That concentration in New York by no means reflects a paucity elsewhere in the U.S., as all but one of the top 10 cities arranged by billings registered double-digit growth, according to the 53rd annual Advertising Age Agency Report.
This growth, a mixture of media billings and fees, coincides with a euphoric media environment in the U.S. But to call this billings growth a media-driven phenomenon is to discount the groundswell of non-traditional (i.e. non-measured media) activity. This sector of the advertising pie is pumping up the fee side of the business and catering to the client side's growing thirst to establish more intimate "relationships" with consumers.
Non-traditional-alternative media, relationship marketing, some medical and forms of sales promotion and direct response-is moving from the periphery to the center of the agency business. In the process, it has spawned a rapid feeding by cash-rich multinational networks and agency holding companies eager to integrate these services into their mix. This is happening at the same time agency giants are siphoning off media into collectives.
The report charted exceptional growth in a number of media categories among the Ad Age Top 500, a ranking of agencies by gross income. Gross income, the agency community's term for revenue, is a more accurate measurement of agency size than billings because in addition to fees it includes actual commissions made on media buys, a rate that can vary by deal.
U.S. billings for the Top 500 were $91.19 billion, up 14.4% from the last report; media's portion was $52.1 billion, up 12.8% from 1995.
Of media reported by the Top 500-about three-quarters of these agencies break out their media billings-cable shot up most dramatically, by 35.7% to $3.53 billion for national and local spot and cable networks combined.
The Top 500 claimed $14 billion in network TV advertising, up 13.8%, an advance nurtured by heavy Olympics and presidential election advertising in the third and fourth quarters. Three agencies accounted for 20% of the total, led by the top network buyer, D'Arcy Masius Benton & Bowles at $1.15 billion, down 3.2%; McCann-Erickson Worldwide at $1.05 billion, up 32.4%; and Y&R Advertising at $973.9 million, a 103.4% climb associated with new AT&T Corp. business. AT&T is the top megabrand in the U.S.
MODEST SPOT TV GROWTH
Spot TV grew a more modest 6.8% to $11.2 billion, as McCann-Erickson took the volume lead at $657.1 million, an 82% increase credited to the creation of Local Communications, a spot TV-buying unit jointly established by McCann and Campbell-Ewald at mid-year.
Consumer magazines hit $6 billion, up 11.6%, paced by BBDO Worldwide's $317.1 million, and spot radio grew 15.6% to $2.9 billion.
New York's $34.2 billion in billings from 155 shops certainly reflects media growth rates recorded by the 500. That mass amounted to a 15.5% increase from the same set of shops in the previous year.
Tokyo, which led all cities last year in media billings, was undone by a 13% decline in the yen against the dollar that caused 1996 dollar volumes to slip 5% beneath those of '95.
Leo Burnett Co.'s $2.66 billion in billings-the largest single shop in the U.S.-kept Chicago in fifth place among the world's ad centers after No. 3 London at $12.6 billion and No. 4 Paris at $10.4 billion.
The Internet has nurtured a wealth of new media shops of sufficient size to rank high among the Top 500. Highest-flyer is CKS Group at No. 26, followed by Eagle River Interactive, No. 59, and TN Technologies, No. 63.
Of the top 500 agencies, 162 reported either interactive fees, interactive business placed as media, or both. Volumes in this still-nascent category included $81.9 million in media placement vs. $20.3 million in '95, and $327 million in fees vs. $79 million in '95.
Each of the big three interactive agencies has grown internally as well as through acquisition, aided by their status as publicly held companies. CKS bought ad agency McKinney & Silver and several other companies; TN Technologies purchased Modem Media, one of the larger interactive shops.
TMP Worldwide, a Yellow Pages agency with a growing presence in advertising on the Internet (about $6 million in '96 revenue from Web sites), went public in December. It used proceeds from its offering to develop overseas capabilities.
Others have been lured to the open market. No. 78 Poppe Tyson was brought to the brink of an initial public offering before scuttling plans at the last minute to wait for more favorable market conditions. Parent Bozell, Jacobs, Kenyon & Eckhardt, meanwhile, built up Poppe's New York presence by folding in new purchase Marshall Jaccoma Mitchell Advertising.
FRANKEL GAINS IN INTERACTIVE
Frankel & Co., the nation's 40th largest agency brand, put its IPO plans on the backburner this year after stating its intent in '96. Market conditions prompted the rethinking. The largely sales promotion shop is increasingly including non-traditional media activities. Already the agency is generating nearly $700,000 in interactive fees.
Cyrk Inc., No. 64, an integrated marketer publicly held since July '93, made several acquisitions on a national basis in '96 to help boost gross income 58.2%-real growth since Ad Age folds in two years of data for acquisitions and divestitures.
These interactive and new-media ventures are a hot commodity among the cash-laden agency holding companies and multinationals.
In 1996, Omnicom Group purchased minority shares of six agencies dealing in new media, placing them under the Communicade banner in its corporate structure. Interpublic Group of Cos. and WPP Group have made similar investments.
Specialty shops of any sort in fact are fair game for agency groups, which tend to gain non-traditional expertise through acquisition. In particular, medical shops, their outlook increasingly rosy because of fast-growing consumer advertising and the panopoly of switches in prescriptions to OTC, have fallen into the fold of the agency giants.
McCann-Erickson in '96 bought Torre Renta Lazur, Lowe & Partners Worldwide added William Douglas McAdams Inc., Omnicom gained Cline, Davis & Mann this February and BJK&E purchased several agencies to boost its BJK&E Healthcare unit.
WORLD's TOP 50 AD GROUPS
WPP, at $3.42 billion gross income, up 9.4%, continued as the world's largest ad organization, followed by Omnicom at $3 billion, up 12.1%, and Interpublic at $2.76 billion, up 11.5%. Both Omnicom and IPG drew larger returns from advertising than WPP, whose returns include heavy contributions from market research and PR.
The chart does not measure the seismic split between True North Communications, No. 10, and Publicis Communication, No. 13. The giants agreed this year to separate their European network-second largest on the Continent-co-mingled in a 1988 alliance. They will attempt to unbundle this year.
A new face among the Top 50 is multifaceted Minneapolis-based Carlson Marketing Group, No. 18. Carlson is a non-traditional agency that grew 17.5% to $222 million in worldwide gross income from its business-to-business, sales promotion, direct marketing and account-specific business.
Publicity-shy Carlson entered the report for the first time, with the partial incentive to do so created by the presence on the chart of Minneapolis competitor Gage Marketing Group-checking in at No. 27. Gage, largely a point-of-sale agency, was spun off several years ago from Carlson Marketing Group's parent, Carlson Cos., a company involved largely in travel and foodservice.
It only seems fitting a non-traditional agency should rise among this elite