AGENCY REPORT: REVENUE SLUMPS 7.5%, JOBS AT 16-YEAR LOW (WWW.ADAGE.COM)

Despite Tumbling Agency Revenue in 2009, There Are Early Indications of Growth and Renewal...

CHICAGO (AdAge.com) -- First the good news: The agency business is starting to see at least tepid growth. Analysts expect 2010 combined worldwide revenue for the top four agency companies to rise about 2% on an organic basis, factoring out currency shifts and acquisitions.

Now the bad news: Revenue for U.S. marketing-communications agencies -- advertising, marketing services, media, health care, public relations -- tumbled 7.5% to $28.4 billion in 2009, according to the Ad Age Agency Report.

That's the sharpest revenue decline in the 66 years Ad Age has produced the Agency Report.

The revenue decrease essentially matched a 7.8% drop in 2009 employment at U.S. advertising/marketing-services firms.

U.S. digital agencies eked out a 0.5% revenue gain in 2009, according to the Agency Report. Health-care agency revenue slipped 1.6%. Fortunes sank in every other agency sector.

Revenue down

Revenue for traditional ad agencies dropped 9.3%, mirroring an 8.9% decline last year in U.S. ad agency employment. Media agency revenue plunged 10.3% in a year when U.S. measured media spending (as tracked by WPP's Kantar Media) fell 12.3%.

Revenue for customer-relationship-management/direct-marketing agencies declined 7.4%, outperforming ad agencies as marketers put more emphasis on data-driven marketing.

Promotion-agency revenue tumbled 13.1%, depressed by lower spending on event marketing.

The Agency Report ranks 883 U.S. agencies, down from 912 agencies on last year's report. The drop-off partly reflects casualties of the downturn. Among agencies to close: Cliff Freeman & Partners, a former high-flying creative shop that shut its doors last October.

This is an industry in constant renewal. With economic prospects brightening, some high-profile agency execs -- including JWT's Ty Montague and Rosemarie Ryan; Saatchi & Saatchi's Gerry Graf; and Vigilante's Larry Woodard -- decamped this year to launch new ventures.

Among highlights from the report:

■ For the first time in the history of the Agency Report, the ranking's biggest agency is far removed from the clique and clack of Madison Avenue. The largest U.S. agency is Arkansas-based Acxiom, a major player in data-centric direct marketing and customer-relationship management. Acxiom Corp. isn't a new name; it's been in business since 1969. High-profile clients include Procter & Gamble Co., AT&T and Macy's.

■ Publicis Groupe, boosted by its acquisition of digital powerhouse Razorfish, moved past Interpublic Group of Cos. to become the world's third-largest agency company, behind WPP and Omnicom Group.

■ Dentsu ranked as the world's largest consolidated agency network. Dentsu's network includes New York agencies 360i (acquired in January 2010) and McGarryBowen.

■ Omnicom's Fleishman-Hillard ranked as the nation's largest PR agency, based on Ad Age revenue estimates. Edelman scored as the world's largest PR agency. This marks the first PR agency ranking published by Ad Age since 2002.

Publicly held agency companies sometimes prefer not to reveal revenue for individual agencies, so revenue figures for those agencies and some independent shops are based on Ad Age DataCenter estimates. Ad Age revised some 2008 estimates, mainly to reconcile revenue with figures that agency firms disclose.

U.S. digital agencies eked out a 0.5% revenue gain in 2009, according to the Agency Report. Health-care agency revenue slipped 1.6%. Fortunes sank in every other agency sector.

Revenue down

Revenue for traditional ad agencies dropped 9.3%, mirroring an 8.9% decline last year in U.S. ad agency employment. Media agency revenue plunged 10.3% in a year when U.S. measured media spending (as tracked by WPP's Kantar Media) fell 12.3%.

Revenue for customer-relationship-management/direct-marketing agencies declined 7.4%, outperforming ad agencies as marketers put more emphasis on data-driven marketing.

Promotion-agency revenue tumbled 13.1%, depressed by lower spending on event marketing.

The Agency Report ranks 883 U.S. agencies, down from 912 agencies on last year's report. The drop-off partly reflects casualties of the downturn. Among agencies to close: Cliff Freeman & Partners, a former high-flying creative shop that shut its doors last October.

This is an industry in constant renewal. With economic prospects brightening, some high-profile agency execs -- including JWT's Ty Montague and Rosemarie Ryan; Saatchi & Saatchi's Gerry Graf; and Vigilante's Larry Woodard -- decamped this year to launch new ventures.

Among highlights from the report:

■ For the first time in the history of the Agency Report, the ranking's biggest agency is far removed from the clique and clack of Madison Avenue. The largest U.S. agency is Arkansas-based Acxiom, a major player in data-centric direct marketing and customer-relationship management. Acxiom Corp. isn't a new name; it's been in business since 1969. High-profile clients include Procter & Gamble Co., AT&T and Macy's.

■ Publicis Groupe, boosted by its acquisition of digital powerhouse Razorfish, moved past Interpublic Group of Cos. to become the world's third-largest agency company, behind WPP and Omnicom Group.

■ Dentsu ranked as the world's largest consolidated agency network. Dentsu's network includes New York agencies 360i (acquired in January 2010) and McGarryBowen.

■ Omnicom's Fleishman-Hillard ranked as the nation's largest PR agency, based on Ad Age revenue estimates. Edelman scored as the world's largest PR agency. This marks the first PR agency ranking published by Ad Age since 2002.

Publicly held agency companies sometimes prefer not to reveal revenue for individual agencies, so revenue figures for those agencies and some independent shops are based on Ad Age DataCenter estimates. Ad Age revised some 2008 estimates, mainly to reconcile revenue with figures that agency firms disclose.

Source: http://www.adage.com/

COMING SOON... DEAN BRAND MARKETING CORPORATE OFFICES

In the future as Dean Brand Marketing, LLC. expands I would love to ideally create a professional, fun and interactive work enviornment for a staff that will work in an initimate setting and share creative minds on how to continue the evolution of the branding and advertising culture.

MAKING AN AGENCY DIGITAL TO THE CORE

I continue to be fascinated by how agencies change and how extraordinarily hard this can be to accomplish. Regardless of the difficulty, it's an essential agency survival skill. Great agencies learn how to continually reinvent themselves to the core, while merely good agencies often only change their outward structure. In some ways this pursuit of change, particularly as agencies define their relevance in the digital world, has been the great advertising drama of the last two years.

Hard to believe, but two years ago people were debating the merits between traditional and digital agencies, as if they had to choose between blue states and red states. Jump ahead to today, and most small agencies have carved out their own path. They have found a way to be true to their roots and have also made huge strides in their commitment to digital marketing. Digital vs. traditional no longer seems like a religious war.

PJA Advertising has made this journey along with the rest, and what I've learned is that change does not come from one defining choice. You need a commitment from the top. You need to redefine processes and roles. You need to bring in new resources and talent. More than anything, if you want to make changes that go beneath the surface to the core, you need to introduce a foreign agent that will chemically alter the composition of the agency. In our case, we didn't experience this degree of change until we opened our doors to the new breed of "digital natives" and gave them the freedom to introduce their digital DNA into the agency.

Specifically, digital natives are people who have spent their entire lives using the internet as an extension of themselves, and there are some good descriptions of the attributes that these people possess. Jeremiah Owyang wrote a nice post about digital natives on his blog, Web Strategy. Without the influence of these native speakers, most of us are doomed to clumsily translate conventional ideas into a digital format, rather than creating original ideas unique to the digital medium. We may master the outward forms but not the soul of the digital world.

Don't get me wrong. I'm not advocating hiring some kid that spends 80 hours a week leveling his "World of Warcraft" character. I'm talking about a specific set of traits and insights that help transform an agency into an innovative digital marketing organization. Here's why every agency needs these people on staff.

They understand what happens under the digital hood. They see beneath the user interface to the underlying technologies. This gives them the ability to assess the true capabilities of a tool or platform and often manipulate it to their own purposes. They can define the digital experience on their own terms and not let it define them.

Digital natives have the skills to conduct their digital lives across many digital platforms with the ease with which an international traveler moves across continents. They can jump from platform to platform depending on its utility. This means that when planning marketing campaigns they can leave the beaten path to create more highly customized online experiences for consumers.

Digital natives treat their identity in the physical world and online as one entity. This makes their online personalities multidimensional and gives them better communications skills than the occasional visitor to Facebook and Twitter.

Because they conduct so much of their lives online, digital natives have a rich collection of experiences with brands in the digital world and a solid understanding about what kinds of communications are effective. With this fluency, they can expand an agency's vision for what is possible when developing strategies and campaigns.

Above all, digital natives get gaming. It's in their blood. As advertising and marketing agencies continue to adopt more of the principles and psychology of online gaming, all of us will need digital natives to help lead us through the maze of opportunities.

Agencies don't just need digital natives working in technical functions. We need them working throughout the agency in planning, media, account, and creative. They need to be allowed to experiment and explore and not be forced to work within old job titles and structures. If you're really serious about a digital transformation, these are the people who can shake up the organizational structure and push senior management to see the world in a fresh way. We're in a business that encourages clients to take big risks on change. We should be willing to do the same for ourselves.