Agencies react to Forrester report

By Michael Estrin

Agencies aren't staying ahead of the digital curve, and no agency is "getting it right," according to Forrester Research. Here's what the agencies have to say in response.

A new report (subscription required) from Forrester Research offers a dire assessment of the advertising industry, saying agencies are "in a world of hurt."

"I can't say there's an agency now that's the agency of the future," said Peter Kim, a Forrester Research analyst and co-author of the report.

But that charge -- one that has been made at countless industry gatherings -- doesn't carry much weight for Kendall Allen, managing director at Incognito Digital.

"There's definitely an evolution at play in the industry," Allen said. "We're a boutique, but we're a full-service digital boutique, which means that what we do is a lot more fluid than things once were for traditional shops."

That fluidity highlights the rough state of affairs outlined in the Forrester report, which points to changing user behavior as a key reason why many agencies are being left out of the conversation.

"I don't think agencies are going away," Kim said. "They're going to be the ones that help marketers to [interact with] communities of mutual interest."

But the recent Super Bowl experience may highlight just how far agencies need to go, according to Mark Silva, principal and founder of Real Branding.

"Those of us in digital have a long way to go to innovate," Silva says. "All you have to do is look at the Super Bowl to see what a missed opportunity there was. At best, we're doing a 'matching luggage' approach to integration."

According to Silva, the traditional agencies that are likely to get it right when it comes to digital are those that bring in outside specialists. But ultimately, Silva says there won't be a moment of "getting it right" until digital and traditional become equal partners.

For Silva, that makes Publicis an agency to watch because CEO Maurice Levy has made clear his intention to make the company's Digitas acquisition the centerpiece of its new model.

But changing a massive company like Publicis will take time. And restructuring the agency to focus on community-driven messaging, as the report suggests, may be a skill in short supply -- at least on the traditional side.

In the interim, smaller, more nimble shops focused solely on digital will fill the void, according to Questus partner Joseph Dumont.

"Brands need to understand that the only digital shops that they should talk to are the ones with a near-myopic focus on digital, because only these shops will have the right relationships with the gatekeepers to these communities, or with the communities themselves," Dumont said.

Forrester: Agencies Need to Reboot

Feb 8, 2008

-By Brian Morrissey

NEW YORK Forrester Research believes today's ad agencies are not well-structured to take on tomorrow's marketing challenges, needing to move from making messages to establishing community connections.

In a new report, the research firm paints a grim view of the current state of advertising, which it believes is in "a world of hurt" because consumers are tuning out the messages the industry is predicated on producing. Instead, it believes shops need to be organized around communities, not disciplines. What it is calling "the connected agency" would not only know certain communities but also be active members of these groups. Pushing messages would give way to encouraging voluntary engagement, and ongoing conversations would replace time-based campaigns.

"I can't say there's an agency now that's the agency of the future," said Peter Kim, a Forrester Research analyst and co-author of the report.

The research firm is certainly not the first to assert that agencies haven't kept up with changing consumer habits and technology. Accenture in November said the shift from analog to digital media is catching shops flat-footed.

In Forrester's view, a simple fact is driving the need for wrenching change in how advertising agencies are structured: consumers increasingly do not trust marketing messages. Instead, they rely on advice from friends and others in their various communities to make product decisions, while using tech tools to tune out ad messages they deem irrelevant. On top of that, consumer media choice has made the notion of a "captive audience," other than during some sporting events, a thing of the past.

"I don't think agencies are going away," Kim said. "They're going to be the ones that help marketers to communities of mutual interest."

He anticipates agencies made up of community members -- moms, for instance, helping Procter & Gamble play a constructive role in communities of other mothers.

Since marketers will continue to focus on results from their marketing, particularly as digital media makes it easier to track, advertising agencies would get geekier, Forrester believes.

Despite these changes, Forrester said creative and media agencies are still built around the mass model: to either produce messages or distribute them. Digital agencies have gone farther, in Forrester's estimation, in centering their businesses around "interaction," but it finds them lacking in the branding skills of traditional shops.

Clients are finding their agencies wanting. Forrester quotes one marketing exec calling agencies "a necessary evil," rather than a strategic partner to grow his business. Another complains, "Most senior ad execs appear more comfortable with conventional channels, which they claim are 'integrated' because they have tacked on a Web site."

"The first step [agencies] need to take is with digital integration," Kim said, adding that the organization of agencies around specific skill sets is the root of their problems.

Ad Houses Will Need to Be More Nimble

Clients Are Demanding
More and Better Use
Of Consumer Data, Web

By SUZANNE VRANICA
January 2, 2008; Page B3

The Web's emergence is forcing ad executives to succumb to marketers' demands that agencies reinvent how ads are created, and forgo their TV-centric approach. Clients are even calling for changes in the way ad firms are structured. But until now, few advertisers have spent more than 5% to 10% of their marketing budgets online. With the growth of online video and social networking, ad experts expect that percentage to jump significantly this year.

Gas Station TV's screens show programming from CBS and ESPN -- along with ads.

Softness in the economy also will likely drive more money to the Internet, which can be cheaper than other media and has a reach that is easier to measure, which is attractive to advertisers in slower times. Merrill Lynch predicts overall ad spending in the U.S. for 2008 will grow 2.3%, while the portion of that spending on the Web will increase 18%. Publicis Groupe's ZenithOptimedia says it expects the amount spent on Internet advertising to overtake spending on radio in 2008, and spending on magazines in 2010.

Amid this transformation of the ad industry, here are five trends to watch in 2008:

• New structure: The Web has fueled marketers' frustration with the lack of collaboration inside the ad holding companies that dominate the industry. Specifically, marketers want more cooperation between the executives who create ads for TV and newspapers and those who craft Web ads or perform less glamorous tasks such as researching consumer behavior.

Many advertisers complain that ad executives too often push agendas that will most help their own bottom lines and tend to favor certain types of media, such as TV. Advertisers want a "media-agnostic" approach, one that picks whatever medium is best for the ad campaign.

Some bigger marketers have taken matters into their own hands during the past year. Procter & Gamble, Dell and Johnson & Johnson each have tried -- working with ad holding companies -- to create new types of ad groups that blend different functions. In 2008, pressure from marketers on this issue is likely to intensify, forcing even more change in the way ad firms are structured.

• Screen wars: As advertisers find it harder to reach consumers in a fragmented media world, some are turning more often to the outdoors. Television screens are increasingly popping up in grocery and department-store aisles, elevators and even gas pumps -- all blaring clips of TV programs, accompanied by ads. Walt Disney's ESPN and CBS Corp. each have programming running on 20-inch liquid-crystal displays at pumps at gas stations around the country. Gas Station TV, which operates about 5,000 such screens in 300 cities, offers ads from marketers such as General Motors' Chevrolet and Sony. Last year, CBS inked a deal to have its programming also air in the waiting rooms of doctors' offices.

• House guest: Over the years, ad makers have tried various methods to learn about consumers, from focus groups to online polls. But many on Madison Avenue are skeptical of these methods, believing consumers don't always share their true feelings in those types of traditional settings. So a growing number of ad agencies are expected to try a different approach: having researchers spend long periods of time with consumers to find out more about how they live.

Some have already tried this. When devising a new ad for J.C. Penney last year, Saatchi & Saatchi sent staffers to hang out with more than 50 women for several days. They helped the women clean their houses, carpool, cook dinner and shop. Rather than pepper them with questions, the agency employees simply observed the women's behavior and emotions. Their research became the basis of a new ad campaign; the commercials have won praise from Madison Avenue's creative community.

"If you want to understand how a lion hunts, you don't go to the zoo -- you go to the jungle," said Sandy Thompson, global head of strategic planning for Saatchi, which is owned by Publicis Groupe.

• Green backlash: Corporate America latched onto environmental marketing last year, as big companies spent millions of ad dollars promoting their products and services as eco-friendly. Some people in the ad business are predicting a backlash this year from consumers who question whether companies are living up to their promises. "Marketers will be more intensely scrutinized for their green efforts -- those that don't hold up will be called out via blogs and elsewhere online, ultimately leading to consumer skepticism," said Greg Stern, chief executive of the ad firm Butler, Shine, Stern & Partners.

• The antisocial movement: Privacy issues, combined with the fact that consumers have only so much free time, could damp the boom in social networking on the Web. "Nobody has 5,000 real friends," says Tim Hanlon, senior vice president of Denuo Group, a media and advertising consulting firm owned by Publicis. "At the end of the day it just becomes one big cauldron of noise." For marketers, he says, that will mean the sites will be much more effective as a consumer-research tool than as a venue to peddle products.

Write to Suzanne Vranica at

Shops Stand to Lose in Digital Revolution

November 14, 2007
By Brian Morrissey

Agencies have the most to lose in the new digital order, even more than broadcasters, per industry leaders surveyed by Accenture.

NEW YORK Changing consumer habits, driven by the shift from analog to digital media, are revolutionizing the ad industry. But that could spell bad news for agencies, according to a new study by Accenture.

According to 70 industry leaders surveyed by Accenture, agencies have the most to lose in the new order, even more than broadcasters. When asked who would fare worst in the transition to digital advertising, 43 percent said agencies, compared to 33 percent who answered broadcasters. Cable operators were third with 10 percent. No respondents chose search companies or digital ad specialists.

The challenge agencies face stems from the rise of performance-based advertising and the technology tools needed to execute highly targeted campaigns, rather than mass-media pushes fueled by a singular "big idea," according to Charlie Symmons, senior manager in Accenture's media and entertainment practice.

"It used to be content was king; now it's very much context is king," he said.

For that reason, Accenture sees a threat to agencies from technology companies, which can provide the tools that allow clients to better know their customers. This could displace agencies' value to their clients, the report warns.

Accenture interviewed 70 advertising "decision makers" around the world from February through April this year. Respondents included executives from agencies, media companies and technology providers.

The consulting firm found 50 percent of respondents believe digital media would be the primary form of content and advertising delivery in the next five years. Over 80 percent think it will happen within a decade.

With that shift to digital, the survey found that advertising is undergoing a fundamental shift to become more accountable, Nearly four-fifths of respondents expect advertising will become more performance based, while 87 percent believe analytics will play a critical role.

Yet traditional advertisers are pessimistic they have a good grasp of the tools needed to operate in this landscape. Over 70 percent said the industry is not "technologically prepared for the resulting changes in performance measurement."

"People felt the complexity had grown over the last few years," Symmons said. "It's harder to target and track and develop campaigns."

While ad agencies were not expected to gain from these shifts, 46 percent thought search companies and 19 percent said digital ad specialists had the most to gain.

Gillette Taps 9,000 Creatives Online

Flat Earth: Online Marketplace OpenAd Has the Potential to Disrupt the Global Ad-Agency Model

By Matthew Creamer

Published: September 17, 2007

This summer, executives from Gillette's Puerto Rican division heard pitches from creatives in 21 countries for a campaign to persuade the island's men to trade in their disposable razors for the Fusion shaver. Among the winners were a Slovenian student, a British photographer and an American creative director, all of whom based their submissions on an initial idea from a small agency based in India.

OpenAd.net is an online marketplace where advertisers and agencies have access to a global pool of creatives.

The pitch, despite its strong international flavor, didn't involve any jet-setting or big-agency boondoggling in far-flung lands. It all unfolded over a website called OpenAd.net, a Slovenian-based online marketplace where ad and design ideas from about 9,000 creatives worldwide are bought and sold. Since it opened for business past year, OpenAd has served European clients, but a trans-Atlantic expansion is under way. The service is quietly being tested by major U.S. marketers such as Gillette parent Procter & Gamble and plans to establish a physical presence here in coming months.

Open market
If it's successful in penetrating the biggest ad market, OpenAd will be yet another potential disruption to the global ad-agency model, and one a long time coming. A dozen years after the internet gained mass appeal, OpenAd represents the ad industry finally taking advantage of flat-earth economics and communications realities to solve one of the marketing business' biggest challenges: finding ideas. Ad agencies once had a lock on that job, but a more complex media world has challenged traditional assumptions, meaning that all manner of interlopers, from media sellers to regular consumers, are now providing grist for the idea mill.

This kind of online marketplace isn't going to replace Madison Avenue's giants. It simply doesn't offer the strategic guidance, account management or executional capabilities agencies have, a fact that one of its founders, Katarina Skoberne, readily owns up to. "In an ideal world," she said, "agencies will use OpenAd on behalf of clients."

Just how well reality measures up to the ideal should reveal itself in the next few months, as OpenAd establishes a beachhead here with an office in New York and, further down the line, one on the West Coast and a third in an undisclosed location.

Russel Wohlwerth, principal at the consultancy Ark Advisors, said the diversity OpenAd affords could be a boon to marketers trying to get close to pop culture. "Agencies can be way too ivory tower," he said. "This is a chance to get close, tap into an incredibly diverse group of people, not just ethnically and racially but in terms of their backgrounds."

Advertisers ready to bite
Agencies are, for many good reasons, protective of their turf as brand stewards and often have trouble collaborating. Advertisers might be more receptive. Ms. Skoberne said the company has already presented twice in front of Association of National Advertisers groups and that several marketers, including automakers, retailers, and food and beverage companies, are kicking its tires.

What they'll find is a massive trove of galleries maintained by freelancers and agencies who register with the site. The service is free to the creatives, but marketers pay to join, and pricing on the ideas, which are vetted by an OpenAd team, is variable. Gillette, for instance, paid the winners of its pitch $1,000 each.

But when marketers don't specify price, the creatives can suggest their own terms. Arriving at price range initially was difficult since ad agencies are usually paid for their man-hours, Ms. Skoberne said. OpenAd, however, has worked to develop pricing guidelines based on the size and power of the market the work will run in, from between a few hundred dollars to more than $100,000.

Katarina Skoberne, one of OpenAd's founders, hopes agencies will use it on behalf of clients.

Marketers can purchase ideas or submit briefs of their own and choose from ideas that it inspires, which is what Gillette did to win converts among its Latin American audiences. The razor maker opened a pitch that was eventually won by Live 1, an Indian agency that came up with the idea "She knows the difference." Gillette then went back to the OpenAd well to get guidance on how the idea could be fleshed out in four different media: TV, print, promotions and interactions.

An unconfirmed report in India's Business Today said the concept had also been licensed for the U.S. market. A P&G spokeswoman didn't respond to an e-mail request for comment, and Ms. Skoberne declined to comment on the Gillette pitch.

Outsourcing?
For creatives in many markets, the upper end of the OpenAd fee range would be an incredible windfall, and a labor pool so intensely international begs a question: Do marketers, especially bottom-line-driven organizations, use OpenAd to outsource labor to cheaper workforces, such as India or Eastern Europe, instead of for its polyglot qualities?

Ms. Skoberne said the company has been approached by procurement types but defended that breed of executives, combating stereotypes that they're mere cost-cutters and are really "looking for ways to add value." Mainly, she said, she's dealing with marketing departments eager to be free of geographical constraints. About 20% of OpenAd's creatives are from Latin America, 15% from Asia, 32% from continental Europe, 20% from the U.K., and 6% from the U.S. and Canada.

The other potential entanglement is quarrels over intellectual property. A formal dispute over rights has yet to arise, but Ms. Skoberne said the company tracks the work on the site closely to make sure no one's ripped off. She said there's also a fair amount of teaching going on as well.

"It's such an unpopular subject," she said with a laugh. "But I think now we probably have the most litigious bunch of creatives you've ever seen."

Ad Firms Hurting the Cause?

Tech-Buying Binge Is Raising Prices -- And Red Flags

By AARON O. PATRICK
September 6, 2007; Page C6

Advertising agencies are buying up technology companies, and tech companies, in turn, are snapping up ad firms. The result: Price tags are rising.

Investors should be wary.

A recent spate of acquisitions in the ad industry has driven up targets' sale prices relative to their profits to levels reminiscent of the 1990s tech-stock boom. Analysts say more acquisitions could be on the way.

That is raising red flags. Prices are so high now that the ad industry may struggle to make its tech investments profitable, some analysts say.

In July, WPP Group PLC bought Internet ad-broker 24/7 Real Media Inc. for $649 million, 44 times earnings before interest, taxes, depreciation and amortization, or Ebitda. In January, Publicis Group SA paid $1.3 billion for Digitas Inc., an Internet marketing agency. The price was 29 times Ebitda, which is a pretax-income figure that some companies use to indicate their ability to service their debt.

A survey two years ago by AdMedia Partners Inc., a boutique investment bank in New York, found that Internet-marketing firms were typically selling for just five to seven times Ebitda.

Driving the deals is the boom in Internet advertising. Global spending on Internet ads rose 92% from 2004 to 2006, when it hit $32 billion, according to PriceWaterhouseCoopers.

Much of that money is bypassing the established global ad networks and instead going to tech companies. By selling millions of short online ads, Google Inc. will this year generate more revenue than WPP or Omnicom Group Inc., the biggest ad groups, according to analyst forecasts. Google and Microsoft Corp. have spent a combined $9 billion buying ad companies this year. Online ad broker BlueLithium Inc., of San Jose, Calif., this week agreed to be acquired by Yahoo Inc. for about $300 million.

Unwilling to cede a lucrative new market, traditional ad companies are fighting back. Over the past year, WPP has bought or invested in 17 tech companies, in addition to 24/7 Real Media.

"These assets aren't cheap, to put it mildly," WPP Chief Executive Officer Martin Sorrell said in announcing the 24/7 Real Media deal. "But I think in the long term they will prove to be the right thing to do."

Some investors agree. "In the short term it's very, very expensive, but it is important to be in these sectors because they have growth," says Bruno Vacossin, a portfolio manager at Palatine Asset Management in Paris, which has about €1 billion ($1.36 billion) in funds under management and owns 140,000 WPP shares, according to regulatory filings.

That said, Robert Willott, a former accounting professor who publishes investment reports on the ad industry, estimates that 24/7 Real Media will need to increase revenue at 50% a year for the foreseeable future to give WPP a 10% return after paying tax.

Revenue at 24/7 increased 43% last year, but "even in the digital market such a long-term growth rate sounds too rich to be true," Mr. Willott says.

WPP executives say 24/7 Real Media should continue to expand quickly by selling services to WPP's existing clients. They also say Internet companies have higher profit margins than traditional advertising agencies, making them more valuable.

Some forecasters see the growth rates in Internet advertising starting to slow. Publicis's Zenith Optimedia ad-broking unit predicts the global Internet ad market will increase 18.8% next year compared with 22.2% this year. Simon Wallis of London broker Collins Stewart Ltd. downgraded WPP to a "hold" from a "buy" after Sir Martin gave a presentation at Collins Stewart's offices in May. Mr. Wallis wrote in a report that he is concerned "there are going to be further expensive strategic acquisitions" by WPP.

One online ad company seen as a takeover candidate is Stockholm-based TradeDoubler AB, which turned down a $900 million offer from Time Warner Inc. early this year.

So far, WPP's tech investments aren't big enough to be a drag on the company if they go bad, analysts say. A spurt of advertising spending expected next year on the Beijing Olympics and the U.S. presidential election should benefit WPP and the other ad groups, they say.

According to financial-data compiler FactSet Research Systems Inc., 14 analysts currently have a "buy" or "overweight" recommendation on WPP and one has a "neutral" call. There are no "sell" recommendations.

WPP's American depositary shares are up nearly 4% this year to $70.43 on the Nasdaq Stock Market (and up 0.5% in London). On the New York Stock Exchange, Publicis is down 0.1% to $42.19 (and down 3.7% in Paris).

Publicis, a smaller company, has spent more on tech firms relative to its size. In addition to the Digitas deal, in June it agreed to buy French Web agency Business Interactif for €137 million, 43 times the firm's Ebitda.

Two big ad companies are sitting out the buying spree. Omnicom hasn't made any big digital acquisitions recently. And Fernando Rodés Vilà, chief executive of Havas SA, says the Paris-based advertising company isn't looking to make any large investments in ad-technology companies, preferring to expand its own Euro 4D and Media Contacts digital units.

"It's hard to see how valuations of these companies can be justified by the profit they are making," Mr. Rodés says.

Creating Great Product and Company Names

from the agency site www.igorinternational.com

Successful product and company names may appear to have been created by magic, but it is possible to develop names that are dynamic, effective and fully leverage a brand's potential if you have the right process in place. A process that is clear, insightful, logical and focused will lead to a name and tagline that are powerful components of your brand strategy, and pave the way for buy-in throughout your organization.

Before you begin, it is essential to decide what you want your new product or company name to do for you. To make that decision, you need to understand the possibilities. A name can:

• achieve separation from your competitors
• demonstrate to the world that you are different
• reinforce a unique positioning platform
• create positive and lasting engagement with your audience
• be unforgettable
• propel itself through the world on its own, becoming a no-cost, self-sustaining PR vehicle
• provide a deep well of marketing and advertising images
• be the genesis of a brand that rises above the goods and services you provide
• completely dominate a category
  

Every naming project is unique and our process is customized for each of them. We make sure that all aspects of a work plan are designed to complement your naming project, corporate culture, approval process and timeframe. Consequently, our process is flexible enough to be tailored to the specific needs of your company.

Whether we are developing product or company names, the process steps outlined below are what gives us the ability to create powerful and lasting brands:

• Competitive Analysis – Our process begins with a thorough competitive analysis, in which we quantify the tone and strength of competitive company names or product names. Creating such a document helps your naming team decide where they need to go with the positioning, branding and naming of your company or product.
• Positioning – The next step is to help you refine and define your brand positioning. The more specific and nuanced your positioning is, the more effective the name will be. All great product and company names work in concert with the positioning of the businesses they speak for.
• Name/brand Development – Product or company name development begins by applying the positioning strategy to figure out what you want your new name to do for your marketing, branding and advertising efforts.
• Trademark – We prescreen names under development through our trademark attorney to determine the likelihood that your company will be able to procure the names. We do this in order to feel confident that the names your attorney submits for final trademark screening and application have been deemed by an attorney as likely to pass muster for registration. If not, valuable time is lost.
• Creative / Testing – A standard part of our naming process is the production of creative support materials to flesh-out potential names, and market research testing when appropriate. These may include stories, ad treatments, or graphic layouts featuring leading name candidates.
• Name and Tagline – Final names and taglines, along with a well-defined positioning strategy, are the outcome of our process.

To print out our entire naming process and more, download our detailed PDF Naming Guide.

Ad Agency AKQA Poised To Buy-out Ad Tech Firm

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Online ad agencies have generally done very well in this environment. SF-based AKQA is no exception and it plans to remain independent while its rivals have been bought out by ad industry giants. It has won its freedom thanks to General Atlantic Partners which bought a stake in AKQA for a reported $150M-$250M in March.
The company has been on a PR tour, to help raise its visibility and is making a strong impression with its numbers.
AKQA says it expects revenue in 2007 to go to $100M from $70 last year. And it is has been profitable for the past 5 years. CEO Tom Bedecarre says he expects to go public in 2008.

Through buyout or direct hire, the company plans to grow its headcount of 550 people by 30% this year. To help get there, Bedecarre told SF Business Times to that we can expect an announcement shortly where AKQA has bought a Bay Area firm. The company recently hired a former Morgan Stanley investment banker, David Atkinson, to run M&A. The firm says it needs to buy or acquire technology to deliver and track ads on cell phones, games, digital signage and GPS units on buses.

iCrossing Doubles Size With Proxicom Buy

iCrossing Doubles Size With Proxicom Buy
by Gavin O'Malley, Tuesday, Jul 31, 2007 6:00 AM ET
MORE THAN DOUBLING IN SIZE overnight, the search-centric iCrossing has acquired Web development agency Proxicom for an undisclosed sum. Growing from 200 to 550 employees, the merger is in line with iCrossing's grand designs to become a top full-service digital agency.
"If you're going to be optimizing pages, you might as well build them," reasoned iCrossing President Don Scales. The two companies had been in talks for about three months prior to Monday's announcement, he said.
Making the deal possible, iCrossing just received $62 million in funding from Goldman, Sachs and existing investors Oak Investment Partners, RRE Ventures and StarVest Partners L.P.
Proxicom gives iCrossing access to an entirely new roster of clients--as there is virtually no overlap between the two companies, according to Scales. Of particular note is Proxicom's automotive vertical, which includes Chevron and Toyota. Dupont is another key Proxicom client.
The acquisition marks one of several recent growth initiatives since the addition of Scales, former CEO of Omnicom's Agency.com.

Aegis, WPP Dominate Digital Agency Ranks, Account For Half The Industry

by Gavin O'Malley and Les Luchter, Friday, Jun 22, 2007 6:00 AM ET

WITH A TEAM OF 1,400 people worldwide, London-based Aegis Group--and its Isobar network--is the ad industry's biggest interactive media services organization, according to estimates released Thursday by Paris-based agency billings researcher RECMA. Based on data published in RECMA's first-ever digital agency report, Aegis accounts for 28% of all the digital media personnel across the six holding companies (see below) and eight nations (RECMA measured eight countries for the worldwide figures--the U.S., U.K., France, Germany, Spain, Italy, Australia and India.) surveyed. WPP's GroupM Interaction is the second-largest digital network holding company--with 1,224 digital staffers globally, or 25% of the total, RECMA said. In the U.S., however, GroupM has a larger presence, with 619 staffers versus Isobar's 595, followed by Publicis (453), Interpublic (365), Omnicom (320) and Havas (79). Aegis' digital edge over WPP is all the more impressive when considering the two agencies' total staffs: 2,175 worldwide for Aegis compared to 5,977 for WPP. Rounding out the top six holding companies are: Publicis Groupe Media with 897 digital staffers (18% of the total)--453 of whom reside in the states; Omnicom Media Group with 590 (12%) worldwide and 320 state-side; Interpublic, with 542 (11%) worldwide and 365 state-side; and Havas Media, with 344 (7%) worldwide, and 79 in the U.S. In terms of individual digital media networks, Aegis' Isobar is again tops worldwide (903 staffers), followed by Publicis' Zenith Optimedia (581), Aegis' Carat (497), WPP's MediaCom (421) and WPP's MEC Interaction (406). In the U.S., Carat is the top digital employer, with 304 staffers, followed by Isobar and Zenith Optimedia tied at 291, and then Interpublic's Initiative at 220. (See complete chart of 15 agencies below.) Overall, RECMA reported that 4,997 people work for digital agencies around the world, with about half of them--2,431, or 49%--in the U.S. RECMA--the "Research Company evaluating the Media Agency industry"--is a Paris-based independent research company established in 1991 with offices in France, the U.S., and Hong Kong. In January 2006, it met with the top managers of global interactive media agency networks. Information collected during these meetings and interviews formed the core of its new "Profiles of the Major Interactive MEDIA Agencies." In December 2006 and January 2007, RECMA met managers of several U.S. global media agency networks and presented a preliminary report. Interactive Media Agencies Ranked By Size Worldwide U.S. Ranked By Parent Company Aegis (Isobar) 1,400 595 WPP (GroupM Interaction) 1,224 619 Publicis Groupe Media 897 453 Omnicom Media Group 590 320 Interpublic (Media Units) 542 365 Havas Media 344 79 Ranked By Media Network Isobar 903 291 Zenith Optimedia 581 291 Carat 497 304 MediaCom 421 200 MEC Interaction 406 200 Media Contacts (MPG, Havas) 344 79 OMD Digital 323 150 Starcom 316 162 Initiative 273 220 MindShare Interaction 262 124 Universal McCann 200 90 Omnicom (OMG Direct, etc.) 185 135 GroupM (Outrider, M80, etc.) 135 95 PHD 82 35 Interpublic (Reprise, IDP, etc.) 69 55 *Total 4,997 2,431

U.S. Agency Revenue Jumps 8.8% to $28.2 Billion

Sea Change: Internet Drives Marketing-Services Gains; JWT Top U.S. Agency Brand; Dentsu Leads World Chart

Published: April 30, 2007

CHICAGO (AdAge.com) -- Revenue for U.S. marketing-communications agencies jumped 8.8% to $28.2 billion in 2006, the strongest growth since ad spending began to rebound from recession in 2002.

The 107-page Agency Report Profile Yearbook and the Agency Family Tree poster can be downloaded below. Also below, find a link to the Agency Report index page where links to all related data and supplemental resources can be found.
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The hot growth came from marketing services, fueled by digital. Traditional ad agencies, grappling with a shift from old media, saw tepid growth.

Agency revenue from marketing services rocketed 13.1% to $15.1 billion, the strongest growth since the recession, according to the 63rd annual Advertising Age Agency Report. Agency revenue from traditional advertising and media rose just 4.2% to $13.1 billion, the weakest growth since 2003, the first full year of the advertising recovery.

In 2006, U.S. agencies collectively generated less than half of their revenue -- 46.4% -- from traditional advertising and media planning/buying, with the rest coming from a range of marketing services including digital/interactive, direct marketing, sales promotion, health care and PR. Marketing services grabbed 53.6% of U.S. marketing-communications agency revenue. That was up from 51.5% in 2005, the first year that marketing services topped advertising/media.

Impact of interactive
What's behind the change? No surprise: the internet. U.S. interactive-agency revenue rocketed 23.1%, driving the increase in marketing services. But digital is more than interactive shops; it's an integral part of marketing services from direct to promotion. "Interactive is huge," says Chris Weil, chairman-CEO of Momentum Worldwide, a promotions agency owned by Interpublic Group of Cos. "If anybody in marketing is not a big part of interactive, they won't be around much longer."

Traditional advertising certainly is under pressure. The 4.2% U.S. revenue growth for traditional advertising/media agencies roughly tracks with ad spending: U.S. measured spending on traditional media last year grew a soft 3.2%, according to TNS Media Intelligence data.

Among key points from the Agency Report:
Dentsu ranked as world's largest consolidated agency network, with 2006 revenue of nearly $2.5 billion. The consolidated-network ranking is new this year, and adds up the revenue of ad agencies and allied marketing-services ventures, excluding media, health care, market research and public relations.
WPP Group's JWT was the No. 1 U.S. agency with estimated revenue of $445 million from traditional advertising, followed closely by BBDO and McCann. The trio has always been near the top. In the first Agency Report, in 1945, the three shops ranked Nos. 1, 6 and 4. JWT's estimated 1944 U.S. revenue: $9 million, or $101 million after adjusting for inflation.
Omnicom's Rapp Collins Worldwide ranks as the top marketing-services agency.
AQuantive's Avenue A/Razorfish was the No. 1 interactive agency. AQuantive ranked as the ninth-largest marketing organization, becoming the first interactive operation to crack the top 10.
Omnicom, WPP, Interpublic and Publicis accounted for 52.6% of revenue for U.S. marketing-communications services. The Big Four's combined U.S. revenue was split evenly between advertising/media (50.8%) and marketing services (49.2%).
Reliance on traditional advertising varies widely by company. Omnicom last year generated just 42.8% of worldwide revenue from traditional advertising/media, lowest among the top four; Publicis drew 70% of revenue from traditional advertising/media, highest among the four.
The $1.3 billion purchase of Digitas by Publicis was the largest acquisition over the past year by a marketing organization, but it was far from the only digital deal. Since January 2006, the Big Four have bought, or made investments in, more than 20 interactive ventures.
The Big Four last year kept the same worldwide-revenue rankings in place since 2003: Omnicom, WPP, Interpublic and Publicis.

Interpublic was No. 1 as recently as 2000. It fell to second, behind Omnicom, in 2001, and third, behind WPP, in 2003. Interpublic could slump to No. 4 in 2007; Publicis, with its faster organic growth and the Digitas acquisition, is coming up fast. Interpublic's position will depend in part on how much progress it makes this year in its stated goal to achieve organic revenue growth "comparable to industry peers ... by 2008."

Hong Kong Media Buying Service Opens New York Branch

March 8th 2007 - Adotas

China New Media Advertising, an online and print media advertising buying service based out of Hong Kong, announced the opening of its New York office today.

A limited liability company, CNMA is owned by IMS Companies.

With access to 150 websites and 75 print business publications, CNMA will provide access to its Mainland Chinese Network. Media buying services and business information to global customers and prospects are also included in CNMA’s offerings along with Chinese language translation.

“China’s population of Internet users has risen by 30 percent over the past year to 132 million, and these are just a couple of fantastic stats about this fast-growing marketplace. From day one, our network of Chinese websites can deliver up to 200 million banner impressions per day, reaching 19 million visitors to this unique website network daily,” stated CNMA president Hector Botero.

Within the 75 trade publications, B2B advertisers are allowed to purchase an entire network or select business newspapers by industry.

Botero added, “Advertisers need expert help to access China and they also need help to efficiently reach their target market. It’s virtually impossible to plan, execute and measure on-line and print advertising campaigns without a local presence and inside China knowledge.”

Maurice Johnson, who holds over 20 years of experience in international advertising, will head the New York office. “Our goal at CNMA is to provide — in China — the resources, knowledge and service that international advertiser’s need,” he said.

Measuring the Invisible

FEBRUARY 28, 2007

Q: What is the ROI of advertising?
A: Stop advertising and find out.

Marketers know that they have to advertise, but many are dissatisfied with advertising's return on investment (ROI) — even though most of them do not measure it anyway, according to a new study by Forrester Research.

Marketers were asked how likely they were to recommend a particular product or service. The aggregate rating for ad agencies was 21%, meaning that very few clients would recommend their agencies' services to others.

The flip side is that 76% of marketers had no way to determine their ROI from their lead agencies, and 69% said ROI is too difficult to measure.

"There's always an undercurrent of discontent with agencies," said Peter Kim of Forrester. "They're dissatisfied, yet on what basis? It's not because the agency didn't help them drive sales or meet some other business outcome. It's a vague disenchantment, or disappointment; it's a feeling that there isn't data to back up."

Marketers aren't the only ones pining for more data. A new joint survey by NSON Opinion Research and the Audit Bureau of Circulations of online ad planners and buyers revealed a strong desire for independent verification of new media ad metrics.

Three-fourths of North American ad professionals said that they would be more likely to advertise on Web sites if the results were independently verified by a third party.

Less than half of advertisers and agency professionals said that they trusted online publisher metrics.

And more than two-thirds of respondents said that they preferred advertising on audited Web sites when possible.

There is good news for agencies. For one, they are still responsible for nearly 60% of ad spending. Plus, firms are always creating more data to meet demand. In traditional media, Nielsen//NetRatings recently started tracking TV viewing by college students. On the new media side, Podtrac just released a media planner for would-be podcast advertisers.

Forrester: Clients Believe Shops 'Unprepared'

February 27, 2007
By Kathleen Sampey

NEW YORK Clients view traditional ad agencies as being particularly unprepared to understand the changing ways consumers use media and technology, according to a new survey conducted by Forrester Research.

Still, of the agency executives surveyed, 93 percent of them thought their efforts "drive their clients' marketing success," while just 63 percent of the marketing executives contacted agreed, the survey revealed.

The company surveyed 141 executives on the agency and client sides to gauge perceptions on various aspects of the relationship.

The findings revealed divergent points of view between the two parties, with agencies overestimating their value in helping clients achieve their business goals.

The gap in perception was most pronounced when each side was asked how equipped the ad agencies were in dealing with changes in Internet advertising and consumer behavior. About 95 percent of agencies thought that they were well positioned to adapt to changes in Internet advertising while only 45 percent of clients agreed.

Less than 60 percent of clients thought agencies could help them deal with changes in consumer behavior while 80 percent of agencies thought they were well prepared to do so.

The report also cited a role reversal of sorts between so-called "traditional" agencies and digital shops. The latter saw a spike in demand during the dot-com bubble from 1999-2001 as clients scrambled to develop Web sites for their brands.

They have since seen resurgence as clients are shifting more dollars towards digital shops, with some, such as Agency.com and AKQA, doing TV ads for Ikea and Yell.com, respectively.

Interactive and digital advertising was the area for which most clients sought specialty agencies, the report said. Social media and ethnic marketing were the areas in which outside specialists were least sought by clients.

Of the survey participants, only 15 percent said their agency compensation was tied to business results. When those who did not have such an arrangement were asked why, 43 percent said they never considered it while 36 percent reported it would be too difficult to truly measure the results.

The results were summarized in a report titled, "Help Wanted: 21st Century Agency."

Measuring the Invisible

FEBRUARY 28, 2007
Q: What is the ROI of advertising?

A: Stop advertising and find out.

Marketers know that they have to advertise, but many are dissatisfied with advertising's return on investment (ROI) — even though most of them do not measure it anyway, according to a new study by Forrester Research.

Marketers were asked how likely they were to recommend a particular product or service. The aggregate rating for ad agencies was 21%, meaning that very few clients would recommend their agencies' services to others.

The flip side is that 76% of marketers had no way to determine their ROI from their lead agencies, and 69% said ROI is too difficult to measure.

"There's always an undercurrent of discontent with agencies," said Peter Kim of Forrester. "They're dissatisfied, yet on what basis? It's not because the agency didn't help them drive sales or meet some other business outcome. It's a vague disenchantment, or disappointment; it's a feeling that there isn't data to back up."

Marketers aren't the only ones pining for more data. A new joint survey by NSON Opinion Research and the Audit Bureau of Circulations of online ad planners and buyers revealed a strong desire for independent verification of new media ad metrics.

Three-fourths of North American ad professionals said that they would be more likely to advertise on Web sites if the results were independently verified by a third party.

Less than half of advertisers and agency professionals said that they trusted online publisher metrics.

And more than two-thirds of respondents said that they preferred advertising on audited Web sites when possible.

There is good news for agencies. For one, they are still responsible for nearly 60% of ad spending. Plus, firms are always creating more data to meet demand. In traditional media, Nielsen//NetRatings recently started tracking TV viewing by college students. On the new media side, Podtrac just released a media planner for would-be podcast advertisers.