, furniture, and arts & entertainment industries respectively. The major reasons are an increase in broad keyword matching, high competition, and inflation.

The cost structure connected with is broken down in the accompanying chart. The cost of production, office expenses, and business setup can depend on multiple cost components, which have been illustrated below.

Sourcing Intelligence

“How do B2B companies engage with advertising service providers? What is the type of engagement model?”

Almost 60 - 70% of B2B companies opt for a full or hybrid outsourcing model for their marketing and advertising activities. Many outsourced advertising teams are paid on a commission basis depending on the terms of the contract. Companies also benefit from specialized knowledge (for instance, SEO, PPC, digital marketing, etc.) and workforce by outsourcing. Clients can get access to trade memberships, advertising databases, marketing automation software and other digital tools, and CRMs. An outsourced agency can also handle end-to-end processes, from creative production, and invoicing, to billing which enables the companies to focus on their core projects and specialties. As a result, companies get better visibility throughout the process, save time on training and hiring, and target audiences effectively while generating higher ROIs.

Companies choose recognized provider operating models to generate more cost savings, lower security-related risks, and ensure better customization flexibility.

Businesses are increasing their spending on cutting-edge technology to provide specialized immersive marketing experiences. Leading businesses are advancing their integration with various platform providers that help with automation and produce higher returns while growing their consumer base. To diversify their service offerings and so reach a larger audience, agencies are also working with third-party providers, acquiring, or partnering with regional vendors who have embraced a global delivery model. For instance,

• In March 2023, Publicis Groupe announced the acquisition of Practia to expand and strengthen its digital business segment. Practia is one of the leading technology providers in the Latin American Market. Through this deal, Publicis Sapient will enter and expand its customer footprint in Latin America. With this, Latin America will become its third major delivery center following India and Eastern Europe

• In January 2023, Publicis Groupe announced the acquisition of a leading Bulgaria-based marketing agency firm, Advertise BG. The deal aimed to expand and strengthen Publicis's end-to-end marketing capabilities in the social media, digital strategy, and digital content creation space. The acquisition will merge Advertise BG with Digitas Sofia, which is a connected agency with Publicis Groupe in Bulgaria

• In January 2023, Publicis Groupe announced the acquisition of the U.K.-based marketing company, Yieldify, which will become a part of Epsilon. Yieldify's platform will combine with Epsilon PeopleCloud to expand its presence in the mid-market and integrate with Epsilon’s industry-leading CORE ID. Audience targeting will become easier through increased personalization

The Advertising services category procurement intelligence report also provides details regarding day one, quick wins, portfolio analysis, key negotiation strategies of key suppliers, and low-cost/best-cost sourcing analysis.  

Advertising Services Category Procurement Intelligence Report Scope