The Annual Special Report

2004 ADVERTISING AGE AGENCY INCOME REPORT

Overall Revenue From Advertising Up 3.4%

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CHICAGO (AdAge.com) -- U.S. advertising is struggling to reassert itself as the nation continues its economic rebound.

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Revenue from U.S. agencies' advertising and media operations rose 3.7% to $10.66 billion in 2003, according to Advertising Age's 60th annual Agency Report.

Outperformed revenue growth
While agencies outperformed the 0.6% revenue growth in 2002 and 2.2% decline in 2001, they didn't keep pace with media spending. U.S. media spending last year grew 6.1%, according to TNS Media Intelligence/CMR.

Media agencies' share of the $10.66 billion pot registered $1.51 billion, up 5.4%, tracking closely with media spending growth.

But revenue for U.S. agencies' advertising operations was up only 3.4% to $9.15 billion. That sluggish growth isn't surprising given intense pressure by marketers to slash agency fees and cut agency profit margins.

457 U.S. agencies
Ad Age's report tallied domestic revenue from advertising and media for 457 U.S. agencies as well as revenue for those agencies from outside the U.S. The report represents a comprehensive list of U.S. agencies. Because these agencies have such extensive global networks, the report effectively reflects

A 52-page report providing detailed corporate profiles of the top 50 agency organizations can be downloaded as a .pdf file. Click the above graphic.
revenue from advertising and media for most ad agency networks operating outside the U.S. The ranking of agencies excludes revenue from marketing disciplines beyond advertising and media.

Among these 457 U.S.-based shops, their agency ventures outside the U.S. took advantage of the struggling dollar to push the agencies' revenue from worldwide advertising and media operations to $20.54 billion, up 4.9%.

The foreign split grew to $9.88 billion (up 6.2%), almost matching the agencies' U.S. revenue. Had the dollar remained constant, however, foreign revenue would have declined. That's because all the big currencies advanced more than the ad/media growth abroad: The euro grew 20.1% against the dollar; the British pound, 11.2%; and the Japanese yen, 7.8%. How the Big 4 marketing organizations stacked up in overall revenue, including advertising, media and other marketing disciplines:

The leader: Omnicom
Omnicom Group's worldwide revenue from all operations jumped 14.4% to $8.62 billion, keeping it the leader among holding companies. The New York-based company posted non-U.S. revenue growth of 20% while improving a healthy 10.2% at home.

Omnicom's global networks, BBDO Worldwide, DDB Worldwide Communications and TBWA Worldwide, grew 9.2% collectively in U.S. revenue and 18.2% abroad.

Five holding companies control 74.1% of the world advertising services market. Click graphic to see large-sized image in .pdf format.

Advancing to No. 2

  • WPP Group pushed past a struggling Interpublic Group of Cos. into the No. 2 position among marketing organizations with $6.76 billion in revenue, up 16.9%. Non-U.S. revenue grew 19.8% as its U.S. tally advanced 12.8%. The U.K. company benefited from five months of revenue from Cordiant Communications Group, acquired in August.

    WPP's J. Walter Thompson Co. held the No. 1 U.S. agency spot with $456.2 million in revenue, up 15.9%.

    Overall revenue down for IPG
    Interpublic dropped 5.5% in overall revenue to $5.86 billion, falling to No. 3. It remained the biggest holding company when ranked on revenue from advertising and media, but the New York-based company's share of the $20.54 billion in worldwide ad/media revenue slipped to 18.3% from 19.3% in 2002.

    Interpublic's U.S. revenue from advertising and media declined an estimated 0.2%. Its major networks, McCann Erickson Worldwide, Foote Cone & Belding Worldwide and Lowe & Partners Worldwide, fell a collective 1.2% in U.S. revenue.

    Publicis' acquisition
    Publicis Groupe firmly entrenched itself as the No. 4 marketing organization at $4.41 billion in revenue, a 7.3% growth that treats its September 2002 acquisition of Bcom3 Group as if it

    All the Agency Report data charts can be found linked to the Chart Index Page. Click the above graphic to go there.
    occurred at the beginning of that year. The French company drew 55% of revenue from international, up 11.5% to $2.42 billion.

    Leo Burnett Worldwide, its lead agency, was the No. 2 U.S. agency brand at $404.2 million, up 6.6%.

    Dentsu stays on top
    Dentsu remained far ahead of its nearest competitor as the world's top agency brand. The Tokyo agency generated an estimated $1.86 billion in worldwide revenue, up 29.2%. Omnicom's BBDO Worldwide vaulted past Interpublic's McCann to take the No. 2 worldwide spot at $1.24 billion (up 16.4%); McCann global revenue from advertising and media was $1.22 billion (up 3.7%).

    There were bright spots in specialty categories. Hispanic agencies grew 13.7% to an estimated $256.8 million in the U.S., but their influence on industry totals is limited; they represent only 2.4% of U.S. agencies' advertising and media revenue.

    Interactive agencies advanced 20.6% to $554.1 million; that excluded interactive operations of publicly traded holding companies, which don't break out interactive results. Healthcare shops grew 6.7%

    Get the 2004 Family Tree Chart for the largest ad agency organizations in print or as a .pdf download. Click the graphic above for more information.
    to $1.64 billion in the U.S.

    Arriving at the numbers
    Holding companies stopped providing revenue splits for their operating properties to Ad Age and other media last year, citing the Sarbanes-Oxley Act. Ad Age estimates revenue for their agencies based on segment splits and historical data. These estimates eliminate subsidiaries -- typically marketing services units -- to arrive at a pure advertising and media total for the core agency.

    In the past decade, agencies have turned to marketing services to boost margins. These operations typically carry a higher markup than traditional agency work.

    But the marketing services side couldn't bail out these agencies in 2003 as all marketing services grew less than 2% in the U.S. If there is consolation in those numbers, it is that marketing services revenue again is growing.

    In 2002, U.S. marketing services declined 3.5%.

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