• by David L. Smith , June 3, 2002

First ad guy: How are you doing? Second ad guy: Great, I’m billing almost what I’ve been telling people. (old Ad Age cartoon)

“Carat is currently in negotiations with Hyundai dealer associations for their media chores. That business is worth $180 million. The Richards Group last week presented capabilities to several Hyundai Motor America regional dealer groups as it vies for creative on the $180 million business.”

Exaggerated billings claims have been around since before we had the GRP. But the splitting of media and creative, both of whom claim the same number, has made these numbers less credible than ever.

Both of the above quotes are from the same issue of Adweek. As media and creative become unbundled on an increasingly larger number of accounts, how many different agencies are going to take credit for the “billings”? As an example, my company is the strategic advertising partner or agency of record on a number of pieces of business. Of course, we claim all the billings we are responsible for and which flow through us. And, the creative companies involved claim all of the billings that they create ads for. But it does not stop there. In cases where we subcontract the broadcast buying, the broadcast buying agency claims those billings too. So we have three companies claiming the same number.

For the big agencies and holding companies that have split off media and creative into separate companies, they both claim the same billings in the Redbook. Ad Age tries to show “ad” agencies (creative shops to a large degree) ranked by gross fee revenues in order to rank companies appropriately. But they still rank media shops by their “billings”, permitting these media agencies to “gross up” fee only situations by a large multiplier to be the equivalent of billings. (As an example, look at the top ten shops in Interactive media spending as reported this spring by Ad Age and tell me if you really believe these numbers). Adweek says that they try to deduct media billings placed by another company from the creative company claims in their rankings. But there are no checks and balances in this.

In the Interactive arena, it gets even more ridiculous. As an apparent throwback to system integrators and other technology company methodologies for reporting revenues, a number of Interactive agencies actually went public by claiming their gross billings as revenues, on the basis that they “touched” the money. This totally distorts the picture, but is still being done today. Check the annual reports.

The interesting fact is that there is no checking going on at all about these numbers. Private agencies are free to report anything that they want. And Redbook numbers do not have to be aggregated for the holding companies, so each division is free to report billings that their sister companies report to the Redbook too.

The fix? An industry standard that forces everyone to report gross fee revenues if they want to be listed in the trades or in the Redbook. This would give us comparable rankings for companies in different categories. It would also cause those media research companies that charge on a percentage of billings to properly reflect the difference between a media only company that brings in fees that are 5% (or less) of it’s billings vs. a full service agency which brings in fees that might be 15% of it’s billings. Under the current system, both are charged the same for many research sources, even though one has much higher revenues than the other.

It would seem that, in the wake of Enron, our industry would want to get more truthful about standards in reporting. Or does anybody really care?