Internet Brings Business Boom With High Price For Marketing Services Industry

The internet boom has brought mixed fortunes for marketing services companies, with an increase in business but a decrease in profitability. According to the latest quarterly findings of Marketing Monitor, research undertaken by Willott Kingston Smith, the drop in profits is mainly caused by the increased cost of employing staff with the skills to deal with e-commerce related work.

Amanda Merron, a partner at Willott Kingston Smith, commented, “Across the board, marketing service companies are witnessing an increase in turnover as e-commerce ventures aggressively seek to build their brands. However, the downside for employers is that employees qualified to work in this area are now in the driving seat- and can be difficult to recruit or retain in the face of ‘blue sky’ share option schemes offered by internet businesses heading for their initial public offering.”

The research showed that advertising companies have seen their employment costs rise by an average of 8.3% per head, while in PR although gross income has risen by 5.3%, operating profit per head has fallen by 9%. In design houses average salaries are up 8.2%, as is gross income, by 3.8%. However, the profit margin on gross income has fallen from 15.6% to 14.7%. The exception was found to be among media buyers, where gross income increased 4.4%, while employment costs per head increased by less than 2%.

Merron went on to warn that if dot com related marketing spend drops off, companies could be left with an overpaid workforce. “Tough restructuring will be an unavoidable consequence.” she said. In order to limit the damage, Willott Kingston Smith expects to see more strategic alliances, corporate partnerships and merger activity between marketing services companies. This would allow companies to fill skills gaps without sacrificing profitability. “The face of the marketing services industry is likely to continue to change as e-commerce continues to present new opportunities and new challenges.” concluded Merron.

Willott Kingston Smith: 020 7304 4646

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