Big 5 Outpace Ad Industry Two To One, Emphasis On Digital Cited

The Big 5 agency holding companies -- WPP, Omnicom, Publicis, Interpublic and Havas -- that represent most of Madison Avenue outperformed the overall growth in ad spending, thanks in large part to their increasing dependence on digital media. That’s the conclusion of an analysis of 2011 earnings data, by Pivotal Research, which shows the Big 5 growing 6.1% in U.S. ad revenues -- about twice the rate of U.S. ad spending.

The holding companies demonstrated “ongoing durability and rising importance in the face of -- and because of -– the rise of digital media,” writes Pivotal’s Brian Wieser, concluding that “agencies are beneficiaries of digital media and not at risk from disintermediation from purely technology-driven companies. This is because more fragmentation among platforms and media means marketers increasingly require a “filter” and navigator for seemingly infinite marketing choices.”

Wieser, who previously was Madison Avenue’s de facto chief economist in his last job as global director of forecasting at Interpublic’s Magna Global unit, compared the “organic” U.S. growth rates (6.1% in aggregate) of the five agency holding companies to the “normalized” growth rate (excluding Olympics and political ad spending) of U.S. ad spending (3.0%).

Moreover, he estimates that the agencies outpaced U.S. national ad growth by 1%, and total normalized ad growth by 4% over the past five years.

The bottom line, he says, is that agencies should continue to outpace the results of media companies and the overall ad economy because of their increasing reliance on digital advertising and marketing services.

“Digital advertising grew from 10% of U.S. advertising to 18% of U.S. advertising between 2007 and 2011, and this has directly benefitted agencies,” he writes. “There is a growing need for services on the part of marketers, especially for dealing with a fragmented landscape of digital media, and this will contribute to ongoing growth for the industry. We continue to expect agencies to outperform growth of ad-supported media well into the future.”

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