ISSUE METHODOLOGY

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There are four major rankings in the Advertising Age Agency Report: world's top 50 advertising organizations; leading U.S. agency "brands"; top U.S.-based agencies on a consolidated basis; and international rankings within 93 other countries.

Each ranking is based on gross income and equity ownership. Gross income is revenue and includes the sum of commissions on media billings, markup on materials and services (usually 17.65%) and fee income.

Parent agencies or holding companies consolidate returns of another equal to their percentage ownership (equity). Acquisitions are treated pro forma as if returns for such operations were on or off the books for two years in a row.

World's top 50 ad organizations: The evolving corporate restructuring blurring the distinction between agencies and holding companies led AA four years ago to create its first ranking of the world's top 50 ad organizations (see chart on Page S-18).

An ad organization qualifies for a top 50 ranking if it owns 50%-plus of itself. It's then ranked on 100% of its equity gross income. The portion not owned can be claimed by another organization on the top 50 chart. One exception is No. 19 Dentsu, Y&R Partnerships. It's a 50/50 joint venture between Dentsu and Y&R, each of which claims 50% equity.

U.S. agency brands: The ranking of 632 U.S. agencies (beginning on Page S-8) is by agency "brand," the core agency. Agency branding strips contributions from specialty units such as direct response, PR, research, medical, sales promotion or Yellow Pages to arrive at a core number.

AA also carried the agency brand concept into the international arena (see chart on Page S-20).

Consolidated U.S. agencies: The ranking of the top U.S.-based agencies on a consolidated basis (Page S-33), reassembles the multitiered agencies (unbundled for branding) to include all subsidiaries and specialty units, except PR.

Rankings in 93 countries: This issue carries 1,270 non-U.S. agencies. Each is ranked in its respective country by 100% of its returns. Rankings are by gross income in U.S. dollars. (Rankings run continuously from Dollar equivalents are derived from exchange rates, based on a 12-month average. Returns are treated historically (each year has its own rate).

Conversion rates for 1994 and 1993 and their percentage difference are part of the headline identifying rankings by country.

Agencies were allowed to report consolidated operations by country, but in such cases they couldn't rank separately any unit in the composite number. Such consolidations are noted in footnotes.

More than 90% of the non-U.S. agencies are connected to network agencies owned by the World's top 50 ad organizations. The ownership status of the parent agency for each non-U.S. shop is displayed next to the agency's name by any of the following symbols: NA, not applicable, meaning agency is not part of a parent network; MJ, majority owned by a top 50 agency; JV, joint venture (50/50); MN, minority owned; NE, no equity but considered a top 50 affiliate.

U.S. media rankings: The top 10 agencies in 14 major U.S. media categories are ranked by their media volume at the U.S. brand level (see chart on Page S-35).

Staff for this report:

Edited by R. Craig Endicott, Profile Issues Editor, Kevin Brown, Information Services Editor, and Ilse Cermak, International Agency Report Editor, under the direction of Larry Edwards, Executive Editor/Features. Also, Geoffrey Shives, Design Director, Mike Ryan, Special Reports Editor, Susen Taras, Research Associate, Cecilia Ramirez and Sarah Polster.

Data for sale:

AA sells selective data from this report. Contact: Kevin Brown, phone (312) 649-5272, fax (312) 649-5360.

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