US Digital Agencies Stand to Benefit from Scale and Evolving Technology, According to New Report

Report from Borrell Associates indicates media agencies and digital services spending reach an all-time high

Digital agencies have almost quadrupled in number in the last decade, and spending on digital media services other than advertising has increased faster than media spend in local markets. According to a new report from Borrell Associates Inc. Scaling Digital Agencies, which was sponsored by Frequence, digital agencies associated with legacy media companies stood to benefit from economies of scale as the market increases.

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“For local media companies, having a digital agency has become vogue,” said Gordon Borrell, CEO of Borrell Associates. “These media-borne agencies have grown at twice the rate — eightfold in the past decade. There are now about 2,500 of them across the U.S. But many have begun hitting a wall because they haven’t been able to scale the business all that well. With the help of Frequence, we identified key characteristics of those who have been able to scale their agency’s sales processes beyond just closing a handful of clients every quarter.”

Beyond the massive growth of today’s agencies, the report also uncovered the significant rise of digital services spending among agencies and examined common practices. Digital services, including all things required to manage a business’ digital presence and marketing communications, accounted for $748 billion in business spending in 2020. Among those costs, Web Hosting and SEO services led the pack with $44.59 billion and $34.87, billion respectively. Following close behind was Website Design/Maintenance, Social Media Management and Online Video Production.

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Additional data from Frequence and Borrell indicated that agencies utilizing software to automate proposal generation and workflow saw significant increases in revenue and efficiency. Across several control groups, monitored from 2019 to 2021, agencies actively engaged in a workflow program saw annual revenue per sales rep increases ranging from 20 to 200 percent – due in large part to increased proposal generation.

“As the digital agency space continues to become more and more crowded, the need to scale operations and create greater efficiencies has never been more vital,” said Tom Cheli, CEO of Frequence. “Staff capabilities will always hit a saturation point, but as this report has shown, scaling is achievable to companies that have, or can implement, a digital focus that broadens their vision beyond their own core product.”

This joint report examined the performance of 271 sales representatives at 35 local media companies between 2019 and the first quarter of 2021, for a total of 27 months. The data examined sales activities, number of proposals submitted, and both the number and value of closed sales.

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