Omnicom Group forged ahead of WPP Group, while J. Walter Thompson Co. leaned at the tape to nip Leo Burnett Co., to lay their respective claims as the world's No. 1 ad organization and the leading U.S. agency brand by gross income.
One ad crown remained firmly fixed -- the world's ad capital -- casting once again its nimbus over New York. Tokyo needed both a yen on the rebound and a miracle economic boom from Japan Inc., but got neither.
The Ad Age Top 500 agencies in the U.S. proved gold is spun from image-making: Gross income from the Top 500 hit $13.07 billion, a heady 13.3% increase on billings of $103.75 billion; non-U.S. contributions from the Top 500 swept totals worldwide to $22.38 billion gross income, up 11.3%, on billings of $174.98 billion.
MORE FOREIGN SUPPORT
The non-U.S. component of the Top 500 came largely from 20 consolidated agencies, registering growth of 8.9% to $9.31 billion gross income. These 20 shops draw more revenue abroad than at home, where they brought in $7.1 billion.
The non-U.S. revenue flow was abetted by the addition of 200 more foreign shops from these 20; only the greenback's strength held back dollar gains.
Omnicom pushed its gross income total to $4.15 billion, up 10.8% pro forma, in dethroning WPP, which was up 6.3% to $3.65 billion. Omnicom's acquisition of GGT Group, the No. 15 ad organization a year ago, fueled its surge along with acquisitions of Integer Group (from 49% to 85%), Cline Davis Mann and Eagle River Interactive in the U.S. But the GGT purchase also brought ill tidings: Its lead U.S. shop, Wells BDDP, is shutting down in May from account and personnel defections.
Bearing down on WPP is No. 3 Interpublic Group of Cos., at $3.38 billion gross income, up 11.4%. A strong stock market is encouraging it to buy agencies with IPG shares. Already this year it has cut stock deals with Carmichael Lynch and Hill, Holliday, Connors, Cosmopulos.
Buyouts and splits, in fact, have shuffled rankings and reconstituted the world's Top 50 ad organization chart (Page S-10). True North Communications, No. 6, bought last year's No. 14 Bozell, Jacobs, Kenyon & Eckhardt and No. 30 Wilkens International while shedding its European network alliance with Publicis Communication, No. 13. TN in previous years was assigned 49% of that alliance.
Cordiant, No. 6 last year, fell under the cleaver, half its components ending up with No. 14 Cordiant Communications Group (Bates Worldwide) and the rest with No. 12 Saatchi & Saatchi.
STILL IN FLUX
IPG's purchase of Hill Holliday, No. 46 last year, followed an equity infusion into No. 29 Campbell Mithun Esty that brought the holding company's investment from 50% to 75%.
Keeping the Top 50 ad group in continuing flux is upstart Snyder Communications, which bought two Top 50 operation's this year -- Arnold Communications, No. 35, and Barry Blau & Partners, No. 37.
The Top 50 ad group has increasingly become two-tiered, the first 14 accounting for 85% of the 50's revenues, and then the rest.
NEW YORK UPS LEAD
New York built a $6.3 billion billings lead over Tokyo as its 152 local shops in the report accumulated billings of $37.7 billion, up 12.6%.
Tokyo drew $31.4 billion in billings, down 5%, a decline traced largely to a 10.2% drop in the yen against the dollar, the second consecutive annual drop of double-digit magnitude. The Tokyo count came from 52 agencies, which in the highly centralized ad community of Japan accounted for 95% of the nation's returns monitored in this report. New York shops account for $1 out of every $2.75 billed by agencies in the U.S.
Even if Tokyo were to spearhead an economic turnaround in Asia and unseat New York in the billings race this year, New York could claim moral victory since its figures do not included nearby ad markets of New Jersey and Connecticut. These two markets, well within the sphere of influence of Manhattan, ranked Nos. 9 and 10, respectively, among U.S. "cities."
Chicago agencies contributed $11.2 billion in billings, up 12.6%, to rank second in U.S. city volume (see chart on Page S-13), and No. 4 worldwide after New York, Tokyo and London ($15.3 billion).
Declines in several major currencies besides the yen had a deleterious affect on ad growth, particularly in France and Germany.
DOOR OPENED FOR JWT
Among U.S. agency brands -- a concept that strips agencies of their specialty units and independent subsidiaries -- Burnett's 2% slip in gross income to $386 million opened the door for JWT to grab the lead at $387.8 million, up 3.4%, though just barely ahead of Grey Advertising, at $387.7 million.
Burnett's decrease was tied to account losses: United Airlines, McDonald's (lead creative role in the U.S.) and Miller Lite (creative). By contrast, account wins at Grey, particularly at its New York office, helped pump up gross income 10.1% for the Grey brand. Burnett narrowly lost its hold on being the largest U.S. agency in a single city to Y&R Advertising, New York, recording $2.65 billion in billings to Y&R's $2.67 billion.
Burnett promptly reorganized in '97 to an agency-in-an-agency system to enhance services to clients.
Pacing the growth among the Top 500 U.S. agency brands were agencies with specialties in medical and marketing services, the latter an Ad Age construction of sales promotion and direct response (see chart on Page S-12).
Among the Top 500 agency brands, direct response agencies grew 19.5% in gross income and sales promotion 14.7% to outpace growth in more traditional advertising.
Marketing services agencies no longer are stepchildren but parents in their own right. Of the top 100 U.S. brands, 29 draw most of their returns from either direct marketing or sales promotion.
FASTER SPECIALTY GROWTH
Ad agencies in the top 100 grew 11.3% in gross income; the 45 specialty shops on that list advanced 17.8% collectively.
Medical agencies grew an even more dramatic 26.2% in U.S. gross income, to $625 million on billings of $4.49 billion for the Top 100. This is from 14 shops with medical advertising accounting for 50% or more of billings. Growth is being spurred in part by the accelerated volume of direct-to-consumer advertising of ethical drugs.
Two U.S. independent medical agencies are in the world's top 50 ad groups: No. 28 Nelson Communications and No. 47 Healthworld Corp., formerly Girgenti Hughes Butler & McDowell.
All major ad organizations have substantial medical ad contributions, usually at the subsidiary level.
Copyright 1998 by Crain Communications Inc. Quotation or reproduction in whole or in part without written permission is expressly prohibited