Not-So-Slow Recovery: U.S. Agency Revenue Surges Nearly 8% in 2011

Digital Shops Lead the Way With 17.1% Revenue Hike

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Agency Revenue Growth vs. Job Growth
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 digital-media employment.

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 U.S. agencies.

The increase topped the 7.7% growth of 2010, when agencies were recovering from the brutal recession of December 2007 through June 2009.

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 began.

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

Find out more about the companies mentioned in this article in Ad Age 's Agency Family Trees 2012.

Much of the job growth came from acquisitions, largely outside the U.S. Adjusting for acquisitions, WPP reported 4.3% employment growth.

Agency Revenue Growth vs. Job Growth
Source: Ad Age Agency Report; Bureau of Labor Statistics.
Percentage change in U.S. agency revenue and U.S. agency jobs, 2011 vs. 2010.

The Big Four accounted for just over half of the $33.2 billion in U.S. agency revenue tallied in the Agency Report.

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 apples-to-apples basis.)

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 prospects.

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."

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