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Agency-building is a jigsaw puzzle in progress: The emerging image, given the extensive acquisitions at hand, seems destined to be mega-advertising groups preying on each other.

The world's big ad organizations, brandishing stock and euro bonds as currency, picked up their pace last year in piecing together broader and broader services through acquisition.

At least 150 U.S. ad agencies, marketing services companies, PR companies or media services companies were bought by agency parents present in this 55th annual Advertising Age Agency Report.

Acquisition activity is converging on the market largely from two directions-high-flying big ad organizations and fast-evolving marketing services companies.

A lot of fish have been caught where their nets overlap.

The big are getting bigger for good reason. Business is booming. The top 500 agency brands recorded in these pages advanced 14.7% last year in U.S. gross income, to $15 billion on billings of $116.25 billion.


Worldwide, these agencies-albeit the top 20 among them-generated $25.63 billion in gross income, up 14.5%, on billings of $197.96 billion. Gross income is agency parlance for revenue.

New York solidified its lead as the world's ad capital, its agencies generating $44.57 billion in billings in 1998, up 15.7%. Among the country's top 10 cities by billings, only Boston and the New Jersey corridor of healthcare shops contributed higher collective growth than New York.

New York accounted for $1 in ever $2.61 in U.S. billings and is the seat of the largest agency brand, Grey Advertising, at $422.3 million gross income, up 8.9%, on billings of $2.82 billion.

As ad centers across Europe grew from 10% to 18% in gross income and billings, Asian markets held on for dear life.

Gross income from Japan slipped 12.2% to $3.78 billion. Tokyo, the world's

No. 2 ad city, plunged 10.8% in billings to $28.19 billion. Japan's recession sent Man Nen Sha, Osaka, the world's 36th largest agency group in last year's ranking, into bankruptcy this March. Its troubles came amid Japan's first drop in ad expenditures in five years, down 3.8% to $48.7 billion, according to a survey by Dentsu, Tokyo.

Elsewhere in Asia, gross income fell 39.1% among South Korean agencies, 33.1% in Thailand, 33.9% in Malaysia and 68.1% in Indonesia.


The world's top 50 ad organizations were largely the beneficiaries of the strong advertising climate.

Leader Omnicom Group, New York, at $4.81 billion in gross income, grew 12%; No. 2 Interpublic Group of Cos., New York, grew 13.1% to $4.30 billion, and No. 3 WPP Group, London, 14.9% to $4.16 billion. The nine Japanese ad organizations in the top 50 each had double-digit declines.


The U.S. independent ad agency in the $15 million-to-$50 million gross income range has become an endangered species.

Falling from the ranks of the sizable independents were Hill, Holliday, Connors, Cosmopulos, Boston, and Gillespie, Princeton, N.J., to Interpublic; GMR, New Berlin, Wis., to Omnicom; Hal Riney & Partners, San Francisco, to Publicis, Paris; Jordan McGrath Case & Partners, New York, to Havas Advertising, Paris; Avrett, Free & Ginsberg, New York, to True North Communication's Bozell Worldwide, New York, and Partners & Shevack, New York, to Wolf Group, Toronto. CKS Group, Cupertino, Calif., and USWeb, Santa Clara, Calif., merged to form USWeb/CKS.

Additionally, Chicago-based UPSHOT went to HA-LO, Niles, Ill.; Margeotes/Fertitta & Partners, New York, and Colle & McVoy, Minneapolis, to MDC Communications, Toronto, and Arnold Communications, Boston, Blau Marketing Technologies, Deerfield, Ill., and Response Marketing Group, Richmond, Va., to Snyder Communications, Bethesda, Md.

The ad organizations that started from a traditional ad agency base have dictated market trends in the past, including a fanning out by traditional agencies into marketing services through acquisition.


That tide has turned. Marketing services organizations-HA-LO, MDC and Snyder among them-are beating the bushes for stray agencies and coming up with them. The strong independents, of course, have gotten caught between these two forces.

Snyder, in particular, has sallied forth with stock, enriched by a strong market, to build itself through acquisitions. Arnold gave it strong creative, Blau and RMG, direct marketing, and Partners BDDH, London, an international creative base.

Like Snyder, HA-LO bought its way onto the top 50 ad organization chart, buying among others, UPSHOT, a promotion marketer, and Lipson Alport Glass & Associates, a global design and branding consultancy.

Multidimensional HA-LO also is involved in telemarketing, sports and entertainment marketing, events and corporate meetings.

Spar Group, Tarrytown, N.Y., accessed the top 50 ad organizations by acquiring in January 1998, Spar/MCI, a Dallas-based sales promotion and direct-response shop.

MDC entered the ad organization domain based on growing returns from its Communications and Marketing Services division that houses new acquisitions: Colle & McVoy, Margeotes/Fertitta, Cybersight, Portland, Ore., and Source Marketing, Westport, Conn.

These U.S. buys account for 77% of the equity gross income in the division that includes Canadian agencies specializing in agrimarketing, healthcare, package design, corporate design and sales promotion.

Adding credence to MDC's example that U.S.-Canadian agency M&A market is a two-way street, smaller Canadian agency groups, Wolf Group and Envoy Communications Group, Toronto, gained stronger U.S. ties, the former by purchasing Partners & Shevack, and the latter through buying Hampel/Stefanides, New York.

Entry from new marketing services Goliaths brings the number of top 50 ad organizations dealing largely in below-the-line areas to nine.


A growing portion of U.S. media billings is being handled by the media service independents and by the unbundled agency media dependents who increasingly are becoming less dependent.

The top 50 media services companies in the U.S. generated about $39 billion in U.S. billings in 1998, up 19% from the prior year. The agency dependents accounted for about two-thirds of that. Their non-AOR billings volume now runs from 20% to 50% of their total billings, according to the survey.

The largest independent, Western International Media, New York, fell into the hands of Interpublic two years ago, and has since been renamed Western Initiative Media after its merger with existing IPG unit, Initiative Media, New York.

The buying convergence has hit PR as well; three of the nation's top 25 PR companies were acquired this past year by ad organizations, leaving only eight independent in that select group (see chart below).

There is a lot less volume left to buy in any specialty, leaving ad organizations to look at each other as possible targets. There's much evidence

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