An in depth look at the state of digital agencies demonstrates that most will go out of business within the next several years. The few that remain will either have dramatically changed or struggle to stay alive. I discuss the future of our industry and the forces that will shape the next decade. If you work at, own or operate, work with or are thinking of starting a digital agency you should check out this presentation.

1. Mass Extinction
The end of an era for interaction design firms

2. Brian Pullen
TWG Design Director, @wisebeard

3. Interaction design firms &
companies with these services
Who I’m talking about

4. A diverse
industry

5. The mass extinction
Our industry is already weak and tough times are ahead

6. Your ValuesClients/ProjectsProfitability Legacy
What does success look like?

7. Profitability

8. Our industry by the numbers
Source: IBS World Industry Report 2014
Revenue
21
Profit
3.5%
$
b
Businesses
124
Share
3%
k

9. Market share maturity
Source: IBS World Industry Report 2014
Revenue
48$
b Businesses
124
Businesses
k
64k
Revenue
21$
b
Advertising Interaction

10. The top 4 advertising firms make up
more than 55% of the market.
The top 4 interactive firms make up less than 10% of the market.

11. Let’s compare profit
Source: S&P 500, StatsCan
3.5%
Interaction
8.9%
US Average
12%
Advertising
20%
Consulting
26%
Software

12. Our clients pay more to clean their
toilets than build their websites.
There are nearly 50,000 cleaning service companies in the US that bring in
over $40 billion dollars annually. Their margins are on average double that of
the interaction design industry.

13. Legacy

14. Creating a legacy
Founded in 1864 JWT has changed
leadership many times over these last 150
years and is still a respected market leader.
J. Walter Thompson

15. Teehan+Lax closed their doors one month ago rather than transfer ownership.

16. Clients & Projects

17. What makes
a good client
& project?
High value Challenge
Impact Partnership

18. Low innovation
& low impact
Low innovation
& high impact
High innovation
& High impact
High innovation
& low impact
Small client
& low interest
Small client
& high interest
Large client
& low interest
Large client
& high interest

19. Values

20. What about
your values?

21. Why is this happening?
We do not know how to communicate or capture value.

22. Our young industry is
highly misunderstood
Many firms have difficulty communicating
their uniqueness.

23. Creative commodity
Fragmentation
Price competition
Poor stability
Low value projects
Low entry barrier

24. Even when we create
value we have no means
to capture it.

25. The corporate takeover
Our newest competitors is the in-house teams at our clients

26. No communication
problem
Design-driven companies outperformed the
S&P by 228% over the last 10 years.

27. Software is eating the world

28. Adaptive Path
Acquisitions are increasing
Hot StudioFjord Carbon Fuse Project
MethodFrogNurun Teehan+Lax Sofa
Companies looking to accelerate the growth of their internal teams
are acquiring top firms with increasing frequency and value

29. We now compete for projects,
budgets and most problematic of
all, talent.

30. Companies that have a
retention problem usually
have a winning problem
-Marc Andreessen
“

31. Clients will
increasingly
hire us for low
value projects

32. Clients will still need us! We
just need a new model and
more time, right?
no not really…

33. Like any extinction your
choice is to evolve, struggle
on for a time or die off.

34. Possible evolutions
•Get acquired
•Divergent specialty
•Research focus
•Become a platform
•Non technical clients
•Venture investing
•Product development
•Hybridize services
•Channel control
•Scale down

35. Most will choose to struggle
rather than change.

36. Yes there will be success stories.
I’m talking about a trend
Disclaimer

37. So what is the TWG plan to
thrive in this chaos?

38. Let’s talk about the future together!
@wisebeard