Lower interest rates will boost cash flow for marketing and advertising firms.
Business services outlook key takeaways
To attract and retain top talent, staffing firms are prioritizing the employee experience.
Advertising firms are at a crossroads that will dictate their level of success.
Business services industry trend #1: Fall 2024 outlook
Business services industry trends fall 2024
The Real Economy industry update—Business services: Marketing and advertising firms are poised to take advantage of lower interest rates.
The Federal Reserve’s September rate cut of 50 basis points, to 4.75%−5%, will provide a lift for the marketing and advertising industries. Not only will their clients’ and prospects’ cash flows increase, but these lower interest rates will reduce borrowing costs for advertising and marketing firms themselves, thus releasing pent-up demand and potentially improving profitability. While the first rate cut is significant, additional rate cuts on the horizon may further boost the industry.
Advertising agencies’ revenue depends heavily on client marketing budgets, which typically equal about 10% to 15% of sales. Reduced borrowing costs will increase cash flow for companies. These prospective clients can redirect their additional liquidity toward marketing and advertising efforts, which typically see pullback when cash flows tighten.
Business services trend #2: Staffing firms need to keep pace
Staffing firms need to keep pace with their evolving market
Staffing firms must adapt and implement new technologies to keep pace with an evolving workforce. This implementation will allow staffing firms to revolutionize the employee and customer experiences, thus providing more value to their customers.
The staffing industry, while facing economic uncertainty and a 12.5% drop in employment in 2023, holds optimism for 2024. Economic conditions have historically influenced staffing firms, and while new job creation slowed in 2023, firms must become more agile, innovative, and data-driven to navigate geopolitical and macroeconomic challenges.
Adopting advanced AI technologies is crucial for recruitment efficiency, with AI enhancing applicant tracking, task automation, and workforce specialization, particularly in cybersecurity. A focus on improving worker productivity through AI is expected to boost the industry's effectiveness. Staffing firms are also prioritizing employee experience, emphasizing work-life integration and providing upskilling and reskilling opportunities.
Middle market staffing firms must innovate and implement digital strategies, including AI, to remain competitive. Failure to do so could result in losing market share to more technologically advanced competitors. Adapting to new technologies will enable staffing firms to revolutionize both employee and customer experiences, providing greater value to their clients.
Business services trend #3: Marketplace differentiation
Advertising firms face crucial decisions this year
Advertising firms are at a crossroads that will dictate their level of success.
Advertising firms have seen significant changes in the marketplace over the past year. But 2024 is shaping up to be the year in which some firms differentiate themselves—primarily through technological innovations—from others that fall behind.
While there is optimism about 2024, there are threats that can impede anticipated ad growth. According to GroupM, the top five global sellers of ads are not even advertising firms. Rather, they are technology companies. Each has increased its ad revenue by 25% on a compounded basis from 2016 to 2022, beating the nearly 10% pace of the total advertising market. This growth has come as advertisers sought out digital tools, specifically those leveraging AI, that can more specifically target individual customers.
In 2024, it is clear that advertising firms are at a critical juncture. Those investing in technology, embracing AI tools and leveraging first-party data are poised to separate themselves from the competition.
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