State of the Online Marketing Services Industry Report

State of theOnline MarketingServices Industry A Publication of HubSpot’s Partner Program

1 Executive Summary

Executive SummaryThe State of the Online Marketing Services IndustryReport was conducted by HubSpots Partner AgencyTeam in the summer and fall of 2011. The surveyconsisted of 45 questions, which spanned topics fromagency size and annual revenue to service offeringsand business processes. 750 survey responses werereceived. STATE OF THEThe goal of the survey was to profile the online ONLINE MARKETINGmarketing industry as a whole, and identify what SERVICES INDUSTRYservice offerings and business processes were beingleveraged by the most successful agencies. We alsoprobed respondents around their biggest pain points,aiming to understand what financial, service andoperational challenges were most prevalent. Thefollowing report contains data and charts derived fromthese questions, as well as interpretations of that databy HubSpot.

2 Breakdown of Agency Size & Structure

Agency Breakdown: Organizational StructureQuestion: Does your agency have Question: Which specific business functionsprofessionals dedicated to specific does your agency dedicate resources towards?functions (e.g. sales, copy writing,etc.) vs. multi-disciplinary? Account Managers 21% Designers/Creative 16% No Technology 16% 33% Sales Professionals Yes (For New Business) 12% 67% Copywriters/Bloggers 11% Internal Marketing 9% Other 15% Note: percentages are based on the number of employees dedicated to a function out of all employees dedicated to specific functions (sums to 100%) 5

Agency Breakdown: Top Service Offerings Question: What are your agencies top 3 service offerings? Web Design 15% Brand Marketing 14% Social Media 12% Search Engine Optimization (SEO) 11% Full-Service Marketing Outsourcing 11%Content Creation (e.g. ebooks, white papers) 6% Email Marketing 5% Public Relations (PR) 5% Pay per Click (PPC) 3% Blogging 3% Direct Mail 2% Marketing Automation 2% 3 of the top Video Production 2% 5 services Application Development… 2% offered are Media Buying – Non-Digital 2% web-related. Media Buying (Digital) 1% Promotional Products 1% Trade shows 1% Affiliate Marketing 1% Appointment Setting 1% 6

Agency Breakdown: Top Service Offerings Question: What services do you currently offer? What services do you plan to add in the future? Social Media 83% 7% Brand Marketing 81% 3% Email Marketing 81% 6% Web Design 81% 4% Search Engine Optimization (SEO) 75% 9% Content Creation (e.g. ebooks) 67% 11% Blogging 67% 11% Pay per Click (PPC) 53% 12% Full-Service Marketing Outsourcing 50% 7% Direct Mail 47% 5% Public Relations 45% 12% Video Production 44% 15% Media Buying – Digital 36% 14% Trade shows 32% 7% Promotional Products 30% 6%Application Development (e.g. mobile) 29% 25% Media Buying – Non-Digital 28% 8% Marketing Automation 27% 13% Currently Offer Service Affiliate Marketing 17% 14% Additional Agencies that Plan to Appointment Setting 12% 7% Offer the Service in the Future 7

Agency Breakdown: Technology Used by Service Question: Do you recommend or resell software in any of the following categories? Email 58% CMS 52% Web Analytics 51% Social Media 46% Blogging 39% 82% of SEO 36% agencies CRM System 30% recommend or resell Marketing automation 23% software. Pay per Click (PPC) 22% Media Buying – Digital 18% Other 7% Media Buying (Non-Digital) 5% 8

3 Biggest Agency Challenges

Agency Challenges: Biggest Pain Points Question: On a scale of 1 to 5 (with 5 being the most painful), how painful are the following challenges? Cash Flow is Too 3.64 Variable Not Generating Enough 3.44 Leads Difficulty Signing Up 3.39 New Clients Retainers are Too Low 3.23 Client Contracts are 2.87 Too Short Difficulty Staying Up to 2.63 Date with Technology Difficulty Keeping Up 2.62 with Client Requests Difficulty Hiring and 2.53 Retaining Employees… 10

A Solution: Grow your Firm’s Retainer BaseThe most acute agency pain points (from the previouspage, 3% and higher) are, at their core, functions ofsales and/or marketing deficiencies. HubSpot believesthat shifting from project-based revenue and adoptingprocesses that position your firm to earn retainerbusiness is the optimal way to overcome thesechallenges.Retainers are a clients commitment to employ theiragency for a defined period of time, for a fixed fee permonth. Most agencies will define the scope of servicestheyll provide as part of their retainer, as well as anestimation of the frequency of those services and/or timerequired to deliver those services.Our most successful Agency Partners have adopted this model and continue to experiencesignificant growth. We used data from a series of survey questions to test this hypothesis. Thefollowing slides segment respondents into four quartiles, according to what percentage of theirbusiness is retainer-based. We then compare these cohorts to see how agencies with small amountsof retainer-based clients compare to those with large amounts of retainer-based clients.

Retainer Revenue: Percentage by Quartile Question: What percentage of your agency’s revenue is from retainers (split into quartiles)? 1st Quartile 70% - 100% 2nd Quartile 40% - 70% 3rd Quartile 20% - 40% 4th Quartile 0% – 20% 12

Biggest Challenge: Challenges by Quartile Question: On a scale of 1 to 5, how painful are the following challenges (broken down by retainer quartile)? Cash Flow is Too Variable 3.85 3.18 Agencies who sell more Not Generating Enough 3.69 retainers are Leads 3.36 less affected by the industry’s Difficulty Signing Up New 3.71 3.33 biggest Clients challenges. Retainers are Too Low 3.30 3.11 Client Contracts are Too 3.19 Short 2.29Difficulty Staying Up to Date 2.82 with Technology 2.64 Difficulty Keeping Up with 2.53 Client Requests 2.60 4th Quartile Difficulty Hiring and 2.40 1st Quartile Retaining Employees… 2.57 13

Retainer Comparison: Length, Value & 3-Year Growth Higher Longer Larger Revenue Retainers Retainers Growth 14.63 66% $4,090 9.14 38% $2,065Avg. Retainer Length (months) Avg. Retainer Size ($) % of Agencies w/greater than 10% Growth Over Last 3 Years 4th Quartile 1st Quartile 4th Quartile 1st Quartile 4th Quartile 1st Quartile

Key4 Agency Takeaways

Services Offered: Top Services by Quartile Question: What are your 3 main service offerings (1st quartile)? Social Media… 13% Brand Marketing… 12% Search Engine Optimization 12% Full-Service Marketing… 11% Web Design 10% Content Creation (e.g.… 7% Public Relations (PR) 6% Pay per Click (PPC) Mgmt 6% Email Marketing 6% Blogging 5% Marketing Automation 2% Video Production 2% Media Buying – Non-Digital 2% Direct Mail 2% App. Development (e.g.… 2% Media Buying – Digital 1% Appointment Setting 1% Affiliate Marketing 1% Trade shows 0% Promotional Products 0% 16

Services Offered: Top Services by Quartile What is the Delta between the 1st and 4th quartile’s main service offerings? 4th Quartile Agencies 1st Quartile Agencies Focus Focus More on These More on These Services Services Social Media (Twitter, Facebook, LinkedIn) 2% Brand Marketing (messaging, etc.) -3% Search Engine Optimization (SEO) 2% Full-Service Marketing Outsourcing Web Design -9%Content Creation (e.g. ebooks, white papers) 3% Public Relations (PR) 2% Pay per Click (PPC) Mgmt 4% Email Marketing 2% Blogging 2% Marketing Automation 1% Video Production -1% Top agencies Media Buying – Non-Digital don’t just focus on Direct Mail -3% common services App. Development (e.g. mobile) like web design - Media Buying – Digital they offer Appointment Setting differentiating Affiliate Marketing services. Trade shows -1% Promotional Products -1% 17

Agency Processes: Robust Sales ProcessesWhat percentage of firms (by quartile) use a Agencies thatnumber of sales process activities? have robust sales processes are 2x as likely to be in the top quartile. 4th Quartile 1st Quartile 39% 35% 36% 30% 29% 25% Sample Sales Processes 23% 20% 21% 18% 17% 1. Use a documented sales 14% process 2. Completed sales training 3. Have a standardized set of questions to qualify prospects as 0 1 2 3 4 5 opportunities 4. Use a CRM to track Number of Sales Processes Agency Undertakes sales activities and (out of 5 processes on right) forecast revenue 5. Have a process to helpExample: 39% of firms that perform all 5 sales processes are in the top quartile prospects establish sales and marketing goals 18

Agency Processes: Robust Delivery ProcessesWhat percentage of firms (by quartile) use a Agencies thatnumber of different business process tools? utilize business process tools 4th Quartile 1st Quartile are more likely36% to be in the top 33% quartile 31% 30% 31% 25% 27% 23% 24% 21% 20% 19% Sample Business Process 14% Tools 8% 1. Content Management System (CMS) 2. Customer Resource Management (CRM) 3. Project Management 0 1 2 3 4 5 6 4. Time Tracking Number of Business Process Tools Used by Agencies 5. Internal Social Network (out of list on the right) (e.g. Yammer) 6. Wiki 7. OtherExample: 33% of firms that use 6 business process tools are in the top quartile 19

About the Authors: Peter Caputa IV & Patrick Shea Peter Caputa IV is HubSpot’s Channel Sales & Marketing Director. Pete has helped hundreds of online marketing agencies scale and grow their businesses by adopting inbound marketing. Follow him on Twitter: @pc4media Patrick Shea is the Marketing Manager for HubSpot’s Value-Added Reseller Channel. Patrick has written and presented extensively on agency growth strategies, and runs a weekly webinar on agency-specific topics. Follow him on Twitter: @mpatrickshea

www.hubspot.com/partners A Publication of HubSpot’s Partner Program

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State of the Online Marketing Services Industry Report

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