How Have Marketing And Advertising Startups Performed In Recent Years?

Startups who operate in the marketing industry have not really been having a good run. According to data from Avid Panda, from the beginning of 2019, to the end of 2023, 42.5% of new marketing businesses had closed down. That is over 31,000 out of 73,000 startups that did not live to see 2024.

Advertising startups were hit the hardest, with a closure rate of nearly 44%. On the other hand, public relations and communications startups fared better, with only 37.1% of them closing during the same period.

Why Is Running An Advertising Agency More Difficult Than A PR Agency?

Running an advertising agency is often more expensive from the start. Avid Panda’s analysis shows that advertising startups face higher operating costs, such as paid media and software, which can quickly eat into their budgets. This makes it tough for them to keep going if they don’t land big clients early on.

On the other hand, public relations startups can often survive with fewer resources. PR firms rely more on building relationships and creating stories, which costs less money. This gives them an advantage in terms of keeping costs down and staying in business longer.

Are Advertising Startups More Likely To Fail Than Other Businesses?

The short answer is yes. Advertising startups are more likely to close than other types of businesses. While the average failure rate for new companies in the UK is about 28.67%, Avid Panda reports that 34% of advertising agencies shut down within their first five years.

This higher failure rate is linked to the heavy investments advertising startups need to make in things like creative campaigns and media production. If they don’t secure enough clients or run into financial problems early on, it becomes hard to stay afloat.

Which Cities Are The Hardest For Advertising Startups?

According to Avid Panda’s research, certain cities in the UK are much harder places to run an advertising startup. Sunderland is the worst, with over 51% of advertising agencies closing in the first five years. Plymouth follows closely with a closure rate of 50.87%, and Crawley also sees half of its advertising startups fail.

In these cities, it appears that new agencies struggle with higher costs, fewer clients, or tough local competition. Starting an advertising business here comes with added risks.

Where Are Advertising Startups Most Successful?

Not all cities are tough for advertising startups. Avid Panda reports Southampton as the best city for new agencies, where 80.33% of startups survive beyond five years. Newport and Norwich are also strong locations, with success rates of 77.97% and 73.53%.

In these cities, the conditions for advertising startups are better. There might be lower costs and better access to clients, which helps new businesses build a more solid foundation.

Does Location Really Matter For Advertising Startups?

Location definitely influences whether an advertising startup would survive or not. Areas like Sunderland and Plymouth are reportedly more difficult environments for new businesses, and Southampton and Newport, for example, would give startups a better set of opportunities for growth.

Choosing the right city could mean the difference between success and failure for an advertising agency. Local markets, costs, and competition all play a part in determining whether a startup can make it through the first 5 years of operation.

A spokesperson at Avid Panda commented, “Our research suggests that running an advertising agency can be riskier than managing a PR firm. One potential reason is the difference in operating costs. PR agencies can rely on readily available tools and strong industry connections to get their stories out there.

“A well-written press release and good relationships with journalists can make a big impact without needing a large budget. Advertising, on the other hand, usually requires heavy investment in paid media, expensive software, and high-cost creative production. These higher overheads can make it much harder for advertising agencies to stay afloat, particularly in their early stages when budgets are limited.”