Agency Report: Revenue Slumps 7.5%, Jobs at 16-Year Low

Despite Tumbling Agency Revenue in 2009, There Are Early Indications of Growth and Renewal

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Source: Ad Age Agency Reports
CHICAGO (AdAge.com) -- First the good news: The agency business is starting to see at least tepid growth. Analysts expect 2010 combined worldwide revenue for the top four agency companies to rise about 2% on an organic basis, factoring out currency shifts and acquisitions.

Now the bad news: Revenue for U.S. marketing-communications agencies -- advertising, marketing services, media, health care, public relations -- tumbled 7.5% to $28.4 billion in 2009, according to the Ad Age Agency Report.

That's the sharpest revenue decline in the 66 years Ad Age has produced the Agency Report.

The revenue decrease essentially matched a 7.8% drop in 2009 employment at U.S. advertising/marketing-services firms.

Agency Report 2010:

Full Report
Ranking of 800-plus agencies. Fast facts, top executives and web links for each agency, plus deeper rankings on digital and other specialties.
Agency Family Trees 2010
Holdings of the world's top 50 agency companies, including agency descriptions, links and related AdAge.com content.

U.S. digital agencies eked out a 0.5% revenue gain in 2009, according to the Agency Report. Health-care agency revenue slipped 1.6%. Fortunes sank in every other agency sector.

Revenue down
Revenue for traditional ad agencies dropped 9.3%, mirroring an 8.9% decline last year in U.S. ad agency employment. Media agency revenue plunged 10.3% in a year when U.S. measured media spending (as tracked by WPP's Kantar Media) fell 12.3%.

Revenue for customer-relationship-management/direct-marketing agencies declined 7.4%, outperforming ad agencies as marketers put more emphasis on data-driven marketing.

Promotion-agency revenue tumbled 13.1%, depressed by lower spending on event marketing.

The Agency Report ranks 883 U.S. agencies, down from 912 agencies on last year's report. The drop-off partly reflects casualties of the downturn. Among agencies to close: Cliff Freeman & Partners, a former high-flying creative shop that shut its doors last October.

This is an industry in constant renewal. With economic prospects brightening, some high-profile agency execs -- including JWT's Ty Montague and Rosemarie Ryan; Saatchi & Saatchi's Gerry Graf; and Vigilante's Larry Woodard -- decamped this year to launch new ventures.

Among highlights from the report:

  • For the first time in the history of the Agency Report, the ranking's biggest agency is far removed from the clique and clack of Madison Avenue. The largest U.S. agency is Arkansas-based Acxiom, a major player in data-centric direct marketing and customer-relationship management. Acxiom Corp. isn't a new name; it's been in business since 1969. High-profile clients include Procter & Gamble Co., AT&T and Macy's.
  • Publicis Groupe, boosted by its acquisition of digital powerhouse Razorfish, moved past Interpublic Group of Cos. to become the world's third-largest agency company, behind WPP and Omnicom Group.
  • Dentsu ranked as the world's largest consolidated agency network. Dentsu's network includes New York agencies 360i (acquired in January 2010) and McGarryBowen.
  • Omnicom's Fleishman-Hillard ranked as the nation's largest PR agency, based on Ad Age revenue estimates. Edelman scored as the world's largest PR agency. This marks the first PR agency ranking published by Ad Age since 2002.
  • Publicly held agency companies sometimes prefer not to reveal revenue for individual agencies, so revenue figures for those agencies and some independent shops are based on Ad Age DataCenter estimates. Ad Age revised some 2008 estimates, mainly to reconcile revenue with figures that agency firms disclose.

    Percent change computed against 2008 data for agencies ranked in 2010. 1. Media and public-relations slices reflect revenue of media agencies and PR agencies tracked in this report; this is a change from the pie in last year's Agency Report, where Ad Age modeled media and PR slices to include entire media and PR agency field, including agencies not measured in that report. 2. Digital specialty agencies only. Other sectors include digital revenue. Source: Ad Age Agency Report 2010.

    Currency troubles
    The global agency business last year was whipsawed both by recession and foreign currency shifts. Based on average full-year exchange rates, a British pound was worth $1.57 in 2009, down from $1.86 in 2008. That volatility affected Agency Report rankings.

    For example, Dublin-based WPP, boosted by its late 2008 acquisition of market-research firm Taylor Nelson Sofres, said 2009 worldwide revenue rose 16.1% in pounds. But WPP said its worldwide revenue, translated to dollars, was flat at $13.6 billion in both 2009 and 2008.

    Likewise, Paris-based Publicis said 2009 revenue in euros fell 3.8%. But Publicis said revenue in dollars dropped 8.9%.

    Agency tumult in 2009 is immediately apparent in one score: jobs.

    The Big Four agency companies in 2009 collectively cut 23,229 jobs worldwide, or 8.6% of staff.

    U.S. advertising/marketing-services firms in 2009 slashed 58,400 jobs, or 7.9% of positions, according to Ad Age DataCenter's analysis of Bureau of Labor Statistics data. Since the recession began in December 2007, these firms have cut 107,700 positions -- one in seven jobs.

    Economists believe the recession ended late last summer. But it's been a jobless recovery for agencies. U.S. ad agency employment in January 2010 slumped to its lowest level since 1994.

    Yet there are positive signs emerging. Interpublic's Martin Agency last year prevailed in 14 new business reviews and this year added Morgan Stanley, Tylenol and Motrin as clients. The Richmond, Va.-based agency is looking to fill 100 open positions. The agency is getting nearly 300 resumes a week.

    "This is a wonderful time for our agency to be hiring," said Mike Hughes, president and co-chief creative officer. "We've never seen a stronger pool of recruits and applicants. So we're doing everything we can to take advantage of the fact that our company and almost all our clients are enjoying robust growth."

    Mr. Hughes added: "We're still ridiculously tough in setting the bar here. I'm pretty sure I couldn't get a job here today."