AGENCY REPORT;SHOPS SOAR ON GROWTH OF 9.2%, TO $17 BILLION;MAGAZINES' 18.8% BOOST HELPS POWER JUMP;TOKYO'S $36 BILLION IN BILLINGS GIVES IT EDGE OVER NEW YORK

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1996 by Crain Communications Inc. Quotations or reproductions in whole or in part without written permission is expressly prohibited.

The top 500 u.s. agencies generated gross income of $17.25 billion worldwide in 1995 for growth of 9.2%. That edged past 1994's advance of 9.1%-then the best showing in a decade for this barometer of the advertising industry.

Billings were stronger, up 11.1% to $130.5 billion worldwide, compared with last year's 9.5% upswing, according to the 52nd annual Advertising Age Agency Report.

The U.S. portion of the mix weighed in at $10.1 billion gross income, up 7.7% on billings of $78.75 billion but three points below the 10.7% advance in 1994 when the nation's media buying hit near-hyperbolic levels.

The "burden" of growth was carried by the non-U.S. side, which rose 11.4% to $7.15 billion gross income on billings of $51.75 billion, a measure of increased activity in the world's emerging markets and stronger currencies.

As in the past, this international volume was generated by agencies with U.S. gross income above $45 million (equivalent to $300 million billings). This group, a collection of 46 agencies, is the backbone of the U.S. side as well, claiming 57% of domestic gross income.

AA 500 COVERS THE NATION

Ad Age's top 500, all of which are U.S.-based, approximates the sum total of U.S. agency activity. AA ranks in this issue 621 U.S. agencies. They returned an aggregate $10.22 billion gross income, or only $115 million more than the U.S. 500 barometer.

Although fees and other revenue schemes are gradually unburdening the general agency's reliance on media commissions (some of the leading agencies currently are receiving an average 8%-10% commission on media vs. the traditional 15% of several years ago), media commissions still account for about 12% of billings of the top 500.

During '95, the slippage in U.S. growth was not so much a case of reduced circumstances as it was a calmer media environment. Media engines opened full throttle in '94 when the three big mediums for agency billings-network TV, spot TV and magazines-rose 9.2%, 15.2% and 11.5%, respectively. Growth in network and spot cooled in '95 to 4.3% and 2.4%; conversely, magazines heated up 18.8%.

Agency casualties had a minor impact on totals; their figures would only be in the prior year totals. Ally & Gargano, with $33 million gross income in '94, folded in '95; Bates Advertising Holdings, $22.6 million in gross income in '94 and successor to AC&R Advertising, dissolved into Bates' U.S. side where it was part of a 2.5% slide in gross income.

STRONG FOREIGN CURRENCIES

Growth abroad was stimulated by stronger currencies. For example, Germany's ad billings grew 9.4% in deutschmarks. In U.S. dollars that translated into a 22.7% gain, to $10.6 billion. Since U.S.-based agencies own nine of the top 10 shops in Germany most the ad volume wound up in returns of the U.S. multinationals. Other coveted currencies: The French franc rose 10.7% after dropping 9.7% in '94; the British pound rose 4.2%, up from a 0.5% decline the prior year.

The Japanese yen's 10.1% growth against the dollar had little impact on U.S. agency business as a whole since U.S. multinationals claim only a sliver of the $35.8 billion billings pie (up 16.9%) generated in '95 by Japanese agencies.

Economic expansion and resurgence has made the Far East and Eastern Europe hotbeds of multinational agency action. China ad billings grew 70.6% to $528.5 million among 16 agencies reporting. Billings growth in four big East Europe markets, the Czech Republic, Hungary, Poland and Russia, ranged from 23% in Russia to 43.4% in the Czech Republic.

Growth has returned to South and Central America, a region of greater political stability, local economic growth and concomitant advertising by global advertisers handled by affiliates of U.S. agencies.

One of that region's bigger investments came from Foote, Cone & Belding Communications, which bought into agencies in Mexico and Peru and added non-equity affiliates in Chile, Nicaragua, Panama and Uruguay. DDB Needham Worldwide entered Colombia, Chile and Venezuela.

AD CAPITALS

Tokyo left little doubt it is the world's ad capital. It is credited with $35.8 billion in billings, up 16.9%, from 50 agencies-all the agencies reporting from Japan. New York's 143 agencies collectively accounted for $29.9 billion in billings, up 10.6%. The city's take is 40% of all U.S. activity.

Ad Age ranks nearby Connecticut and New Jersey separately. Even with those regions aggregated into New York, the regenerated total of $32.4 billion would still leave the Big Apple far short of the Tokyo take.

Dentsu, the world's largest agency brand, dominates-its $12.4 billion in local billings contributing a dollar out of every $2.88 billed in Tokyo.

Tokyo's No. 2 agency, Hakuhodo Inc., at $6.38 billion in billings, is second in the world only to Dentsu in billings volume generated in a single city market.

Leo Burnett Co., Chicago's lead agency, at $2.48 billion, is a distant third in spending focused from one locale. Gross income of $370.6 million attached to the Burnett billings kept the agency on top of the Ad Age U.S. brand rankings. Brands are agencies stripped of their specialty advertising and non-media components like PR.

London at $12.4 billion from 76 shops and Paris at $9.9 billion from 50, ranked third and fourth in city billings; followed by Chicago, $9.5 billion from 73; Los Angeles, $6.2 billion from 53; Detroit, $5.7 billion from 24; and Frankfurt, $4.5 billion from 18.

WORLD'S TOP 50 AD GROUPS

WPP Group, generating $3.13 billion gross income on billings of $22.7 billion, continues to outdistance the field of world's top ad organizations. WPP is parent of J. Walter Thompson Co. and Ogilvy & Mather Worldwide.

Closing on WPP is Omnicom Group, whose advertising component is larger than WPP's. Omnicom hit $2.58 billion gross income, up 16.7%, replacing Interpublic Group of Cos. as No. 2. IPG pulled $2.34 billion in gross income.

Omnicom totals do not include those of new acquisition Ketchum Communications, No. 22 ad organization worldwide. Ketchum was bought earlier in '96 and is being operated as a wholly owned subsidiary under Omnicom, whose ad returns come largely from BBDO Worldwide, DDB Needham Worldwide and TBWA International.

ON ACQUISITION BINGE

Omnicom has been acquisition crazed. Last year it purchased Ross Roy Communications and merged it into BBDO. Just months before, it fattened the TBWA side with the acquisition of Chiat/Day. DDB Needham was the nesting place for Griffin Bacal, acquired two years ago.

IPG also has been active, purchasing Western International Media and Anderson & Lembke last year, and this year acquiring William Douglas McAdams Inc., now renamed Lowe McAdams Healthcare.

True North Communications, No. 11 ad organization, earlier this year bought Bayer Bess Vanderwarker. Last year it grabbed Livingston & Co., Seattle, and merged it with Borders, Perrin & Norrander.

D'Arcy Masius Benton & Bowles, the No. 12 ad organization, purchased 45% of Pacific Marketing, San Francisco, and merged it with the DMB&B Los Angeles office, forming Highway One Communications. Last month Havas Advertising, No. 8 ad organization, purchased Dahlin Smith White, Salt Lake City.

Meanwhile, No. 5 ad organization Cordiant is streamlining. It lost two of its four agency arms in '95: Kobs & Draft Worldwide, bought back by management and renamed DraftDirect Worldwide; and Campbell Mithun Esty, another management buyback.

BUILDING M&C SAATCHI

Even more dramatic than these evacuations was the defection of Cordiant's founders, Maurice and Charles Saatchi, who took several chunks of business to serve as building blocks for their new London shop, M&C Saatchi, ranked No. 33 among U.K. shops in this report.

Acquisitions certainly aren't the province of the big ad organizations. EvansGroup purchased Floathe Johnson; HMS Partners (formerly Hameroff, Milenthal, Spence) bought McFarland & Drier and Chuck Ruhr Advertising.

Lois USA will grow nearly 50% with the inclusion of '96 acquisition Eisaman, Johns & Laws; Citigate Group, London, bought Albert Frank-Guenther Law last month and renamed it Citigate Albert Frank. Warwick, Baker & Fiore is buying Lopex Group's holding in its shares, a 40% stake taken in 1979.

NAMES A'CHANGING

Name changes affected a number of top agencies, including Rumrill-Hoyt, the Saatchi & Saatchi business-to-business agency. R-H was dropped to become Saatchi & Saatchi Business Communications; the Saatchi name gives it better leverage on the international scene, says an R-H executive. Rumrill-Hoyt had entered the Saatchi brood via Saatchi's purchase of Compton Advertising, New York, in the early '80s.

Compton Partners is the new name of the Campbell Mithun Esty office in New York taken over by Saatchi & Saatchi several months before CME left Cordiant; Marsteller Advertising was inaugurated by parent Young & Rubicam. Marsteller (as in William A. Marsteller) was a forerunner of PR/ad agency Burson-Marsteller under the Y&R wing.

Havas, the starting point for the French ad shop that through acquisitions evolved into Euro RSCG, is back again, this time as the umbrella title for the Euro RSCG network.

Joey Reiman Agency turned egoless as a Japanese screen. In one deft brushstroke it struck the founder's name from the door for a new moniker, Bright House, and resigned its accounts telling them they had to go elsewhere for execution and media buys.

JUST SELLING IDEAS

"We decided to sell ideas? Maybe ads or maybe not," said Roger Milks, chief operating officer, referring to an early success that involved the creation of the name and positioning of a new perfume. Two clients returned.

But Bright Ideas' plunge into what it calls "experimental marketing" carried a price. Lacking media, gross income fell 81% in '95, and employment dropped from 105 to near 20.

Agency parent GGT Group in London didn't quibble with the change: If you get international clients, this can play, came word from London. A Dutch temporary service agency moving into the U.S. just hired Bright Ideas. It's a start.

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