Marketing and advertising firms are focused on deal making, AI solutions and potential economic challenges.
Business services outlook key takeaways
Environmental and facility services companies are investing in operational efficiencies and sustainability initiatives.
Advertising firms are at a crossroads that will dictate their level of success.
Business services industry trend #1: Winter 2025 outlook
Business services industry outlook: Winter 2025
The Real Economy industry update—Business services: Companies are focusing on innovative strategies and technology
Marketing and advertising firms, environmental and facility service companies, and workforce solutions companies are concentrating their efforts on strategic growth initiatives. They are also emphasizing technological advancements to foster long-term viability and efficiency.
Three key themes have emerged for marketing and advertising firms, according to Bloomberg Intelligence:
- Dealmaking
- Generative AI
- Economic conditions tempering the ad-spending outlook
Each of these themes will directly affect the value of marketing and advertising firms, which have underperformed the MSCI World Index for multiple consecutive quarters. The index measures the performance of large- and mid-cap companies across developed markets worldwide.
Business services industry trend #2: 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 #3: 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.
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