US agencies post record decline in revenues

27 April 2010

NEW YORK: Advertising and marketing agencies in the US posted the most substantial decline in revenues for more than six decades over the course of last year, according to a new study.

Advertising Age has released its latest annual Agency Report, which is based on figures from 800 advertising, marketing, media, healthcare and PR agencies, as well as its own estimates.

The trade title suggested that total agency revenues contracted by 7.5% to $28.4bn (€21.3bn; £18.4bn) in the US in 2009, the biggest such decline since it started collating this kind of data in 1944.

Advertising agencies posted a decrease of 9.3% to $9.4bn, with media specialists down by 10.3% to $1.9bn, one of the largest drops year-on-year recorded by a single discipline.

"Design and creative agencies are better than media agencies at convincing brands that they have the brands' interests at heart," said Kester Fielding, Diageo's global demand procurement director.

"That may explain some of the pressure media agencies feel from clients, and some of the reason clients seem to view media as a commodity more than certain other crucial areas."

Agencies specialising in PR, CRM/direct marketing, healthcare and promotions also saw their revenues fall, leaving digital specialists as the only group to register an improvement, up by 0.5% to $3.9bn.

In reflection of the overall shift towards the web, Acxiom was named as the largest independent agency in the US, with domestic billings of $632m over 2009 as a whole.

The company provides a range of tools covering digital campaign planning, management and tracking, and boasts clients such as Procter & Gamble, AT&T and Macy's.

Other developments said to be re-shaping the trading climate included a rush by agencies to expand their remit, particularly in the social media sphere, often leading to conflict rather than an enhanced service.

"Agencies need to collaborate amongst themselves to create client-focused value versus playing out strife in public view of their clients," said Tony Palmer, cmo of Kimberly Clark.

"This, in my view, is killing agency credibility and value among marketers."

The role of procurement departments was another area which attracted considerable attention from clients and agencies in 2009, a move which has been encouraged by the downturn.

"From most companies marketing has been an area where the level of consistent process and rigor has not been as applied as other areas," Lisa Martin, chief procurement officer at Pfizer, said.

"It's about wanting to pay for fair value. I don't want to give the impression that I think the marketing sector is the Wild Wild West in terms of spending."

Craig Brown, vp, director of materials at Intel, added: "Sales and marketing like the opportunity to go out and do all sorts of advertising, but the robustness of their spending, often, wasn't managed that well.

"One of the things we had to do was say, we add value, so let us help you get more for your budget, not take it away."

In a reflection of a greater overseas interest in US agencies last year, Cheil Worldwide, the South Korean network, acquired a controlling share in Barbarian Group, a boutique shop in New York.

Dentsu also stepped up its presence in the US through its purchase of Innovation Interactive, which houses 360i, Search Ignite and Net Mining.

Data sourced from AdAge; additional content by Warc staff