Will WPP overtake Omnicom?

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WPP Group's purchase of Grey Global Group doesn't change the world ranking of agency holding companies for now. But setting aside all other factors, WPP conceivably could take the top spot from Omnicom Group if the dollar weakens.

Omnicom reported revenue last year of $8.6 billion. That was far ahead of No. 2 WPP, which posted revenue of $6.7 billion based on the average conversion rate for pounds into dollars used by the U.K. firm. Add in Grey's $1.3 billion in revenue, and WPP came in at $8 billion, well below Omnicom.

Ad Age's DataCenter, which produces this magazine's industry rankings, used a different conversion rate for British firms last year that put WPP revenue at $6.8 billion. Based on that measure, WPP and Grey combined for $8.1 billion last year, still below Omnicom.

But a weaker dollar has helped boost WPP's revenue translations; the dollar in February fell to its lowest value against the pound since 1992. WPP converts its profit-and-loss statements into dollars by calculating a pound on average was worth about $1.44 in 2001, $1.50 in 2002, $1.64 in 2003 and $1.82 in the first half of 2004.

In the first half of this year, Omnicom had revenue of $4.6 billion. WPP came in at $3.7 billion; but add in Grey, and WPP revenue was $4.4 billion.

If WPP's 2003 sales were converted at first-half 2004 rates, its revenue last year would have been $7.5 billion-and revenue including Grey would have been $8.8 billion, ahead of Omnicom.

That, to be sure, is theoretical. But it shows how currency fluctuations can change the rankings.

WPP's actual results, after it completes the buyout of Grey in December or January, will be more complicated. WPP must deal with account wins and losses, changes in client spending and currency fluctuations.

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