How agency revenue growth soared—and what it means for the industry

The agency business has come roaring back, with strong revenue growth across disciplines and record-high U.S. ad agency employment. U.S. revenue for agencies from all disciplines jumped 13.5% in 2021, the fastest growth in Ad Age’s annual Agency Report since 2000. Last year’s rebound followed a 6.8% drop in 2020, when fallout from COVID-19 pushed the economy and agencies into a deep but short downturn. The revenue growth rate is based on Ad Age’s bottom-up analysis of stated organic growth for the biggest agency companies and stated or estimated growth for other agencies in Ad Age Agency Report 2022. Organic growth strips out acquisitions, divestitures and the effects of exchange rates. Total 2021 U.S. revenue for the more than 300 agencies in this Agency Report came to $56.9 billion. Among those agencies, 85% delivered a 2021 revenue increase. See Ad Age Datacenter Agency Report 2022 Stories, rankings, stats Click here Five key stats 1. U.S. agency revenue growth +13.5% 2021 growth in revenue for agencies from all disciplines, fastest since 2000 2. U.S. ad agency jobs 213,400 Employment in February 2022, an all-time high 3. U.S. PR agency jobs 64,100 Employment in February 2022, an all-time high 4. Digital share of revenue 64% Estimated 2021 share of U.S. agency revenue from digital work for agencies from all disciplines 5. Organic growth +4.8% to 5.1% Average forecast of 2022 worldwide growth for five top agency holding companies (WPP, Omnicom, Publicis, Interpublic, Dentsu) Major consultancies—Accenture Interactive, PwC Digital Services, Deloitte Digital, IBM iX—helped power agency growth. Revenue at Accenture Interactive surged 27.0% in the U.S. and 17.4% worldwide. U.S. revenue for agencies from all disciplines, excluding the four big consultancies, rose 11.8%. Organic growth for agency holding companies bounced back in 2021 after a sharp drop in 2020. Organic growth for five major agency companies—WPP, Omnicom Group, Publicis Groupe, Interpublic Group of Cos., Dentsu Group—jumped in 2021 by an average of 9.6% in the U.S. and 11.5% worldwide. The rebound in 2021 means all five of those firms except Omnicom had fully recovered from a 2020 worldwide decline in business based on positive worldwide two-year compound organic growth for 2020-2021 vs. pre-pandemic 2019. WPP, the world’s biggest agency company, trumpeted in its annual report: “WPP has demonstrated exceptional performance in 2021, delivering growth ahead of pre-pandemic levels and our fastest organic growth for over 20 years.” The average of 2022 worldwide organic growth forecasts from those five firms comes in at a healthy 5%, with comparatively little variance among the companies. Worldwide employment at the five companies increased by 8.5% in 2021 following a 6.0% cut in 2020. Combined worldwide employment for the five firms at year-end 2021 was 1.9% above the level at year-end 2019, before the pandemic. Ad Age Agency Report 2022 There’s a lot for agencies to cheer about—but caution, too. Stocks for four major agency companies—WPP, Omnicom, Publicis, Interpublic—are down in the range of 12% to 18% since February, compared to the Standard & Poor’s 500 pullback of 11% from its early 2022 all-time high. The drop comes amid worries about slowing economic growth (and mounting fears of a 2023 recession), rising interest rates, surging inflation and war in Ukraine. A year ago, amid early signs of a rebound, Agency Report’s introduction offered: “It’s morning again in America—maybe.” The outlook today is cloudier—definitely. Publicis, the first of the big agency firms to announce first-quarter results, beat expectations with organic growth of 10.5% worldwide and 8.0% in the U.S. for the first three months. But it struck a cautionary note in its earnings statement. “In the first quarter 2022, Publicis recorded a stronger-than-expected start to the year, both financially and commercially,” the company said. “While this should have led the Groupe to upgrade its expectations for 2022 organic growth, the global health situation, the evolution of the conflict in Ukraine, and the consequences of inflation for the clients, create too much uncertainty to do so at this stage.” Omnicom reported first-quarter organic growth of 11.9% worldwide and 10.6% in the U.S. Interpublic reveals its results April 28, when it will deploy a new three-segment reporting structure that puts its media, data and digital brands into one segment. The takeaways from Agency Report: Revenue rose last year in every agency discipline tracked in Agency Report as the ad business rebounded. Revenue for U.S. ad agencies jumped 12.6%, underscoring the resilience and relevance of ad agencies in the midst of a marketing revolution. Media agency revenue increased 12.1%, reflecting strong demand for buying and planning tied to digital and data. PR agency revenue advanced 10.9%. Ad agencies and public relations agencies in February 2022 both reached all-time highs in U.S. employment, bouncing back from pandemic losses. U.S. health care revenue for agencies rose 11.2% in 2021, just below the standout 11.7% growth that came in 2020 when demand surged for marketing services tied to the coronavirus. Revenue at promotion agencies—a diverse discipline that includes experiential and event marketing—scored a 10.1% gain after a dismal 2020. The freeze in experiential and event marketing began to thaw in 2021, with an 8.7% increase—following a 47.9% plunge in 2020—as agencies delivered on virtual events and, later in the year, more hybrid and live events. Agency revenue from customer relationship management and direct marketing increased 6.1%, good growth for a discipline that held up well earlier in the pandemic. On a worldwide basis, agency firms posted strong growth across nearly all disciplines. WPP and Interpublic had double-digit worldwide organic growth across business sectors, with 16.1% organic growth at WPP media powerhouse GroupM. WPP said digital accounted for 43% of GroupM billings in 2021, up from 41% in 2020. Among Omnicom disciplines, experiential scored the highest organic growth (up 27.0%, albeit from 2020’s depressed level). Dentsu’s Dentsu International network delivered organic growth in all service lines, with 12.6% growth for media but only 3.7% growth for creative. The resurgence of agencies reflects the rebound in worldwide and U.S. ad spending, propelled by digital. Digital work accounted for about 64% of 2021 U.S. revenue for agencies from all disciplines, according to Ad Age Datacenter. That’s double the percentage of 2011. Worldwide ad spending jumped 15.6% in 2021, with 24.8% growth in digital advertising, according to Publicis-owned media agency Zenith. U.S. ad spending rose 18.7% in 2021, with 33.7% growth in digital, according to Zenith. The August merger of MDC Partners (Anomaly, Assembly) and Stagwell Marketing Group (Code and Theory, Targeted Victory) was among the notable agency deals over the past year. One old-line agency company stayed on the deal-making sidelines: Interpublic made no acquisitions in 2021, the first year since 2006 that it didn’t do a deal. Other agency firms have angled to reel the deals for the lure of digital and data. Publicis last month bought Tremend, a software engineering company in Romania with more than 650 software engineers. WPP’s 2021 acquisitions included DTI Digital, a Brazilian digital innovation and software engineering company with more than 600 software engineers. Marketing consultancies also are buying up talent. Deloitte Digital in November acquired Madras Global, a content production agency with about 1,000 employees. More deals are coming. Publicis in February revealed plans to invest up to $680 million in “bolt-on” acquisitions this year “to continue strengthening data and tech capabilities.” Dentsu intends to invest up to $2.6 billion from 2022 through 2024 in acquisitions mostly related to what it calls “Customer Transformation & Technology.” See Ad Age Datacenter Agency Report 2022 Stories, rankings, stats Click here Subscribe to Ad Age’s Datacenter for ongoing data and insights on marketers, brands and agencies.

How agency revenue growth soared—and what it means for the industry

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