State of Digital Services 2023

Navigating Change: The Resilience of Adaptive Digital Agencies Amid a Rapidly Evolving Environment

Digital agencies' average revenue grew by 17% in 2022, a slower rate than the 25% seen in 2021, but still above historical trends. The pace was partly driven by the continued pull-forward in digital transformation spending from the pandemic.

103 agency leaders surveyed · Fielded April 2023 · Primarily North America · 27 pages

Top findings

• There was a substantial increase in agencies identifying as specialists, leading to higher growth rates. Agencies that tailored both their service mix and industry focus saw average revenue growth of 20% in 2022.
• The most successful agencies refocused their service mix rather than simply expanding it.
• Raising prices also became more common, with higher hourly rates seen in 2022.
• Agencies that used value-based pricing saw slightly above-average growth rates and higher profitability.
• Agencies reported an average net margin of 14% in 2022, a decrease from the 17% observed the year prior.
• Combined employee turnover averaged 23%. Agencies with under 10% combined turnover grew 68% faster than average; those above 50% grew 118% slower.
• Agencies using offshore/nearshore talent grew significantly faster than fully onshore agencies (22% vs. 11%) and earned much higher margins (17% vs. 11%).

Inside the report

1. Introduction
2. 2022 In Review
3. Current Trends
4. Methodology & Demographics

Format: 27-page PDF report, single-license use. Promotional support from the Bureau of Digital.

Methodology

103 responses from digital agency owners and managers, fielded April 2023. Primarily North America: 84% U.S., 10% Canada, 5% Europe, plus Asia-Pacific and Latin America. Average agency size 35 FTE; median 16 FTE.

About Promethean Research

Promethean Research has tracked the digital agency industry since 2015. The State of Digital Services is our annual benchmark for agency leaders making decisions on growth, pricing, margins, staffing, and M&A.