Table of contents
The marketing and advertising agencies market comprises companies that develop, implement and monitor marketing and advertising strategies. We segmented the European market into agencies that offer (i) multimedia, (ii) digital marketing, (iii) customer loyalty, (iv) marketing consulting and (v) affiliate marketing services.
The European landscape is characterised by a medium degree of consolidation, with varying levels across geographical markets and verticals (e.g. concentrated customer loyalty market). Herein, the primary driver for consolidation is financial sponsors aggregating agencies specialised in niche markets to create one-stop-shop propositions. Due to the large number of market players and the sustained strong outlook for organic growth, we anticipate consolidation to continue in the future.
Sponsor-led interest has been significant, with ~72% of identified European assets being backed by financial sponsors (April 2023). Particularly, the digital marketing segment has attracted the greatest attention from investors (~86% of assets being backed). Investors attempt to capitalise on significant growth opportunities in certain market verticals (e.g. sustainable marketing campaigns) and seamless integrations of players into holistic agency networks that can serve blue-chip customers across multiple end markets. However, the high turnover of clients given low switching costs in a commoditising market must be taken into consideration by financial investors.
Relevant ESG topics primarily revolve around environmental and social issues. Players are expected to achieve sustainability goals outlined by the EU and incorporate topics around environmental protection in their campaigns. Furthermore, social matters are rooted in guaranteeing protection when handling client and customer data as well as implementing marketing strategies by promoting inclusiveness.
The global digital marketing industry was valued at ~€294.6bn in 2022 and is expected to reach ~€447.3bn by 2027 (+8.7% CAGR 2022-2027; Technavio, January 2023)
Statista (February 2023) projects that, in 2023, ~€115.4bn will be spent on digital advertisements across Europe. By 2027, total spending is anticipated to increase to ~€146.0bn (+6.0% CAGR 2023-2027)
Executives interviewed by Gain.pro expect the European marketing and advertising market to grow at ~5% YoY in the medium term
The increasing fragmentation of marketing-related needs by clients highlights the potential benefits of outsourcing all activities to marketing agencies. Similarly, clients increasingly favour partnering up with only a handful of agencies to ease project management and enhance integration across marketing verticals, which raises the market potential for one-stop-shop players (interviews by Gain.pro; McKinsey & Company, September 2021)
AI drastically reduces the amount of work needed to achieve specific output (e.g. content creation, coding, data analysis), thereby freeing up resources while obtaining more personalised results (interview by Gain.pro). While keeping hourly rates fixed, AI-savvy agencies may experience efficiency gains in the form of improving bottom-line margins
Significant pricing upside with end customers increasingly shifting towards sustainable marketing (i.e. higher-priced) campaigns. This creates opportunities for identified players with expertise in promoting socially responsible products, using recycled materials for physical marketing products (e.g. in-store campaigns) and energy-efficient coding (e.g. website development; interviews by Gain.pro; HubSpot, August 2022)
The decreasing complexity of digital advertising platforms (e.g. Google, Meta) eliminates the need for external marketing services providers. Additionally, the fear of a pending recession and high market uncertainty negatively affect customers’ market budget allocations (interview by Gain.pro; McKinsey & Company, March 2021)
Elevated price pressure stemming from the ongoing commoditisation of digital marketing services (e.g. SEO, social media marketing) due to market-wide adaptation, with such digital capabilities becoming a hygiene factor in agencies’ offerings (interview by Gain.pro)
Emergence of new competition from adjacent (i) tech giants, (ii) consultancies and (iii) tech-savvy individuals/SMEs competing in niches, while large customers simultaneously consider moving core marketing activities in-house to ensure agility (interviews by Gain.pro; BCG, September 2022)
Read the full report on Gain.pro
Request a 7-day free trial to gain in-depth knowledge on the Marketing & advertising agencies industry.
With the full report, you have access to…
Detailed assessments of the market outlook
Insights from c-suite industry executives
A clear overview of all active investors in the industry
An in-depth look into 179 private companies, incl. financials, ownership details and more.
A view on all 966 deals in the industry
ESG assessments with highlighted ESG outperformers
And much more!