• by Joe Mandese  @mp_joemandese, August 4, 2004

Ad agencies--especially foreign-owned holding companies with big media services units like Publicis, WPP, and Havas--are some of the fastest-growing companies in the communications industry. With a compound annual growth rate of 46.8 percent during the five-year period between 1999 and 2003, Publicis ranked as the fourth-fastest-growing company in the industry behind France's Vivendi International (now part of NBC Universal), Comcast Corp., and Canada's CanWest Global, according to estimates released this week as part of Veronis Suhler Stevenson's 2004 Communications Industry Forecast & Report.

On Friday, Publicis reported strong first-half 2004 results, and reaffirmed its guidance for healthy growth during the second half of the year and into 2005. "In the second half of the year, we anticipate consolidation of market growth. And we have full confidence that Publicis Groupe will be able to take advantage of this," said Chairman-CEO Maurice Levy, adding: "Based on current forecasts, our growth objectives should remain firm."

Interestingly, Publicis ranks only fourth in size among the big agency holding companies--behind Omnicom, WPP, and Interpublic--but is growing at a more rapid rate and has better margins, according to VSS' tracking data. Publicis owns Starcom MediaVest Group and ZenithOptimedia Group.

Generally, the agency groups are growing at a faster rate than the communications industry at large. Among the 50 fastest-growing companies in the sector, WPP (parent of MindShare and Mediaedge:cia) ranked 16th, Havas (parent of MPG) ranked 22nd, and Omnicom (parent of OMD and PHD) ranked 23rd. Interpublic (parent of Initiative Media and Universal McCann) ranked 46th, and actually declined 0.4 percent during the five-year period measured by the report.

The finding that most of the major agency holding companies managed double-digit revenue growth during the period is remarkable, given the fact that U.S. ad spending only rose at an annual rate of 3.0 percent over the five-year period. However, VSS is projecting that the industry should see more than double that rate of growth--6.5 percent--over the next five years.

Five-Year Revenue Growth (1999-2003*)

                     Rank         Compound  
                    Among           Annual  

Top 50          Growth*  

Publicis            No. 4           +46.8%  
WPP                No. 16           +20.2%  
Havas              No. 22           +16.3%  
Omnicom
No. 23           +13.9%  
Interpublic        No. 46            -0.4%  

U.S. Ad Spending    -- --            +3.0%  

Source: Veronis Suhler Stevenson, PQ Media.