Change afoot for ad industry

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For the first time, U.S. agencies collectively are generating less than half of revenue from advertising and media planning and buying. If you want proof of how the marketing-services space is growing, this is it.

Advertising Age's 62nd annual Agency Report, published last week, showed that advertising and media services last year accounted for 49.3% of U.S. agency revenue. A diverse range of marketing services-direct marketing, public relations, interactive, sales promotion, health care-now makes up the majority of revenue.

The Big 4 holding companies generated 46% of U.S. revenue and 54% of global sales from advertising and media, according to the Ad Age DataCenter.

There's no denying that marketers are turning more to marketing services to help connect with consumers. For holding companies, expansion in marketing services provides insulation from the short-term ups and downs and long-term challenges of the media market. Our AdWatch analysis on P. 8 shows how agencies and media no longer move in tandem: Since the advertising recovery began four years ago this month, two-thirds of the media companies on the AdMarket 50 have seen their stocks fall while four of the AdMarket's six agency members have seen stock gains.

To be sure, it's a more varied picture within the holding companies. No. 1 Omnicom Group is least reliant on advertising and media, which kick in just 25% of U.S. revenue and 44% of worldwide revenue. WPP Group, the second-largest holding company, gets just over half of U.S. revenue and slightly below half of worldwide revenue from its advertising and media work, by Ad Age's analysis.

Interpublic Group of Cos. gets 57% of U.S. and 62% of worldwide revenue from advertising and media. No. 4 Publicis Groupe is most reliant on ad and media services, which produce 72% of U.S. and 77% of worldwide revenue, according to Ad Age.

Growth in marketing services shows how the agency field can adapt to the changing needs of marketers. That's good news for an industry that often has been reluctant to accept big change.
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