U.S. agency revenue by discipline.
U.S. agency revenue climbed a solid 7.9% in 2011. Agency stocks
soared to post-recession highs in March. Omnicom's John Wren scored
a 43% pay increase.
The agency business, in short, is humming along even as the
economy struggles through low-grade growth.
All agency disciplines grew last year as the business continued
its post-recession recovery. But performance varied sharply by
sector and, naturally, the star performer was digital.
Revenue for U.S. digital-specialty agencies -- digital pure
plays -- rocketed 17.1%, right in line with a 17.4% growth in
Media agencies' revenue jumped 11.4%, slightly ahead of the
sector's 10.2% employment growth.
Ad agencies' revenue rose a more muted 4.7%, vs. 3.9% job
growth. Public relations grew 5.3%; PR staffing edged up 2.7%.
Double-digit digital growth is not a surprise. Media-agency
revenue and job growth reflects the success agencies have had in
building revenue through media planning, analytics, digital
offerings and other services, allowing the sector to outpace meager
growth in media spending. (Publicis Groupe 's ZenithOptimedia
estimates that U.S. major-media spending grew just 1.6% in 2011,
and forecasts 3.6% for this year.)
Total 2011 U.S. revenue for marketing-communications agencies
(advertising, media, digital, marketing services, health care,
public relations) rose 7.9%, to $33.2 billion, according to
Ad Age 's
Agency Report 2012, which tracked performance of more than 900
The increase topped the 7.7% growth of 2010, when agencies were
recovering from the brutal recession of December 2007 through June
Though the recession officially ended nearly three years ago,
the job market is still recovering. U.S. advertising and
marketing-services firms (ad agencies, media agencies and other
disciplines) have added 48,400 jobs since staffing hit its low
point in February 2010. Employment stands at 51,200 jobs below its
all-time high in November 2007, a month before the recession
Agency revenue growth has outpaced staff growth during this
recovery; agencies and agency companies have been successful at
generating more revenue per employee.
Interpublic Group of Cos., for example, last year increased U.S.
revenue by 4.8%, while its year-end staffing remained essentially
unchanged from 2010.
The four largest agency companies -- WPP, Omnicom Group,
Publicis, Interpublic -- boosted worldwide employment last year by
8.1%, or 21,000 jobs. That's nearly double the 11,000 jobs they
added in 2010 and close to the 22 ,000 jobs they cut in
recessionary 2009. (See AdAge.com/adjobs.)
Much of the job growth came from acquisitions, largely outside
the U.S. Adjusting for acquisitions, WPP reported 4.3% employment
Source: Ad Age Agency Report; Bureau of Labor Statistics.
Percentage change in U.S. agency revenue and U.S. agency jobs, 2011
The Big Four accounted for just over half of the
$33.2 billion in U.S. agency revenue tallied in the Agency
U.S. agencies did well last year, but the agency business grew
faster abroad. Revenue for the world's 25 largest consolidated
agency networks -- units such as WPP's Young & Rubicam
Group -- grew 8.1% in the U.S. and 11.4% abroad. (Ad Age DataCenter adjusts agency and agency-network
revenue figures for acquisitions to show revenue growth on an
Revenue for the world's 50 largest agency companies totaled
$68.7 billion in 2011, up 12.2%. U.S. revenue for those firms rose
8.6%; non-U.S. revenue jumped 14.8%. The Big Four hauled in nearly
two-thirds of the top 50's worldwide revenue. (Ad Age DataCenter
does not adjust agency company total-revenue figures, so growth in
part reflects acquisitions.)
Shares in WPP, Omnicom and Publicis hit post-recession highs in
March 2012, an indication that investors are bullish on
Agency brass are sharing in the bounty. Omnicom President-CEO
John Wren, for example, reeled in total compensation of $15.4
million in 2011, a 43% increase. Mr. Wren earned $1,760 an hour,
assuming that he worked 24/7.
WPP disclosed more than $500 million in 2011 incentive payments,
representing "close to maximum achievement of agreed performance
objectives." The company defended its rich payout: "Given the
record profit and margin performance in 2011, most of the group's
operating companies achieved record incentive levels -- reflecting
pay for performance, not failure."