2006 Agency Business Report: Introduction

Numbers point to a bright future

Numbers point to a bright future

Revenues reported by the 202 agencies in this report demonstrate unequivocally that the industry overall had a successful year in 2005, continuing and surpassing the momentum that was apparent in 2004.

Among the firms that reported their numbers the past two years in a row, revenues increased 17%, compared to 13% at the same comparison between 2003 and 2004. (There were 28 fewer firms reporting this year than last.)

All of this success seems to have occurred in an environment where agencies are operating more efficiently. Overall, there is a marked trend towards strategic hiring in the agency workplace – doing more and generating more revenues with fewer bodies. This is not to say that agencies aren't hiring. In fact, talent is a key driver behind the success of an agency.The competition for great people with exceptional skills who represent a broad range of experience, knowledge, and cultural back- grounds has never been more intense. In short, staffing is more selective and geared toparticular areas of expertise.

To illustrate the point, revenue among the top 10 firms in this year's rankings grew 8.9% to $521 million total, up from $482 million in 2004. But total staffing numbers for those same agencies grew 3.9% from 3,042 to 3,161.

Ruder Finn is the most striking example of doing more with less. The firm maintained US revenues of $74.4 million, as in 2004, while decreasing its headcount from 459 to 399. Kathy Bloomgarden and Peter Finn, the firm's co-CEOs, say they've noticed the trend in recent years for clients to demand a higher level of expertise than ever. And part of its core strategy last year was to make staff changes to reflect that. "In many of our assignments," says Bloomgarden, "we need high-level people to engage in dialogue at the senior level. So we've changed the composition of the team."

Adds Peter Finn, "We've made investments in more senior people. [Our strategy is] fewer people, more senior. It's something we've been moving toward."

The numbers tell other stories. Tech is back, a fact that is apparent upon review of the numbers for Text 100, Bite Communications, OutCast Communications, The Horn Group, and A&R Partners, which all show signs of robust growth. While 2004 was certainly a rebounding year for the sector,continuing strength in 2005 and so far in 2006 signals more than mere recovery from tough times, but rather true growth on a solid foundation.

With a few surprising declines – such as Peppercom's 7% drop, due to decreases in key client spending – there are still interesting variations in the agency business story. Indeed, one of the most fascinating views to emerge recently is that firms are not always experiencing improvements and declines in the same sectors as their competitors. That speaks to the continuing trend of specialization and differentiation, two of the most compelling themes for agencies today.

Julia Hood, Editor-in-chief, PRWeek

Michael Kriak, CFO, Haymarket Media

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