Digital Agencies in Indonesia

An insight on digital agencies business models

A digital agency is a business that delivers services for the creative and technical development of internet-based work products. The services range from the generalist such as website design, e-mail marketing and micro-sites, to the specialists such as viral campaigns, pay-per-click ad management, banner advertising, search engine optimization and marketing, podcasting, social media marketing, branding, PR and mobile apps and web technology development.

There are several kinds of digital agencies, such as full service digital agency, marketing agency, design agency and engineering agency. Full service digital agency is an agency that caters to all kinds of services from engineering, marketing to designing. While marketing, designing and engineering agencies caters to its own expertises.

Full service digital agencies does not necessarily grow from marketing, designing or engineering agencies. Some of them are established as a full service digital agency from the first time they were built. Theoretically, full service digital agencies should get more revenue and sales as they have the most complete services but, it’s not necessarily like that. Some of them are just fairly good at what they do, or as they say, “jack of all trades, master of none”.

And theoretically, the marketing, designing and engineering agencies should be an expert at what they do because they’ve spent a long time running only that business and perfecting it but, it’s also not necessarily like that.

The determining factors that tells whether your business is successful or not are your business model and the quality of your team. And what we’re gonna discuss in this post is about the business model of digital agencies.

The determining factors that tells whether your business  is successful or not are your business model and the quality of your team. And what we’re gonna discuss in this post is about the business model of digital agencies.

There are several kinds of business models for digital agency:

1.Time and Material
Time and material model is usually used if there’s no whole vision of the final product, so you do the work as the idea is coming and finalized by the client. This option is negotiable and can use hourly, daily, weekly or even monthly rate for the amount of work or resources the project used.

2. Project Based
The project based business model revolves around the projects between clients and the agencies. The revenue came from the income of every project which the sum is agreed between two parties.

3. Agency of Record
Agency of record business model is based on a long term contract that was signed by the client and an agency for a specific service over a specific-long period of time. Usually the AOR business model is used by advertising agency.

4. Value Based
Value based business model is based on the value that the product or service the agency provide for the client. The pricing depends on the benefits that the agency can prove and offer to the clients.

5. Revenue Sharing & Commission
This business model allows the agency to have a share in percentage of the revenue from the clients business. This model is useful for long term partnership where the quality of the product and service from the agency play an important role on the clients ongoing business. The benefit for the client is that it is cheaper than other business model to start the project, while the benefit for the agency is that the agency will have a huge recurring revenue if the product is successful.

6. Investing
This investing business model allows the agency to trade time for equity using their services to invest in their company. By investing time, an agency is paid through an acquisition of their investment.

7. Software as a Service
The software as a service (SaaS) model revolves around the sales of a software products from the agencies. For the long term, the SaaS model is more favourable because it has the potential to make the revenue grow in a non-linear curve if the product is successful.

8. Patents
This business model take pride over the agency’s research & development work. The agency will regularly conduct research and file them for patent. Once its done, they will sell or license the patent to other companies.

9. Acquisition
Some companies seek acquisition as their final goal. The acquisition of a service company usually is to use its resources or brand name. The goal for the buyer is to monopolize a market or strengthen its company by acquiring assets of other company.

The most common business models in Indonesia are project-based and SaaS. The SaaS agency is more favourable for small-medium business (SMB) because of the lower price and simpler process. With SaaS agency, SMB only need to pay the monthly/annual subscription fees and they can get started to use the product they bought for their business, every tech problems that appears is the problem of the agency to solve. If SMB used the service of the project-based agency, they have to pay quite a big sum of money upfront and they need to understand the tech or have a dedicated team of developers to maintain the application they are using.

As a country with the majority of people still learning about the tech industry, SaaS will benefit more for the people. But, if you are a few of the tech-savvy or have a dedicated team of developers in your business, you may benefit more with the service of the project-based agency. It will cost more than the SaaS product but you can go with the more personal, distinct look that would make you stand out between your competitors.

Communications made easy despite the long distance and different time zones. Swift transactions despite different banks, regions, even different currencies. Offices going digital. It’s proven that technology is improving the quality, productivity and profitability of our businesses and our lives. A lot of small-medium businesses, even big companies who are late to join the race wants to catch up to tech-savvy one. The market is rife with opportunities and it’s up for grab!

As a digital agency in a country still growing in the technology sector, we have the responsibility to not only help corporates and small-medium businesses. We, as a tech community, have the responsibility to lead and shape the future of technology in Indonesia. We have to show the world that Indonesia is going to be one of the greatest in the technology industry!

Contact us to discuss how we can help you improve your business!


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