Revenue from U.S.-based traditional and marketing services agencies rose to $17.59 billion in the U.S. for a solid 8.6% growth, virtually euphoric when compared to the 1.7% decline in 2001, and the 3.1% and 3.7% upticks in the next two years, respectively, according to Advertising Age's 61st annual Agency Report.
This report almost saw a new marketing organization crowned. Omnicom Group at $9.75 billion in revenue held off WPP Group's pumped-up $9.37 billion, with WPP showing a strong growth quotient from existing business and new ad dollars from its buyout of Grey Global Group, seventh-largest marketing organization in 2003.
The world's top four marketing organizations, Omnicom, WPP, Interpublic Group of Cos. and Publicis Groupe, contributed 57.4% of U.S. advertising and media, up slightly from 57.2% in 2003. For advertising, media and marketing services, these behemoths controlled 51.4% of ad revenue in the U.S., up from 50.9% in 2003.
Traditional advertising and media contributed $11.20 billion of the $17.59 billion in U.S. agency revenue, up 8%, with media specialist companies contributing $2.17 billion of that, up 8.2%-growth in line with the 9.8% increase in U.S. media billings monitored by TNS Media Intelligence and a figure infused with heavy spending associated with the Athens Olympics and the U.S. presidential election.
Ad growth in 2005 is likely to taper off due to the absence of these media locomotives. WPP, in fact, projects industry organic growth at 2% to 3% worldwide this year. The lack of another 2004 media driver, the European Football Championships, also will affect media spending in 2005.
Marketing services-direct marketing, sales promotion and interactive-contributed $6.39 billion of the $17.59 billion U.S. tally, up an impressive 9.8%, reflecting how the "focus on creativity is becoming accountable," according to Marc Landsberg, president of Publicis Groupe's Arc Worldwide marketing services operation.
That accountability is the strong mix of direct marketing and interactive often identified as customer relationship marketing. While not all direct and interactive is data-mining, a lot is. Interactive growth soared to $1.43 billion in the U.S., up 20.2%, as direct hit $2.89 billion, up 9%. Sales promotion grew 4.6% to $1.92 billion.
Strong gains in both advertising and marketing services could reflect what agency executives are identifying as a marketing mixture in which marketing services is moving from below-the-line to around the table. That integration is enhanced by concerns about efficiency and effectiveness of media advertising. The upshot is a marketer's first agency session now includes direct, promotion and interactive with the traditional creative elements.
Indeed, there is a blurring at the margins of all marketing specialties, including brand advertising: "We're not an advertising company but an integrated communications company," says an executive at Omnicom's DDB Worldwide Communications.
On a global basis, U.S.-based advertising and marketing services agencies climbed 10.5% to $31.11 billion. The international component grew 13.1% to $13.52 billion as the weak U.S. dollar helped boost money repatriated to the U.S., at least on the balance sheet. The dollar fell 11.8% against the pound, 9.4% versus the euro and 8.6% against the yen.
Among the top four marketing organizations, WPP grew the most abroad-21.3% to $5.72 billion, representing 61% of its total, up from 58% in 2003 when the dollar was stronger. WPP's top international network, JWT, generated 64% of its own worldwide total from non-U.S. business. JWT continues to rank No. 1 among U.S. agency brands with core advertising revenue of $476.5 million.
TOP FOUR SHOPS UNCHANGED
There were no changes through the top four agencies. However, WPP's Ogilvy & Mather Worldwide moved from seventh to fifth in 2004 on the basis of its estimated $249.3 million revenue from the U.S., up 12.8%. Two shops among the top 25 U.S. core brands fell three slots: Havas' No. 13 Euro RSCG Worldwide on the basis of its $161.4 million in U.S. revenue, down 10.7%, and Interpublic's No. 18 Lowe Worldwide for its $120.9 million, down 6%.
Dentsu remained the world's largest agency by core ad revenues at $1.94 billion, up 18.3%. Ad Age estimates returns for most agencies of publicly held marketing organizations. These parents no longer provide agency splits because of the Sarbanes-Oxley Act passed by Congress in 2002.
Carlson Marketing Group topped the U.S. marketing services chart at $246.5 million, as it drew $160 million from sales promotion, $82.5 million from direct and the rest from interactive. "Clients want to know: How do we make customers? How do customers get value from us?" says Carlson Chief Marketing Officer Mike Kust. Apparently, enough clients were so curious in 2004 as to push up Carlson's revenue by 5.3%.