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The impact of COVID-19 on digital agencies: Challenges and opportunities

Our partners, digital agencies, have always been a significant and inseparable part of our business. When the COVID-19 pandemic struck the world economy, ensuring we stay close to them and to our customers was one of our top priorities. Lately, we surveyed more than 100 digital agencies as part of our partner executive sessions to better understand the impact of COVID-19 on their businesses.

The economic impact of COVID-19 is now inevitable in the majority of industries. The digital sector is one of the more fortunate ones—if you are a software vendor or a digital agency, you can immediately switch to remote work and fulfill your business goals from anywhere in the world. That being said, not every organization is so lucky. Some industries were struck hard— travel and tourism is a telling example.

During our latest partner executive sessions, we were keen to bring our partners across the globe together, share the experience, and understand the outlook for agencies in the coming months and what they perceive to be the biggest challenges.

The current situation brings not only challenges but also creates great new opportunities for digital transformation. Sure, it’s this buzzword again. However, the reality is that companies may now feel more than ever that digitalization is not an option, but an undeniable sine qua non.

Let’s see what the outlook is for digital agencies! The data presented below was collected from 113 leading digital agencies from the US, Europe, and Australia.

What is the biggest challenge for digital agencies right now?

Surprisingly enough, it seems like cash flow is not the greatest challenge for digital agencies these days. Most digital agencies fear a drop in demand for new projects. This applies to North America, Europe, and Australia as well. The positive thing is that only around 15% of digital agencies expect to lose some of their existing clients. 

Business forecast: Expectations differ enormously

As you can see below, the majority of digital agencies in the US and EMEA expect their business to drop by up to 24% this quarter. On the other hand, 46% of surveyed agencies in APAC believe they won’t be affected by the COVID-19 crisis and expect the same results as in the previous quarter. Only about 11% to 20% of agencies in each territory anticipate growth.

This chart tells us that there’s no unified opinion on whether and how agencies worldwide will be affected by the current situation. While some are optimistic, some predict significant drops in their business. 

Digital agencies expect to go back to normal in 6 months

The data clearly shows that most agencies (45% in APAC, 37% in EMEA, and 36% in the US) think they will return to normal in half a year. In fact, 74% of all agencies expect the current economic situation to last no more than 9 months.

Interestingly, about 16% of all agencies state that their business is more or less the same (compared to the previous quarter) or even growing. Only 3% of surveyed agencies believe it will take more than 12 months for them to recover and go back to normal.

The biggest opportunity? Digital transformation projects!

In the last question of our survey, we wanted to find out what agencies saw as their greatest opportunities in the coming months. 64% of agencies in total are planning to focus on digital transformation projects.

Since the respondents could choose more than one answer, a lot of them also want to devote their time to working on new websites and redesign projects. According to the responses, the least attractive opportunity seems to be focusing on mobile apps.

To sum up

This short survey shows that even though most agencies fear they might see a drop in their business and income in this quarter, they hope their business will go back to normal in about six to nine months. In the meantime, they want to focus on digital transformation projects, new or redesigned websites, and upgrade their projects. 

“An agency’s purpose has always been to support, augment, and enrich other businesses beyond their own means. That is more important now than ever before. The opportunity we all face during the COVID-19 crisis forces progress beyond traditional limitations and towards innovation of new means to empower your clients and their success. During this time, complacency is our enemy. Don’t be afraid to spend time planning for initiatives that might not be realized until an indefinite time in the future. As an agency, this level of thought leadership is how we build meaningful relationships with our clients and push them to the next level now.”  Wes McChristian, Kentico Practice Director, Americaneagle.com

As part of the partner executive sessions, we also had lively discussions about the impact on different verticals. While each agency may focus on different industries, it is clear now that we will see a shift in focus from the most affected sectors such as tourism or hospitality towards online retail, health care, and anything online.

If you want to see how your digital agency can deliver projects faster and learn best practices in the market, be sure to check out the Kentico Partner Program!

By Vojtech Boril in Kentico