Second study by Deloitte for the ACC: The accrued gross income of the agencies falls below €100 million for the first time

Agency fees remain under pressure

Brussels, 28 February 2012 – Deloitte Belgium unveiled the results of its research on the Belgian advertising and communication industry today -- a study conducted at the request of the the Association of Communication Companies (ACC). The gross margin of communication agencies turns out to have dropped by 2% while the number of agency staff is stabilising. Even though the total profit margin of the agencies is slightly up, it would appear that one agency in five is not viable. Finally, advertising and communication agencies are starting to reinvest, in spite of the sluggish results. Investments in fixed assets have actually gone up by 13%.

After an initial initiative last year, the Association of Communication Companies (ACC) commissioned Deloitte Belgium to once again study the Belgian advertising and communication sector in order to get a better understanding of the industry and its trends. The study was based on the 2009 and 2010 balance sheets of the ACC member agencies.

AAC currently encompasses all advertising and communication agencies in Belgium fulfilling certain eligibility criteria. This barometer consequently constitutes the most representative snapshot of the sector. This study does not gauge the investments of advertisers in terms of advertising space, but rather their investments in strategy, creation and coordination in the agencies.

Deloitte Belgium managed to draw the following conclusions this year:

Some lessons drawn from the study:

Patrick De Schutter, Partner at Deloitte Belgium: "Service firms have by definition a higher wage to income ratio than other companies. There are standard ratios for the sector, and Belgium is above the average, owing to its heavy employment costs. A scan of the figures of ACC members shows that their ratios are too high. As income continues to drop and the wage bills continue to rise, the situation is obviously far from optimal. It's a difficult equation to balance for this highly competitive sector where agencies have to invest in human resources. Moreover, as certain agencies do not manage to make a profit, the notion of income must be reviewed, for today, income is no longer generated from fees alone. The challenge that agencies and advertisers face in the immediate term is finding a better balance between the services and their price. In other words, it is necessary to ensure proper remuneration because otherwise, the strategic and creative qualities of the agencies will decline."