E-consultancy Digital Agency Rate Card Survey 2008

Digital Agency Rate Card Survey 2008
July, 2008

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Other E-consultancy Survey Reports:
Online Lead Generation (B2C) Report 2008 http://www.e-consultancy.com/publications/online-lead-generation-2008 Online Measurement and Strategy Report 2008 http://www.e-consultancy.com/publications/online-measurement-and-strategy-report-2008/ UK Search Engine Marketing Report 2008 http://www.e-consultancy.com/publications/search-engine-marketing-report-2008/ Email Marketing Census 2008 http://www.e-consultancy.com/publications/email-marketing-census-2008/

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E-consultancy Digital Agency Rate Card Survey 2008

Table of Contents 1. About E-consultancy .............................................................................. 2 2. About this survey ................................................................................... 2 3. Executive Summary and Highlights ...................................................... 4
3.1 Profile of Responding Agencies ............................................................................................ 5 3.2 Business Confidence ............................................................................................................. 5 3.3 Charge-out Rates ................................................................................................................... 6 3.3.1 Summary Table - Average Daily Charge Out Rates by Job Role ......................................7 3.3.2 Summary Table - Average Daily Rates by Category of Job Role ..................................... 8 4.1 Year Company Founded ...................................................................................................... 10 4.2 Average Number of Employees ........................................................................................... 11 4.3 Projected 2008 Turnover..................................................................................................... 12 4.4 Geography ............................................................................................................................. 13 5.1 How optimistic are you for your business over the next 12 months? ................................14 5.2 Projected year-on-year growth ............................................................................................ 15 5.3 Opportunities for growth within the digital agency marketplace .....................................16 5.4 Challenges ............................................................................................................................. 17 6.1 Analysis by Job Role .............................................................................................................19

4. Profile of Responding Agencies ........................................................... 10

5. Business Confidence ............................................................................ 14

6. Charge Out Rates ................................................................................. 19

6.1.1 Average Day Rates for Director / Partner................................................................................... 19 6.1.2 Average Day Rates for Commercial / Strategic Roles................................................................ 22 6.1.3 Average Day Rates for Project / Account Management Roles .................................................. 23 6.1.4 Average Day Rates for Creative Roles ........................................................................................ 24 6.1.5 Average Day Rates for Content, Usability and Accessibility Roles ........................................... 25 6.1.6 Average Day Rates for Technical Roles ...................................................................................... 26 6.1.7 Average Day Rates for Media Planning and Buying ..................................................................28 6.1.8 Average Day Rates for Online Marketing, eCRM and Market Research .................................. 29 6.1.9 Average Day Rates for Affiliate Marketing, Email Marketing, Web Analytics.........................30 6.1.10 Average Day Rates for Search Engine Marketing .................................................................... 31 6.1.11 Average Day Rates for Testing/Quality Assurance and Training ............................................ 32 6.2.1 Change in average daily charge-out rate since 2006 ................................................................. 33 6.2.2 Expected change in 12 Months‟ Time......................................................................................... 35

6.2 Change in Day Rates ........................................................................................................... 33

7. Nature of Work .................................................................................... 42

6.3 Maintaining or Increasing Charge-Out Rates ................................................................... 37 6.4 Rate Card Availability ......................................................................................................... 38 6.5 Average Discount Offered on Rate Card ............................................................................ 39 6.6 Reasons for Variances in Charge-Out Rates...................................................................... 40 6.7 Method of Time Tracking.....................................................................................................41 7.1 Retainer versus Project Work ............................................................................................. 42 7.2 Work done by Contractors versus Employees ................................................................... 43 7.3 Fixed fee versus „Time & Materials‟ .................................................................................... 44

8. Contact ................................................................................................. 45

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E-consultancy Digital Agency Rate Card Survey 2008

1. About E-consultancy
E-consultancy.com, an online publisher of best practice internet marketing reports, research and how-to guides, was named Publisher of the Year at the 2006 AOP Awards. Since moving to a paid content model, it has amassed thousands of paying subscribers, 70,000 registered users and 145,000+ unique user sessions per month. Subscribers pay from £195 per year to access exclusive and practical content. E-consultancy has more than 100 events lined up for 2008, including roundtables and Supplier Showcases, where six suppliers pitch to an audience of pre-qualified buyers in a Central London venue. E-consultancy also provides a range of public and in-house training programmes including courses. If you would like to know more about our training options then please visit our website or contact Craig Hanna on +44 207 681 4078 or email him at Craig@e-consultancy.com. http://www.e-consultancy.com/about/

2. About this survey
The principal objective of this E-consultancy survey is to get a clear idea about what UK digital agencies charge for different types of skills and levels of seniority, and to understand how and why rates may vary, for example by size of company and by region. This year‟s survey follows similar Rate Card Surveys we carried out in 2005 and 2003, enabling us to see the extent to which rates have changed over the last few years. We believe that this report provides real practical value for agencies who want to benchmark their own fees and understand what the going rate is for different services in the marketplace. As far as we are aware there is no comparable data available elsewhere. The report is also intended to be a useful resource for client-side organisations who want to understand what level of rates they can expect to be charged and how this differs according to region and specialty. Some 328 digital agencies participated in this 2008 survey from different locations across the UK. The term “digital agency” covers suppliers across an increasingly broad range of disciplines and service offerings. Respondents include full-service agencies, media agencies, search engine marketing agencies and specialists in areas such as affiliate marketing and email. In total, we asked agencies about their daily rates for around 50 different job roles.
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E-consultancy Digital Agency Rate Card Survey 2008

There is no standard taxonomy for agency job roles, but we have done our best to create a sensible and thorough list. There is obviously some overlap between different job roles. Business confidence The report also contains sections on business confidence and projected revenues which have once again enabled us to provide top-line data about the health of the industry as well as an analysis of the foremost opportunities and challenges which are shaping the digital landscape. If you have any questions, please contact Linus Gregoriadis, E-consultancy’s head of research, at linus@e-consultancy.com or call +44 (0)20 7681 4052. Methodology This report is based on an online survey carried out in April 2008. Information about the survey, including the survey link, was emailed to digital agencies within Econsultancy‟s user base. E-consultancy uses Clicktools for its online surveys.

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E-consultancy Digital Agency Rate Card Survey 2008

3. Executive Summary and Highlights
E-consultancy‟s Digital Agency Rate Card Survey 2008 is based on information provided by 328 UK digital agencies.  Digital agencies report that daily charge-out rates have gone up by an average of 17% in the last two years (since 2006). The biggest increases have come from the smallest agencies (i.e. those with a projected 2008 turnover of less than £300,000). The projected average increase in daily rates over the next 12 months is 9%. Some 59% of those agencies surveyed expect their daily rate to be higher in 12 months‟ time. A third of agencies said that there would be a 10% increase, 17% said there would be a 20% increase and 4% said there would be a 30% increase. On average, digital agencies project that they will grow their turnover by 28% year-on-year in 2008. This compares to 31% year-on-year growth in 2005 when E-consultancy last carried out this survey.

The research has also found that four in five agencies (80%) estimate that their 2008 revenue will outstrip their turnover for 2007. This constitutes more evidence of the continued good health of the digital marketing industry despite the continued gloom within the wider economic environment. The equivalent figure in 2005 was 83%. More encouraging news for this sector is that 90% of agencies surveyed said that they were “quite” or “very” optimistic about the future of their business over the next 12 months. However, this compares to an equivalent figure of 96% in 2005 when 55% said they were quite optimistic (compared to 51% this year) and 41% said that they were very optimistic (compared to 39% this year). The proportion of agencies who say they are “not very optimistic” has increased from 3% to 9%. This may to a large extent reflect the credit crunch and the continued uncertainty surrounding the economy. It also reflects the fact that running agencies profitably is becoming more challenging. For many job roles, the rate of increase in daily rates has actually stayed the same or decreased in real terms (i.e. when inflation is taken into account). Coupled with increased competition in the marketplace, the trend towards paying higher salaries means that margins are inevitably being squeezed. The issue of staff recruitment and retention continues to be seen as the biggest challenge for digital agencies. There is still a chronic shortage of suitably qualified professionals in a number of specialties which is reflected by higher salaries. This is good for individuals but not necessarily for the agency bottom line.
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E-consultancy Digital Agency Rate Card Survey 2008

Other Survey Highlights include: 3.1 Profile of Responding Agencies   Almost 30% of agencies were founded more than ten years ago, demonstrating the increasing maturity of the digital marketplace. Just over a third of digital agencies surveyed (35%) have been around for five years or fewer. The number of new agencies setting up has been declining since around 2004. The proportion of agencies with more than 50 employees has increased from only 6% in 2005 to 17% in 2008. One in 11 agencies surveyed now has more than 100 employees. Less than half of those surveyed (44%) now have 10 or fewer employees, compared to an equivalent figure of 63% in 2005 and 71% in 2003. The proportion of agencies expecting to earn more than £3 million in revenue this year has increased dramatically from 10% in 2005 to 24% in 2008. Only 17% of digital agencies expect to have revenues of less than £150,000 this year, compared to 28% in 2005 and 41% five years ago when the industry was much more embryonic. The combined proportion (63%) of those agencies located in London and the South-east is similar to 2005 when the equivalent figure was 64%.

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3.2 Business Confidence  The percentage of agencies expecting growth of 100% or more has decreased from 11% in 2005 to 5%. This reflects the maturation of the digital marketing sector and growth of agencies to a level where it is much harder to keep doubling in size during a single year. The most frequently cited opportunities listed by agencies are, in this order: 1) Up-selling and cross-selling of services 2) Opportunities from emerging markets 3) Increased exposure to blue chip clients 4) Increased spending by current clients 5) Opportunities afforded by social media The most frequently cited challenges listed by agencies are, in this order: 1) Staff recruitment and retention 2) Recession / credit crunch 3) Reduction in client spend 4) Increasing competition 5) Demonstrating ROI
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E-consultancy Digital Agency Rate Card Survey 2008

3.3 Charge-out Rates  Survey respondents were asked to rank the effectiveness of a number of ways of maintaining or increasing charge-out rates. Overall, “increasing specialisation of skills” and “improving the perceived value of the skills” are regarded as the best approaches. The availability of rate cards, both for internal use by agencies and for clients, has substantially increased relative to 2005. Two thirds of agencies are prepared to offer a discount of up to 20% on their standard daily rates.

 

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E-consultancy Digital Agency Rate Card Survey 2008

3.3.1 Summary Table - Average Daily Charge Out Rates by Job Role (In descending order of daily rate)
Rank Job Role 2008 average daily rate
£919 £809 £808 £788 £783 £781 £755 £737 £736 £725 £724 £723 £708 £694 £699 £691 £689 £688 £683 £675 £666 £657 £650 £650 £647 £643 £642 £639 £630 £628 £623 £617 £615 £614 £606 £605 £600 £593 £589 £590 £581 £576 £552 £551 £527 £513 £506 £498 £482

2005 average daily rate
£798 £759 £783 £782 £724 £664 £680 £664 £658 £693 £618 £678 £631 £610 £687 £705 £597 £678 £608 £605 £611 £526 £591 £583 £569 £565 £572 £573 £621 £605 £581 £554 £562 £613 £580 £532 £533 £527 £543 £533 £517 £497 £495 £571 £459 £483 £483 £439 £411

% increase (since 2005)
15% 7% 3% 1% 8% 18% 11% 11% 12% 5% 17% 7% 12% 14% 2% -2% 15% 1% 12% 12% 9% 25% 10% 11% 14% 14% 12% 12% 1% 4% 7% 11% 9% 0% 4% 14% 13% 13% 8% 11% 12% 16% 12% -4% 15% 6% 5% 13% 17%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

Director/Partner Group Account Director/Regional AD Senior Consultant/Strategist Senior Head of Media/Media Director Senior Technical/Development Director Senior Creative/Art Director Strategic Brand Planner Head of Production Services Business Analyst Online Marketing Planner Senior SEO Consultant Senior Account/Project/Operations Director Usability/User Experience Consultant Information Architect Customer Insight Specialist eCRM Consultant Training Mid-Consultant/Strategist Senior PPC Consultant Accessibility Consultant Mid Technical/Development manager Audio/Video producer/editor User Interface Specialist 3D Modeller Mid-Design/Creative Manager Storyboarding/Wire-framing Content Management Specialist Production Manager Mid Media Planner/Buyer Mid-Account/Project/Ops Mgr/ Producer Web/Metrics Analyst Email Marketing Manager Animator Research/Market Analyst Database Manager Copywriter Mid SEO Consultant Illustrator Data Analyst Testing/QA Mid PPC Consultant Traffic Manager Junior Programmer/Developer Affiliate Manager Junior - Designer/Creative Junior Media Planner /Buyer Junior-Account/Project/Ops Executive Junior SEO Consultant Junior PPC Consultant

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E-consultancy Digital Agency Rate Card Survey 2008

3.3.2 Summary Table - Average Daily Rates by Category of Job Role
Job Role 2008 average daily rate
£919 £808 £755 £736 £688 £809 £737 £723 £639 £628 £506

2005 average daily rate
£798 £783 £680 £658 £678 £759 £664 £678 £573 £605 £483

% increase (since 2005)
15% 3% 11% 12% 1% 7% 11% 7% 12% 4% 5%

Commercial and Strategic Roles Director/Partner Senior Consultant/Strategist Strategic Brand Planner Business Analyst Mid-Consultant/Strategist Project and Account Management Group Account Director/Regional AD Head of Production Services Senior Account/Project/Operations Director Production Manager Mid-Account/Project/Ops Mgr/ Producer Junior-Account/Project/Ops Executive Creative Senior Creative/Art Director User Interface Specialist 3D Modeller Mid-Design/Creative Manager Animator Illustrator Junior - Designer/Creative Content and Usability Usability / User Experience Consultant Information Architect Accessibility Consultant Audio/Video producer/editor Storyboarding/Wireframing Content Management Specialist Copywriter Technical Senior Technical/Development Director Mid Technical/Development manager Database Manager Data Analyst Junior Programmer/Developer

£781 £650 £650 £647 £615 £593 £527 £708 £694 £675 £657 £643 £642 £605 £783 £666 £606 £589 £552

£664 £591 £583 £569 £562 £527 £459 £631 £610 £605 £526 £565 £572 £532 £724 £611 £580 £543 £495

18% 10% 11% 14% 9% 13% 15% 12% 14% 12% 25% 14% 12% 14% 8% 9% 4% 8% 12%

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E-consultancy Digital Agency Rate Card Survey 2008

Job Role
Media Planning & Buying Senior Head of Media/Media Director Mid Media Planner/Buyer Junior Media Planner /Buyer Traffic Manager

2008 average daily rate
£788 £630 £513 £576

2005 average daily rate
£782 £621 £483 £497 £693 £687 £705 £613

% increase (since 2005)
1% 1% 6% 16% 5% 2% -2% 0% 7% 11% -4% 17% 12% 13% 12% 13% 17% 15% 11%

Online Marketing, eCRM, and Market Research Online Marketing Planner £725 Customer Insight Specialist £699 eCRM Consultant £691 Research/Market Analyst £614

Affiliate marketing, Email marketing & Web Analytics Web/Metrics Analyst £623 £581 Email Marketing Manager £617 £554 Affiliate Manager £551 £571 Search Engine Marketing Senior SEO Consultant Senior PPC Consultant Mid SEO Consultant Mid PPC Consultant Junior SEO Consultant Junior PPC Consultant Quality Assurance & Testing Training Testing/QA £724 £683 £600 £581 £498 £482 £689 £590 £618 £608 £533 £517 £439 £411 £597 £533

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E-consultancy Digital Agency Rate Card Survey 2008

4. Profile of Responding Agencies 4.1 Year Company Founded Figure 1 shows how the sample of agencies is split in terms of their longevity in the market. Almost 30% of agencies were founded more than ten years ago, pointing to a strong bedrock of agencies who have come through the lean years and shown their continued ability to flourish in the digital marketplace. Just over a third of digital agencies surveyed (35%) have been around for five years or fewer. The number of new agencies setting up has been generally declining since around 2004, probably because there are fewer gaps in the market for new agencies to exploit. Figure 1

Base – All Agencies Responding (328)

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E-consultancy Digital Agency Rate Card Survey 2008

4.2 Average Number of Employees Figure 2 shows the size of the average agency, according to the number of employees. The comparison with 2005 data (in red) shows clearly that the average agency has significantly grown in size since 20051. The proportion of agencies with more than 50 employers has increased from only 6% in 2005 to 17% in 2008. One in 11 agencies surveyed now has more than 100 employees. As well as organic growth in many cases, this reflects a high level of consolidation in the sector, with numerous mergers and acquisitions taking place as the major players have jostled for position and, in many instances, integrated smaller, specialist agencies. Less than half of those surveyed (44%) now have 10 or fewer employees, compared to an equivalent figure of 63% in 2005 and 71% in 2003. Figure 2

Base – All Agencies Responding (2008 = 324; 2005 = 328)

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When E-consultancy carried out its last rate card survey.
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E-consultancy Digital Agency Rate Card Survey 2008

4.3 Projected 2008 Turnover The consolidation and growth of this sector is even more apparent in Figure 3 which shows projected turnover for 2008. The proportion of agencies expecting to earn more than £3 million in revenue in the current year has increased dramatically from 10% in 2005 to 24% in 2008. The increase is also clearly apparent in the £1.5m-£3m bracket, with the number of agencies in this turnover band more than doubling from 7% in 2005 to 16% in 2008. Only 17% of agencies expect to have revenues of less than £150,000 this year, compared to 28% in 2005 and 41% five years ago when the industry was much more embryonic. At the top end of the scale, it should be noted that these companies include media agencies where the turnover includes the cost of all media bought by the agency on behalf of their clients. This means that their turnover can look artificially high compared to agencies whose turnover comes only from billed fees. Figure 3

Base – All Agencies Responding (2008 = 324; 2005 = 328)

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E-consultancy Digital Agency Rate Card Survey 2008

4.4 Geography The chart below shows the geographical distribution of agencies surveyed. Unsurprisingly, London is home to more agencies than any other region, with 42% of participating companies based in the capital [Figure 4]. The combined proportion of those agencies located in London and the South-east (63%) is similar to 2005 when the equivalent figure was 64%. A fifth of agencies (21%) are based in the South-east (outside London), with a “long tail” of agencies spread across other regions. Excluding London and the South-east, the North-west is biggest hub for digital agencies, with 8% of responding organisations based in this region. Manchester and Leeds in particular are home to a number of well-established digital agencies. Figure 4

Base – All Agencies Responding (2008 = 324; 2005 = 328)

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E-consultancy Digital Agency Rate Card Survey 2008

5. Business Confidence 5.1 How optimistic are you for your business over the next 12 months? Despite growing fears over the economic downturn, the encouraging news for this sector is that 90% of agencies surveyed said that they were “quite” or “very” optimistic about the future of their business over the next 12 months. This is a very positive picture although the equivalent figure in 2005 was 96%, when 55% said they were quite optimistic (compared to 51% this year) and 41% said that they were very optimistic (compared to 39% now). The proportion of agencies who say they are “not very optimistic” has increased from 3% to 9%. This may reflect the credit crunch and the continued uncertainty surrounding the economy, combined with factors such as salary inflation. Many analysts believe that the digital marketplace may be shielded from the impact of a downturn or recession, as companies shift advertising budgets away from traditional media channels into the more measurable digital sphere. However, the significant increase in the proportion of agency respondents who are not very optimistic suggests that some clients may already be cutting back their investment slightly, or threatening to do so. But there are also other challenges being faced by agencies, such as increasing competition and recruitment difficulties. Figure 5

Base – All Agencies Responding (270)

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E-consultancy Digital Agency Rate Card Survey 2008

5.2 Projected year-on-year growth On average, digital agencies report that they will experience 28% year-on-year growth in 2008. This compares to 31% year-on-year growth in 2005. Four in five agencies (84%) estimate that their 2008 revenue will outstrip their income for 2007. The equivalent figure in 2005 was 83%. The percentage of agencies expecting growth of 100% or more has decreased from 11% in 2005 to just 5%. This reflects the maturation of the digital marketing sector and growth of agencies to a level where it is much harder to keep doubling in size during a single year. Figure 6

Base – All Agencies Responding (276)

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E-consultancy Digital Agency Rate Card Survey 2008

5.3 Opportunities for growth within the digital agency marketplace We asked respondents “What are the greatest opportunities for growth for your business?” An analysis of company verbatim answers shows that the most commonly cited opportunities were: (In order of frequency of citation) 1) 2) 3) 4) 5) Up-selling and cross-selling of services Opportunities from emerging markets Increased exposure to blue chip clients Increased spending by current clients Opportunities afforded by social media

Respondents cited a wide variety of opportunities for growth, but up-selling and cross-selling of services was mentioned much more than any other factor. Other opportunities also included growth through expanding into new geographical regions and attracting more work both from existing clients and new business from blue-chips. Social media2 and, more generally, expanding into new service areas, were also cited by a number of companies. Voice of the Agency: Greatest opportunities for growth “What are the greatest opportunities for growth for your business?” “Cross-selling and up-selling of services, to be perceived as consultants adding value.” “Growth in digital video online offers potential for cross-selling skills.” “Emerging countries, specifically Eastern Europe.” “Specialisation of our service offering, and ability to acquire blue chip clients.” “Greater contracts from existing clients. Full service sell - design and build and online marketing, and expanding resource to cope with inbound opportunities.” “Growth of key skills and extending our offering to offer more strategic services. International growth. Increasing client focus on delivery of measurable value/ROI will translate into an increasing spend on digital marketing over traditional. We will be focusing on delivering measurable business benefit to our customers as well as outstanding creative (and technical) solutions.” “New media and social media marketing; corporate blog coaching; media workshops.” “Commercial SME/Governmental E-consultancy report about Social Media Readers may be interested in the following, freeagencies with less than £100k spend per project. http://www.e-consultancy.com/publications/social-media-roundtable-briefing-june-2008/ Expansion into Asia & expansion of social media analytics and consulting work.”
2

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E-consultancy Digital Agency Rate Card Survey 2008

5.4 Challenges We also asked agency respondents “What are the biggest challenges your business faces?” The most commonly cited challenges were: (In order of frequency of citation) 1) 2) 3) 4) 5) Staff recruitment and retention Recession / credit crunch Reduction in client spend Increasing competition The challenge of demonstrating ROI

Given that there is a skills shortage in digital marketing as a whole, it is perhaps unsurprising that the biggest challenge faced by the majority of responding agencies is recruiting staff with appropriate skills. Voice of the Agency: Staff Recruitment and Retention “What are the biggest challenges that your business faces?” “Difficulty in finding skilled staff, particularly strategists and programmers.” “It is difficult to recruit experienced creatives generally but rich media specialists are in particularly short supply. Pitch work, as ever, impacts the bottom line as well as a sense of being involved to simply make up numbers in some cases.” “Staff, Staff, Staff! Absolutely the single biggest issue we have ever faced, recruiting quality permanent members of staff, particularly on the development side.” “Finding good skills and often poor (but slowly improving) client-side understanding of skills needs and production processes, sometimes low recognition of skills shortages, and hence reluctance to accept that good skills cost money.” A significant portion of respondents also cited the credit crunch and associated economic uncertainty as a threat to their business. Some analysts have predicted that a downturn or recession will lead to a shift in advertising budgets from traditional channels to online, which could help to insulate the industry from any serious threat that the credit crunch poses. Despite this, some respondents have reported an overall reduction in client spend.

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E-consultancy Digital Agency Rate Card Survey 2008

Voice of the Agency: Fear of Recession and Reduction in Client Spend “What are the biggest challenges that your business faces?” “Credit crunch, and firms / consumers tightening their spending over the foreseeable future.” “Talk of a recession is a slight concern but the accountability of search marketing means we expect investment in search to continue even if a recession takes hold.” “General economic difficulties resulting in less spending by clients, and less new clients looking to spend.” “The credit crunch poses it own challenges but we hope this won’t cause too many issues.” “Impact of credit crunch/global economy - particularly on financial sector clients this year and forecast [impact on] other client sectors from 2009.” “Possibly the credit crunch having a knock-on effect on the economy. Also, the market is becoming very competitive with more companies.” Respondents also cited increasing competition, due to low barriers to entry, as well as difficulty in demonstrating ROI. Social media is often particularly difficult to measure in terms of return on investment. Voice of the Agency: Increasing competition and Demonstrating ROI “What are the biggest challenges that your business faces?” “Understanding of online ROI and benefits within our market sector and increasing competition.” “Demonstrating ROI of online - particularly newer areas such as social media marketing.” “Continuing differentiation with cheaper competitors and ensuring clients focus on the majors. Managing clients’ online marketing expectations reasonably (and profitably!).” “Increased competition is an on-going battle as barriers to entry are so low, new start-ups are inevitable and [they] often start by trading on price.” Other factors also included lack of client knowledge, unrealistic salary expectations, and over-dependence on a few select clients. Some respondents felt that the lack of client knowledge contributed to many projects being won on the basis of budget alone, without clients taking into account the quality of the agency involved.
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E-consultancy Digital Agency Rate Card Survey 2008

6. Charge Out Rates 6.1 Analysis by Job Role NB: For each role average rates are shown for all agencies (i.e. the overall average) and then for agencies in the following turnover bands: £0-£300k, £300k-£1.5m, £1.5m+. See summary tables in Section 3 for all 2008 and 2005 averages.

6.1.1 Average Day Rates for Director / Partner The average daily charge-out rate across all agencies surveyed for a director / partner is now £919, an increase of 15% from £798 since 2005. For those agencies with an expected 2008 turnover of more than £1.5 million, the average daily rate is now £1,158 [Figure 7]. For comparison, the 2005 average for the largest agencies was £1,015. It should be noted that, for the previous survey report, we included any agency with a turnover of more than £500,000 in the largest turnover band. The largest agencies are now charging 75% more than the smallest agencies for their most senior employees‟ time. The gap has closed slightly since 2005 when there was an 86% difference. Figure 7

Base – All Agencies Responding (296)

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E-consultancy Digital Agency Rate Card Survey 2008

Average Day Rates for Director / Partner – London, South-East and non South-East Figure 8 shows that there is a significant weighting in terms of what London agencies are charging for their most senior employees compared to their counterparts outside the capital. On average, the daily rate for a director / partner at a London agency is £1,054, a 26% premium on what agencies elsewhere in the South-east are charging and a 31% premium on agencies outside the South-east. London agencies, of course, generally have higher costs for staff, offices and other general overheads. The average daily charge-out rate for a partner at a large London agency is just under £1,300. This “London weighting” is apparent across all the turnover size bands. Figure 9 shows a more granular regional breakdown. After London, the highest daily rates are to be found in the North-west and South-west (an average of £942 and £941 respectively). In the North-west, the average for the largest agencies (£1,363) is even higher than for London. NB: For each role average rates are shown for all agencies (i.e. the overall average) and then for agencies in the following turnover bands: £0-£300k, £300k-£1.5m, £1.5m+. See summary tables in Section 3 for all 2008 and 2005 averages.

Figure 8

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Average Day Rates for Director / Partner – Detailed Regional Breakdown Figure 9 Region London (135) North West (25) South West (18) North East (21) Midlands (15) South East (67) Northern Ireland (2) Scotland (16) East Anglia (14) Wales (6) Other (5) All £1,054 £942 £941 £879 £823 £802 £800 £700 £680 £600 £800 £0 - £300k £739 £680 £700 £600 £725 £642 N/A £533 £525 £100 £1,000 £300k - £1.5m £925 £600 £1,000 £760 £775 £821 N/A £800 £733 £800 £600 £1.5m+ £1,286 £1,363 £1,029 £975 £940 £1,017 £800 £1,000 £833 £700 £800

Base – Shown in brackets for each region

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6.1.2 Average Day Rates for Commercial / Strategic Roles The increases since 2005 in average daily charge-out rates for strategic brand planner /consultant (+11%) and business analyst (+12%) have been higher than for senior consultant / strategist (+ 3%) and for mid-level consultant/strategist (+1%). Figure 10 shows that the average daily rate for a senior strategist is now £808, but this goes up to an average of £959 for the largest agencies. The rates for strategic brand planner / consultant and business analyst are similar. NB: For each role average rates are shown for all agencies (i.e. the overall average) and then for agencies in the following turnover bands: £0-£300k, £300k-£1.5m, £1.5m+. See summary tables in Section 3 for all 2008 and 2005 averages. Figure 10

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6.1.3 Average Day Rates for Project / Account Management Roles Figure 11 and Figure 12 show the average daily rates for a number of project and account management roles, covering different levels of seniority from group account director / regional account director to junior account / project executive. Figure 11

Base – All Agencies Responding (328)

Group account directors, on average, command a daily rate of £809, rising to £929 for the largest agencies [Figure 12]. The rate charged for production manager is similar to mid-account project / operations manager. Figure 12

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6.1.4 Average Day Rates for Creative Roles The day rate for senior – creative / art director has gone up by 17% since 2005, which makes this role one of the biggest climbers since 2005. The best creative talent is in very short supply and therefore charged out accordingly. The day rate for senior – creative / art director is now £781 on average, rising to £914 for the larger agencies. The day rates for mid – design / creative manager and for junior - designer / creative have gone up by 14% and 15% respectively. The average day rates for user interface specialist, illustrator, animator and 3D Modeller have all gone up by around 10%. Figure 13

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Figure 14

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6.1.5 Average Day Rates for Content, Usability and Accessibility Roles Of the content, usability and accessibility roles shown in Figure 15 and Figure 16, the most valued are information architect and user experience consultant which, on average, are charged out at £694 and £708 per day respectively. The rate for copywriter has gone up by 14% since 2005 but this speciality is still not perceived as being as valuable as others in this category, probably because this is a skill which is slightly less scarce than others shown in these charts. The importance of rich media is growing exponentially, and this is reflected by a 25% rise in the average daily rate for audio / video / producer / editor. Figure 15

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Figure 16

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6.1.6 Average Day Rates for Technical Roles Senior technical agency employees continue to be highly valued across the industry, with charge-out rates to reflect this. The average day rate for a senior technical/ development director is £783, an increase of 8% since 2005. The average charged by the bigger agencies is now £942 [Figure 17]. In the 2005 version of the report, we suggested that there could be downward pressure on charge-out rates for junior and mid-range technical roles, with nonstrategic technical work increasingly being outsourced to countries where programming skills can be bought much more cheaply. However, there is no evidence of such a trend. The average daily rates for midtechnology / development manager and junior – programmer / developer have gone up by 9% and 12% respectively since 2005. NB: For each role average rates are shown for all agencies (i.e. the overall average) and then for agencies in the following turnover bands: £0-£300k, £300k-£1.5m, £1.5m+. See summary tables in Section 3 for all 2008 and 2005 averages.

Figure 17

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Database Managers and Data Analysts Database Managers are charged out for slightly less than mid-range technical staff. Data Analysts are valued at less than database managers but more than junior technical staff/programmers. Figure 18

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6.1.7 Average Day Rates for Media Planning and Buying Within this media planning and buying section, the biggest level of inflation is for traffic managers, whose daily charge-out rate has gone up by 16%. The daily rates for senior - head of media / media director and mid - media planner / buyers are now £788 and £630 respectively. Surprisingly, the former is virtually the same as 2005 while the latter has only gone up by 3%. It is notable that these rates have actually decreased in real terms. It may be because of increased competition among agencies for this work. Figure 19

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As with other areas of digital marketing, there is a vast gulf in charge-out rates between senior and junior staff because of the value associated with the best and most experienced people.

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6.1.8 Average Day Rates for Online Marketing, eCRM and Market Research Online marketing strategists/consultants, eCRM consultants and customer insight specialists are all charged out, on average, for around £700 per day. The rates for all the job roles in Figure 20 are similar to 2005 which shows that they are still highly valued but have not been subject to the same inflation as some areas. Figure 20

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E-consultancy Digital Agency Rate Card Survey 2008

6.1.9 Average Day Rates for Affiliate Marketing, Email Marketing, Web Analytics Web analyst/ metrics analysts (£623) command the highest average rates of these three roles, followed by email marketing managers (£617) and then affiliate managers (£551). According to the Online Measurement and Strategy Report 2008 3, only 19% of organisations say that web analysts are “definitely sufficiently valued” within their organisation. About half (49%) say that this is “somewhat” the case. Just over a quarter of both company and agency respondents (26%) say that web analysts are “not at all” sufficiently valued. The average daily rate for web analyst has gone up by 7% since 2005. Figure 21

Base – Agencies Responding (328)

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http://www.e-consultancy.com/publications/online-measurement-and-strategy-report-2008/
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6.1.10 Average Day Rates for Search Engine Marketing Average daily rates for search engine optimisation (SEO) specialists are slightly higher than for PPC, according to Figure 22 and Figure 23. The average daily rate for senior SEO consultant has gone up by 17% since 2005, which underlines the value associated with natural search knowledge. The rate for senior paid search/per-per-click (PPC) consultant has gone up by 12%. Day rates for each of these search roles have gone up by at least 10% since 2005, highlighting the continued importance of both SEO and PPC. Figure 22

Base – Agencies Responding (328)

Figure 23

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6.1.11 Average Day Rates for Testing/Quality Assurance and Training The overall average charge-out rate for quality assurance/testing is £590. The largest agencies, on average, charge £627 a day. The overall average charge-out rate for training is £689, and £760 for the £1.5 million+ agencies. The 15% rise in training day rates since 2005 is not surprising, given the skills shortages across the industry and thirst for knowledge as companies realise that they need to bridge the skills gap. Figure 24

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6.2 Change in Day Rates 6.2.1 Change in average daily charge-out rate since 2006 The average digital agency daily charge-out rate has gone up by 17% “in the last two years” (i.e. since 2006). This average is derived from a specific question about the percentage change since 2006, rather than by taking an average for all the day rate changes for every job role since our last survey. The biggest increases have come from the smallest agencies (i.e. those with an expected 2008 turnover of less than £300,000). For these agencies, the average increase since 2006 has been 21%. This compares to an increase of 18% for mid-tier agencies (those with a turnover of between £300,000 and £1.5 million) and 13% for the £1.5 million+ agencies. Figure 25

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Figure 264 shows that almost 30% of agencies said that their average charge-out rate has stayed the same since 2006. Just 6% of respondents say that the average chargeout rate has decreased since 2006. Figure 26

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Almost 67% of respondents said that their average charge-out rate had increased within the last two years, with 58% saying it was either 10%, 20%, 30% or 40% higher5. Of these, a quarter said their daily rates had increased by 10%, and a fifth said their rates had increased by 20%. It is clear that for many agencies daily rates have not really gone up since 2006, which shows that these companies face a real challenge in trying to improve their financial performance.

4

Respondents were shown a drop-down box with percentage changes in 10% increments from -100% to +100%. These percentage bands have been aggregated into groups.
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E-consultancy Digital Agency Rate Card Survey 2008

6.2.2 Expected change in 12 Months‟ Time On average, the projected average increase for all agencies in 12 months‟ time is 9%. This shows that agencies are planning to increase their charge-out rates well above the rate of inflation in spite of some fears around the economic climate and increasing competition. The increasing cost of recruiting and retaining staff is likely to be a major factor behind the increase in daily rates charges by agencies, as well as the knowledge that clients will pay for the best people and skills. Figure 27 shows that the smallest tier of agencies (below £300,000 turnover) are planning above-average increases to their daily rates. This may be because the smaller agencies often have specialist skills and realise that they can increase their rates accordingly. Figure 27

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Some 59% of all agencies surveyed said that they expect their daily rate to be higher in 12 months‟ time [Figure 28]. A third of agencies said that there would be a 10% increase, just under a fifth said there would be a 20% increase and 4% said there would be a 30% increase6. A small minority (6%) of respondents said that they expect the charge-out rate to be lower, whilst 36% of all agencies surveyed anticipated that the daily rate would remain the same. Given inflation, this actually reflects a decrease in real terms. For comparison, when E-consultancy carried out this research in 2005, 52% of agencies anticipated that their charge out rates would be higher by 2006. Figure 28

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Respondents were shown a drop-down box with percentage changes in 10% increments from -100% to +100%. These percentage bands have been aggregated into groups.
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E-consultancy Digital Agency Rate Card Survey 2008

6.3 Maintaining or Increasing Charge-Out Rates Survey respondents were asked to rank the effectiveness of a number of ways of maintaining or increasing charge-out rates [Figure 29]. Overall, increasing specialisation of skills is regarded as the best approach, with 38% of respondents ranking this as the most effective. This was closely followed by improving the perceived value of skills, ranked as the best by 37% of respondents. What is the most effective way to maintain or increase charge-out rates? Figure 29 Maintaining and increasing charge-out rates: Effectiveness of different approaches Percentage of agencies regarding most important 38% 37% 12% 6%

Increasing specialisation of skills Improving the perceived value of skills Having more solid and recognised benchmark industry rates Refusing to reduce discount rate

A significant number of respondents cited other factors as being important. Other ways to maintain or increase charge-out rates include:    Improving client understanding of the production process and explaining the added value more clearly. Greater transparency with the client regarding overheads, employment costs and agency margin. Delivering excellent results to the client and demonstrating tangible business benefits.

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6.4 Rate Card Availability The availability of rate cards, both for internal use by agencies and for clients, has substantially increased relative to 2005. Three-quarters of agencies (76%) now make sure that a standard rate card is available internally compared to 64% three years ago. Similarly, many more agencies now have rate cards which are available for external consumption (54% compared to 44% in 2005). This trend again reflects the maturation of the industry as agencies attempt to introduce more transparency around charge-out rates both internally and for clients. Figure 30 2008 Proportion of agencies with standard rate card available internally Proportion of agencies with standard rate card which is available to clients 76% 54% 2005 64% 44%

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6.5 Average Discount Offered on Rate Card Figure 31 shows that two thirds of agencies are prepared to offer a discount of up to 20% on their standard daily rates. Around a 30% say that they don‟t offer any discounts. Figure 31

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6.6 Reasons for Variances in Charge-Out Rates The most important reason given for variances in daily charge-out rates by agencies is the volume of work carried out for the client [Figure 32]. Agencies are typically more willing to reduce their fees if it means that they get a significant and sustained level of work from a loyal client. The amount clients will pay and the historical relationship are deemed to be the most important reason for rate card variances by 27% and 21% of agency respondents respectively. Figure 32 Reasons for variances in charge-out rates Percentage of agencies regarding as most important 46% 27% 21%

Depends on volume of work Varies according to what clients will pay Depends on historical relationship

Of those who cited other reasons, the analysis of verbatim responses shows that many agencies offer discounts because they work with charities, as well as profit-seeking clients. The strategic importance of the work is also a key reason for variance in the daily rate. Many agencies are willing to be a lot more flexible with their charge-out rates if they are looking to expand into a new sector or if they want to build a longterm relationship with a new client.

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6.7 Method of Time Tracking Slightly more agencies are now using software to track their projects (52% compared to 46% in 2005 and 41% in 2003). Just 8% of agencies currently don‟t use any tracking at all. Figure 33

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6.7.1 Software Packages Of those agencies using software packages, the most frequently cited resources were Microsoft Excel, Basecamp and bespoke software designed in-house. Basecamp was mentioned by 15 respondents, and Microsoft Excel by 11 respondents. 15 respondents said that they used bespoke/internally built software packages. Other software packages included Concept, Harvest, Paprika, Synergist and Traffic.

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7. Nature of Work 7.1 Retainer versus Project Work The proportion of work carried out by agencies which is done on a retainer basis has not changed much since 2005 (27% now compared to 26% in 2005). It is surprising that agencies have not been able to establish a higher percentage of retainer work, and possibly disappointing in some cases because of the security this reliable source of income can give a business. Figure 34 Approximate percentage of total billed work done as part of ongoing „retainer‟ arrangements as opposed to project work NB: The average percentages are shown for all agencies (the bottom right quadrant) and also for agencies in these turnover bands: £0-£300k, £300k-£1.5m, £1.5m+.

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7.2 Work done by Contractors versus Employees The proportion of work now done by contractors / freelancers versus employees (20%) is similar to 2005 and 2003. The smallest agencies (with a turnover below £300,000) are the most reliant on freelancers. Figure 35 Approximate percentage of total billed work done by freelancers / contractors as opposed to employees

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7.3 Fixed fee versus „Time & Materials‟ The percentage of work done on a time and materials basis rather than a fixed fee basis is also similar to 2005 (36% compared to 35%). Most work is still done on a fixed fee basis because clients generally prefer to work on a fixed budget. The on-going challenge for agencies is to ensure that they have a detailed understanding of time and resources expended on fixed-fee projects so they can price projects realistically and understand what kind of work is most profitable. Figure 36 Approximate percentage of work done on a fixed fee basis versus „time and materials‟

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8. Contact If you have any questions about this survey please contact: Linus Gregoriadis, Head of Research, E-consultancy Tel: + 44 20 7681 4052

Email: linus@e-consultancy.com Web: http://www.e-consultancy.com

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