TL;DR

• Last call: State of Digital Services closes Thursday, 2/20. If you want to participate, make sure your data is in by EOD Thursday.
• Uncertainty Is Back: Business leaders aren’t at 2020-level anxieties, but the overall outlook has grown shakier compared to a year ago.
• Reduced Growth Spend: When clients feel uncertain, they downsize investments in agency-led growth initiatives like marketing, web design, and dev projects.
• AI Concerns: AI is fueling uncertainty about service offerings (commoditization) even though it’s easier to boost efficiency by plugging AI into operations.
• Policy & Tariffs: Tariffs and policy decisions from the Trump administration are increasing uncertainty in industries like auto, construction, clean energy, healthcare, etc., leading to further budget tightening.
• Stay Nimble: Our core recommendation is for agencies to remain agile, frequently reassess market changes, and develop workarounds quickly.
• Agency Mythbusters: Carl and I are diving into some of the most common agency advice and pairing his experience with my data to bust some myths. Check out the first episode and LMK what you think!​

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Welcome Back to the Land of Uncertainty!

I have the privilege of chatting with new agency leaders each week. I’m also running this year’s State of Digital Services Survey (closes EOD Thursday), and I took a sneak peek at the results. A common theme emerging from both is just how uncertain many leaders feel about the future.

We aren’t at 2020’s uncertainty levels yet, but we’re a hell of a lot higher than a year ago.

Unfortunately for everyone, increasing uncertainty is a surefire way to bring business investment and consumer spending to a standstill.

Most of what agencies sell is growth-related.

When you trace back what everyone does, it’s mostly a means for your clients to grow revenue.

• Marketing agencies create leads.
• Design shops aid conversions.
• Dev shops facilitate sales. (Dev shops also increase margins via creating software that increases efficiencies, so these are more insulated.)

When uncertainty rises, your clients become less sure about their ability to grow.

They scrutinize everything more.

They start with smaller projects.

Their mentality shifts into risk-avoidance mode.

Something similar happens when consumers (AKA your client’s clients if they’re B2C) become less certain about their employment prospects. They spend less. They also make up about 2/3 of the U.S. economy, so a small shift here has massive consequences.

What this boils down to is that individual’s feelings about the economy are what drive it. It’s all about sentiment. Right now, that sentiment is shaky.

Two main forces are causing agency leaders to feel less solid about 2025:

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Artificial Intelligence

AI is obviously a sizable driver of this uncertainty.

Leadership teams have been working to understand just how it fits into both agency ops. and service offerings.

Ops. integration has been somewhat easier since most of the heavy lifting is done by tools agencies already use. When your knowledgebase or CRM makes AI a key feature, it’s pretty simple to build it into your workflow.

Service offering integration has been tougher.

The reason seems to stem from two main sources: output quality and the fear of commoditization.

The quality issue is slowly fixing itself as the underlying models become more sophisticated. The ability to layer on multiple actions and perform tasks many times while choosing the best result also helps. We'll see where agents go.

The commoditization angle is the real concern.

There’s an undercurrent of worry from agency leaders that a large portion of what they bill for could be reduced to a few prompts in the not-too-distant future.

This worry is aggravated by comments from large tech leaders about how they won’t need to hire coders anymore. Real or not, that’s something that adds to the overall uncertainty.

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The Trump Administration

Beyond AI, the instability caused by sweeping tariffs, spending freezes, and all the Musk nonsense is making it difficult for agency leaders to identify and quantify risks.

One example of this is agencies that serve the auto industry (or manufacturers of parts for the auto industry).

​Last week, Ford CEO Jim Farley warned that Trump's proposed tariffs on Mexico, Canada, and China could devastate the US auto industry.​

That language has an effect.

It makes it difficult to imagine a manufacturing executive with major exposure to the auto space allocating significant spend to a new website when his biggest client is using terms like “devastated.” Map that same scenario to a new brand, ecommerce revamp, or any other large project.

This is happening to a number of major industries.

Construction is staring down the threat of massive increases in materials costs.

Anything clean energy-related is at risk.

Healthcare, education, and agriculture are all facing their own fallout from this administration’s policy decisions.

The potential fallout for each of these is shifting quickly, which makes it even harder to quantify accurately.

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It’s Not Just You

These factors are causing many agency teams to lose confidence in their strategies.

What worked last year isn’t working this year and it seems like there could be a lot more uncertainty coming.

The best answer I can come up with for this is to stay nimble.

Have a way of intaking new information, assessing it’s potential impact, and designing workarounds when necessary. This process should be happening fairly frequently when uncertainty is high.

I’d add a discussion about this to monthly leadership meetings. Obviously, if something major happens, react more quickly, but build a regular cadence of evaluating new developments and some way to quantify their potential impacts.

Until next time!

-Nick

State of Digital Services - Closes Thursday, 2/20!

• What’s the actual impact of AI versus all the clickbaity hype?
• How are tariffs and other policy shifts actually impacting agencies?
• How hot will this M&A market be?

71% of the responses have been directly from Founders/Owners/Partners, too, which is always great to see.

Average agency size is right around 24 employees, and it looks like we've had solid representation from both small and large shops.

This should give us some great data to help your teams make better decisions in 2025.

Can Agencies Scale?

Carl and I are diving into some of the most common agency advice and pairing his experience with my data to bust some myths.