How the top five agency holding companies cut more than 22,000 jobs in 2020

The world’s five biggest agency holding companies in 2020 cut more than 22,000 jobs representing 5.8% of their workforce, according to Ad Age Datacenter’s analysis. The staff cuts came as organic revenue slumped at agency companies due to marketers pulling back on advertising and marketing services during the pandemic. Worldwide organic growth, which factors out acquisitions, divestitures and effects of exchange rates, came in at an average of -8.3% for the five companies. Job cuts ranged from an 8.4% reduction in headcount at Omnicom Group to a 2.8% decrease at Dentsu Group. The five companies—WPP, Publicis Groupe, Omnicom, Interpublic Group of Cos. and Dentsu—had a combined worldwide headcount of 358,663 people at the end of 2020. Worldwide employment at agency holding companies Headcount at end of year. In aggregate, these five big agency companies last year cut staffing by 5.8% as organic revenue slumped 8.3%. By one measure, Interpublic had the most productive employees: Amid all the challenges of 2020, it generated $154,300 in net revenue per employee, highest among these companies. Worldwide employment 2020 worldwide net revenue* Company 2020 2019 2020 vs. 2019 Organic growth Dollars in billions Defined as Per employee WPP 99,830 106,786 -6.5% -8.2% $12.5 Revenue less pass-through costs $121,300 Publicis 80,000 83,235 -3.9 -6.3 11.1 Net revenue (revenue less pass-through costs) 135,700 Omnicom 64,100 70,000 -8.4 -11.1 9.8 Revenue less third-party service costs 146,900 Interpublic 50,200 54,300 -7.6 -4.8 8.1 Net revenue (revenue less billable expenses) 154,300 Dentsu 64,533 66,400 -2.8 -11.1 7.8 Revenue less cost of sales 119,400 Worldwide total for these companies 358,663 380,721 -5.8% -8.3% $49.3 Net revenue* $133,400 Source: Ad Age Datacenter analysis of company reports. Numbers rounded. *Or Ad Age's proxy for net revenue. Omnicom doesn't report net revenue and declined to comment on Ad Age's use of revenue less third-party service costs as proxy for net revenue. Net revenue per employee based on average number of employees in 2020 as calculated by Ad Age. If calculated with WPP's stated like-for-like average number of employees, WPP's figure would be $121,900. Organic growth factors out acquisitions, divestitures and effects of exchange rates. Organic growth based on net revenue or figure similar to net revenue. Omnicom organic growth based on revenue. Worldwide total organic growth is the average for these five companies. Agency staff cuts in tough times are no surprise: Labor is far and away the biggest cost for agencies. At Publicis, personnel costs were equal to 64.3% of worldwide net revenue in 2020. At Interpublic, salaries and related expenses were 66.3% of net revenue. For WPP, staff costs came in at 67.2% of revenue less pass-through costs. Interpublic reported worldwide organic growth of -4.8% in 2020, best among the five companies in a difficult year for the industry. Interpublic reduced its headcount by 7.6%, a bigger drop than its organic net revenue decline. Factor out headcount reductions tied to divestitures, and Interpublic’s organic headcount reduction was 6.3% in 2020. Interpublic came out on top in another measure: Worldwide net revenue per employee was $154,300, highest among the five companies, according to Ad Age Datacenter’s calculations based on the average number of employees in 2020. (Investors are happy with the company’s performance; Interpublic’s stock this month reached its highest level since 2002.) For the other four companies, organic growth fell more sharply than headcount reductions. Dentsu's organic growth came in at a weak -11.1%, but the company’s headcount at year-end 2020 was down just 2.8% vs. a year earlier. Dentsu is in the midst of a broader reorganization. The company last August announced a “comprehensive review and accelerated transformation program” intended to simplify its business, reduce operating expenses, improve its balance sheet and maximize shareholder value. As part of that reorganization, the company’s Dentsu International network—which manages operations outside Japan—plans to consolidate to six “global leadership brands” (Carat, iProspect, Dentsu X, Dentsumcgarrybowen, Isobar, Merkle) from more than 160 brands within two years. With this reorganization, Dentsu International expects its total headcount to decline about 12.5% by the end of calendar 2021 vs. the staffing level in the fourth quarter of 2020. In a statement to Ad Age, Dentsu said: "This new structure will be more transparent for our clients, enabling us to serve them better by de-duplicating the services offered to our clients. It will also enable us to reduce costs as our operations become simpler with more common systems and processes. The transformation will also include all service lines, functions and central teams." The reorganization follows years of acquisitions and investments as Dentsu built an agency network outside its home market of Japan. Back in 2016, Dentsu made 45 deals (the largest number in its history), including a majority stake in data marketing agency Merkle. Dentsu in 2020 bought the remaining stake in Merkle. Propelled by acquisitions, Dentsu worldwide staffing has more than tripled since 2009, when the industry was near the depths of the Great Recession. Worldwide employment in 2020 vs. Great Recession These five agency companies at year-end 2020 employed 358,663 people worldwide, up from 265,745 following the 2007-2009 Great Recession. That increase largely reflects acquisitions (offset by some divestitures). Dentsu’s staffing over this period more than tripled as it built a major international network through acquisitions. Employment at WPP and Omnicom at year-end 2020 was little changed from 2009. Interpublic’s job cuts last year (-7.6%; see the above chart) were on the same scale as cuts during the 2007-2009 downturn (-7.0%). Worldwide employment Company 2020 2009 2007 2009 vs. 2007 Selected deals WPP 99,830 98,759 90,182 +8,577 9.5% 24/7 Real Media (2007), Taylor Nelson Sofres (2008; combined with Kantar), AKQA (2012), STW (2016). Sold majority stake in Kantar (2019) Publicis 80,000 45,402 43,808 +1,594 3.6 Digitas (2007), Razorfish (2009), Rosetta (2011), LBi (2013), Sapient (2015), Epsilon (2019). Sold Publicis Health Services (2019) Omnicom 64,100 63,000 70,000 -7,000 -10.0 Clemenger (2011), Marina Maher (2011), Mudra (2011), Grupo ABC (2016). Sold Bernard Hodes (2013), Novus (2017), Sellbytel (2018), MarketStar (2019) Interpublic 50,200 40,000 43,000 -3,000 -7.0 Reprise (2007), Huge (2008), Profero (2014), Media Experts (2015), Brooklyn Brothers (2016), ReviveHealth (2016), Salt (2017), Acxiom (2018). Sold Dailey (2017), TM (2017), Fitzco (2019), Casanova//McCann (majority stake, 2020) Dentsu 64,533 18,584 16,765 +1,819 10.8 Mcgarrybowen (2008), 360i (2010), Aegis (Carat, iProspect and Isobar) (2013), MKTG (2014), Gyro (2016), Merkle (2016) Worldwide total for these companies 358,663 265,745 263,755 +1,990 0.8% Source: Ad Age Datacenter analysis. Selected deals shown; not comprehensive. Publicis employment at year-end 2020 (about 80,000) is far above its 2009 level (45,402), largely reflecting a spate of acquisitions including digital network Sapient and data play Epsilon. (Publicis and Omnicom in 2014 aborted another deal: a “merger of equals” that would have created the world's biggest agency firm.) Omnicom’s employment at the end of 2020 (64,100) has barely budged from 2009 (63,000). Omnicom made some acquisitions over that period including Australia’s Clemenger Group and Grupo ABC in Brazil, but it’s also offloaded ventures such as Sellbytel, an outsourced sales, service and support company, and MarketStar, a sales outsourcing venture. Omnicom's job reductions in 2020 (8.4% of headcount) approached the level of cuts made during the period of the Great Recession (10.0%). For WPP, the biggest agency company, employment at year-end 2020 (99,830) was little changed from year-end 2009 (98,759). WPP made acquisitions over that time frame including digital agency AKQA and a majority stake in Australia’s STW Communications Group. (WPP this year has a pending deal to buy the remaining stake in its Australian agency venture, which now operates as WPP AUNZ.) The company also has divested various non-core holdings and sold a majority stake in research business Kantar. Total employment for the five holding companies at the end of 2020 (358,663) was 35% above the level at the end of 2009 (265,745). While these companies have all cut staffing during the pandemic, they collectively have a far bigger global scale now than at the end of the Great Recession.

How the top five agency holding companies cut more than 22,000 jobs in 2020

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