AGENCY REPORT: U.S. AGENCY REVENUE JUMPED7.7% IN 2010Agencies Are Hiring and Agency Stocks Are Back to Pre-Recession Prices. But U.S. Ad Spending May Not Get Back to2007 Levels Until ... 2013Published: April 24, 2011The agency business has come back to life, with U.S. revenue jumping 7.7% as the domestic market led a2010 worldwide rebound in advertising and marketing services.The standout performer: digital marketing, which accounted for 28% of U.S. agency revenue.Related StoriesTweet This: Agencies Get 28% of Revenue From DigitalMad Ave Better Take Note -- You Are Digital, or You Are Very, Very UnimportantPlot line of this recovery: The recession officially ended in June 2009, U.S. measured-media spendingturned northward in first-quarter 2010 (according to WPPs Kantar Media), and U.S. advertising andmarketing-services firms have added 23,100 jobs since ad industry employment hit bottom in February2010 (according to Bureau of Labor Statistics data).The Big Four agency holding companies -- WPP, Omnicom Group, Publicis Groupe, Interpublic Group ofCos. -- in 2010 added 11,000 jobs (including acquisitions) after slashing 22,000 jobs in 2009.
2010 worldwide revenue for worlds 15 largest agency companies. Some figures are Ad Age estimates. Some U.S. figures reflect North America.See expanded information on these companies: AdAge.com/agencyfamilytrees2011.Source: Ad Age DataCenter.Shares in WPP, Omnicom and Interpublic in first-quarter 2011 reached their highest levels since pre-recession 2007, a sign of investors optimism about the sector. Publicis shares this year reached theirhighest point since 2000.U.S. 2010 revenue for marketing-communications agencies -- including advertising, marketing services,media, health care and public relations -- rose 7.7% to $30.4 billion, according to the Ad Age AgencyReport, which tracked the performance of more than 900 U.S. agencies. (Ad Age DataCenter adjustedagency revenue figures for acquisitions to show revenue growth on an apples-to-apples basis.)Every major agency discipline rebounded last year, with U.S. revenue growth in the range of 6% to 7% for
most disciplines (including advertising, promotion, health care and public relations). Revenue for digital-specialty agencies (essentially digital pure-play agencies) surged 16.3%.The U.S. was the worlds star performer in 2010 for advertising and marketing services, exceedingexpectations and outpacing growth in most other regions.To be sure, some of the U.S. advertising markets recovery reflected what WPP Chief Executive MartinSorrell has called a "dead cat bounce": The ad business fell so sharply that it wasnt surprising to seedecent percentage gains when the economy began to recover after the longest recession (December 2007through June 2009) since the Great Depression.1. Digital-specialty agencies.2. CRM/direct agencies had $4.75 billion in revenue including $2.00 billion from digital services.Numbers rounded. Source: Ad Age Agency Report 2011.Remember how bad things were: U.S. ad spending as a percent of gross domestic product in 2009slumped to its lowest level in decades, and U.S. agencies in 2009 saw the sharpest revenue drop (7.5%)since Ad Age began the Agency Report in 1945.Ad spending and employment remain well off their peak. Publicis ZenithOptimedia says U.S. ad/marketing-services spending wont break its 2007 record until 2013. U.S. ad and marketing-services firms employ76,500 fewer people today than at the industrys pre-recession, late-2007 peak. (See AdAge.com/adjobs.)But there is no denying the turnabout in ad spending last year as key advertising sectors includingautomotive rebounded from their Great Recession lows.Omnicom in 2010 reported 8.7% U.S. organic growth (revenue growth after factoring outacquisitions/divestitures and the impact of foreign exchange), beating its 6.4% worldwide organic growth.In 2010, Interpublic reported robust 10.1% organic revenue growth in the U.S., and Publicis posted 9.9%organic growth in North America, better in both cases than any other single region except Latin America.
Source: Ad Age Agency Reports.Revenue for the worlds 50 largest agency companies totaled $62.2 billion in 2010, up 9.4%. U.S. revenuefor those firms jumped 11.4%. (Ad Age DataCenter did not adjust agency company total-revenue figures,so the high growth rates last year in part reflect acquisitions.)The U.S. accounted for 42% of the top 50 agency firms worldwide revenue.With the economy and financial markets back on track, marketing-communications companies havereturned to merger-and-acquisition mode, doing a lot of buying -- and some selling.Omnicom is undertaking a global review of operations with the aim to reorganize or dispose of whatPresident-CEO John Wren has termed "non-core, low-growth, low-margin businesses ... generally insmaller markets." As of April 2011, Omnicom had disposed of units with combined annual revenue of about$120 million.OUT WITH THE OLD, IN WITH THE NEWAgency firms over the past year announced numerous fill-in acquisitions but no blockbusters. Among thedeals and agency realignments:WPP (No. 1) in April 2011 agreed to buy Commarco Holding (No. 37), a German agency group controlledsince 2003 by a private-equity firm. WPP completed 25 small and midsize acquisitions in 2010, includingCanadian agency Taxi; I-Behavior, a U.S. database marketing firm; Marketing Direct Inc., a U.S. marketing-services company; and U.S. digital agencies Blue State Digital and Digitaria. WPP also rolled up four WPPshops into Possible Worldwide, a global digital agency.Omnicom (No. 2) took majority ownership of Clemenger Group, an Australian agency company in whichOmnicoms BBDO Worldwide had been a minority investor since 1972. Omnicom also purchasedCommunispace, a digital market-research-services firm; bought The Modellers, a market-researchcompany; acquired The Core, a U.K. design and branding agency; bought Sales Power, an in-storepromotion company in China; and purchased a majority stake in Maslov PR, a PR agency in Russia.Omnicom disbanded pioneering digital agency Agency.com, splitting its offices among TBWA Worldwidenetwork agencies. Omnicom sold a majority stake in U.S. PR firm Brodeur Partners.Publicis (No. 3) made two deals in Brazil, buying digital shop AG2 and a 60% stake in agency firm TalentGroup. Publicis also acquired PR firms Eastwei Relations (now Eastwei MSL) in China and InteractiveCommunications Ltd. (now ICL MSL) in Taiwan. Publicis bought U.K. integrated/digital-marketing firmsAirlock, Chemistry Communications Group, Holler and Kitcatt Nohr. Publicis this month agreed to sell its56% stake in U.K. PR firm Freud Communications back to Chairman Matthew Freud.Interpublic (No. 4) bought U.K. shop Delaney Lund Knox Warren from agency firm Creston, making therenamed DLKW Lowe the U.K. hub of Lowe Worldwide.Interpublic increased its stake in Brooklyn-baseddigital agency Huge to 75% from 51%. The company did two deals in Brazil, acquiring digital shop Cubocc