Prices for digital advertising agency services have been rising an estimated average 3.1% per year in the three years to 2017. Demand for advertising services has been rising, incentivizing suppliers to raise prices.
In particular, growth in internet traffic volume and total advertising expenditure have driven increases in demand. Internet traffic volume has had the biggest impact on demand and prices for this market’s services. This is because as consumers increasingly spend more time online, the audience for digital advertisements expands. Additionally, growth in total advertising expenditure has compelled buyers to spend more on services as part of their overall advertising package. These factors have supported price increases by fostering growth in market demand.
However, falling corporate profit has mitigated market price growth somewhat. Low oil prices have kept profit margins from growing for some sectors, such as finance, oil and gas, leading overall corporate profit in the economy to decline and dampening demand growth for services. Nonetheless, growth in the market’s other demand drivers has outweighed stable corporate profit, harming buyers by keeping market prices on the rise.
Along with rising prices, moderate price volatility has hampered buyer power. Fluctuations in internet traffic volume and the price of advertising placement have led to moderately volatile prices for digital advertising agency services. The medium level of price volatility has made prices somewhat difficult to anticipate, which disrupts buyers’ ability to budget accurately for future expenses. Moreover, prices are forecast to continue rising in the next three years. Thus, buyers are advised to secure a lower price now to avoid paying more in the coming years.
During the three years to 2020, the price of digital advertising agency services is projected to rise at an annualized rate of 2.5%. Price growth is anticipated to continue rising at a moderate pace due, in part, to the return to growth in corporate profit. However, price volatility is anticipated to fall to a low level, which will protect buyers from extreme price fluctuations.
Price growth will be driven primarily by further increases in demand. Through 2020, internet traffic volume will continue to expand, increasing the pool of viewers for digital advertising and, subsequently, the value of digital advertising. This trend will cause more companies to seek digital advertising solutions. Corporate profit is also anticipated to return to growth, opening up business budgets for advertising purchases and boosting demand for this market’s services. Additionally, total advertising expenditure is projected to rise further, leading to greater spending on digital advertising as businesses invest more in their advertising efforts. Combined, growth in these demand drivers will result in increases in service prices.
Fortunately for buyers, service price growth is forecast to stabilize in the coming years. Price volatility is expected to fall through 2020, benefiting buyers by allowing them to better budget for advertising services. Ultimately, however, service prices will still rise. Buyers are therefore encouraged to procure services sooner than later to lock in prices before they rise further.