A brief history of ad agency economics: U.S. agency employment reached its all-time peak (207,400) in August 2000, four months before ad spending's dot-com-bubble peak.
Media spending began to recover in May 2002, but agency employment didn't hit its post-bubble nadir until January 2004 (164,200), a loss of 43,200 jobs, according to Bureau of Labor Statistics data.
Employment then rebounded to an October 2007 business-cycle peak of 188,600 -- recovering more than half of agencies' job losses -- two months before the start of the recession and five months before ad spending turned negative.
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By October 2008, agency employment fell to 182,400, a loss of 6,200 jobs from the business-cycle staffing peak.
More cuts are likely; Omnicom Group did major cuts in December. While economists guess the recession will end in the second half of 2009, the U.S. job market -- including the agency sector -- could get stuck in another extended "jobless recovery."
Investors have soured on the agency sector. Combined market capitalization of the Big Four agency firms -- Omnicom, WPP, Interpublic Group of Cos., Publicis Groupe -- in December 2008 was $23.4 billion, not dramatically above the June 2007 market cap of WPP alone ($18.3 billion).
Agency firms continue to do deals. WPP in November 2008 swallowed Taylor Nelson Sofres for roughly $2 billion, adding the U.K. firm (parent of ad tracker TNS Media Intelligence) to Kantar, its market-research operation.
The agency business, obsessed with the word "Group" since the formation of Interpublic Group in 1960, now has one less groupie: WPP Group is now just WPP. In a tax-saving move, the agency and research firm in November formed a new holding company, WPP plc.
WPP plc, listed in the U.K. and incorporated in the British Crown dependency of Jersey, is now the official name of the parent company overseeing WPP's agencies and businesses.Slicing Up Agencies' $31 Billion Pie