Creative Agencies Under Half as Profitable as Media Shops: Report

22 October 2001

The latest annual survey of UK agency profitability, by ad industry-oriented accountants Willott Kingston Smith, indicts the performance of creative shops – which on average achieve less than half the profit-per-head of their media planning/buying counterparts.

WKS examined the accounts filed at Companies House over the past twelve months by the nation’s leading agencies, media and creative. On a per-head basis, the latter slid by 10% to £5,986 while the former increased to £13,489.

Rhetorically enquires survey editor Bob Willott: “Are media buyers better fee negotiators than traditional agencies? Undoubtedly so. Are traditional agencies less ably managed than media buyers? Almost certainly.”

He, acknowledged, however, that most creative shops shoulder higher client servicing costs than their media brethren and need to operate from more prestigious addresses. But, queries Willott: does this justify current average gross income margins of around seven per cent against the 15% yardstick of former years?

Below even this puny average were Bates UK, D'Arcy, Leagas Delaney, Lowe Lintas and TBWA\London – all returning profit margins of less than 5%. From the sub-standard to the subterranean, Willott fingers Saatchi & Saatchi which posted a loss-per-head of over £25,000. How long, he asks, will Publicis tolerate such a headcount? Nor will Grey Advertising in London have pleased its masters with losses of £21,209 per head.

All is not gloom, however. Some creative shops buck the trend, WCRS topping the performance league with an operating profit per head of £29,957, followed by financial specialist Citigate Albert Frank.

News source: CampaignLive (UK)