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MP74043

MAPS ADVERTISING AGENCIES : AUGUST 2003

Overview

Editor: Market Assessment
ISBN: 1-84168-298-X

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This report covers: advertising agencies, advertising,direct mail, internet advertising, press, television, radio, cinema, online, roadside, transport,online,

Companies covered include: Omnicom Group,Publicis, SA,WPP,

Table of Contents
Executive Summary
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TABLE OF CONTENTS

1. Introduction 8

REPORT FOCUS 8

RESEARCH PROBLEMS 8

DEFINITIONS 8

Agency Job Functions 9

Account Management 9

Account Planning 10

Media Analyst 10

Media Buyer 10

Media Planner 10

Creative — Art Director/Designer/Artworker/Copywriter 11

2. Strategic Overview 12

BACKGROUND 12

Table 1: Main Media Advertising Expenditure by Product Category (£000), Years Ending March 2002 and 2003 13

MARKET DYNAMICS 14

Table 2: Advertising Costs for Press and Television by Constant 1995 and Current Prices (1995=100), 1997-2001 16

SECTOR EXPENDITURE 16

Table 3: Media Expenditure by Channel (£000 and percent), Years Ending December 1998-2002 17

Table 4: Above-the-Line Advertising Expenditure on Media (£m), Years Ending December 1998-2002 17

Regional Press 18

Cinema Advertising 18

Table 5: Top Ten Agencies by Media Expenditure (£m), 2002-2003 19

Television Advertising 19

Direct Mail 20

Table 6: Direct Mail percentage Volume Growth (million items, percent and £m), Years Ending December 1998-2002 20

Online Advertising 21

Table 7: Internet Advertising Expenditure (£m), Years Ending December 1998-2002 21

Table 8: Share of Advertising Expenditure by Medium ( percent), Year Ending December 2002 21

DISTRIBUTION 22

Table 9: Distribution of Advertising Agencies in the UK by Region, Combined Gross Income and Number of Agencies (£m), 2001 22

COMPETITIVE STRUCTURE 23

Table 10: Top Ten Advertising Agencies by Ranking and Media Billings (£m), Years Ending December 2001 and 2002 23

Table 11: Top Ten Advertising Agencies by Ownership, Year Ending December 2002 23

INDUSTRY ISSUES 24

THE CONSUMER 27

Table 12: Top Ten Advertisers by Ranking and Expenditure (£m), Year Ending December 2001 28

Table 13: Top Ten Brands by Retail Sales (£m), Year Ending March 2002 28

MARKET FORECASTS 29

Table 14: Forecast Advertising Expenditure by Medium at Current Prices (£m), 2002, 2005 and 2010 30

3. Above-the-Line Advertising 31

BACKGROUND 31

Table 15: Top Ten Advertising Agencies by Gross Income (£), Year Ending December 2001 31

Table 16: Top Ten Media Agencies by Gross Income (£), Year Ending December 2001 32

MARKET SIZE 32

Radio 32

Table 17: Top Ten Advertisers' Radio Expenditure (£ and percent), Years Ending March 2002 and 2003 33

Table 18: Top Ten Creative Agencies' Radio Expenditure (£m and percent), Years Ending March 2002 and 2003 33

Table 19: Top Ten Media Planning Agencies' Radio Expenditure (£m and percent), Years Ending March 2002 and 2003 34

Outdoor 35

Table 20: Top Ten Outdoor Advertising Categories (£ and percent), Year Ending December 2002 35

Table 21: Top Ten Outdoor Advertisers (£m and percent), Years Ending December 2001 and 2002 35

Roadside 36

Transport 36

Retail 36

Non-Traditional Formats and Ambient 36

Cinema 37

Table 22: Top Product Categories in Cinema Advertising (£m and percent), Year Ending December 2002 37

AWARDS 38

4. Below-the-Line Advertising 39

BACKGROUND 39

MARKET SIZE 40

Table 23: percentage of Sales Generated by Direct Mail by Consumer Demographics ( percent), Year Ending December 2002 40

Table 24: Top Ten Direct Marketing/Sales Promotion/Integrated Communications Agencies by Gross Income (£m), Year Ending December 2001 41

CONSUMER TRENDS 41

5. Online Advertising 42

BACKGROUND 42

MARKET SIZE 42

Table 25: Top Ten Full-Service Independent Interactive Agencies by Declared Turnover (£m), Year Ending December 2002 43

Table 26: Top Ten Media Agencies Specialising in Planning/ Buying Interactive Campaigns by Declared Billings (£m), Year Ending December 2002 44

CONSUMER TRENDS 44

Table 27: Marketing Budget Allocations by percentage of Expenditure Category for Five Countries, 2001-2003 45

6. An International Perspective 46

EU LEGISLATION 46

GLOBAL EXPENDITURE 46

Table 28: Year-on-Year percentage Change in Total Expenditure ( percent), Financial Years 2001-2003 47

THE US 47

7. PEST Analysis 48

POLITICAL FACTORS 48

ECONOMIC FACTORS 49

SOCIAL FACTORS 50

TECHNOLOGICAL FACTORS 51

8. Consumer Dynamics 52

OVERVIEW 52

SURVEY RESULTS 52

The World's Favourite Advertisements (Table 29) 52

S1: "The quality of television advertisements in the UK is much higher than in other countries." 52

S2: "Most television advertisements are entertaining." 52

Table 29: Attitudes Towards Quality and Entertainment Value of Advertisements ( percent of respondents), 2003 53

Sex Sells? (Table 30) 55

S3: "I prefer straightforward factual advertisements compared to obscure 'arty' ones." 55

S4: "Advertisements are getting too sexually explicit these days." 55

Table 30: Attitudes Towards Style of Advertisements ( percent of respondents), 2003 56

Have a Break (Table 31) 58

S5: "I wouldn't mind seeing advertisements on the BBC channels." 58

S6: "I prefer to tape programmes so I can fast forward through the advertisements." 58

Table 31: Attitudes Towards Advertising Breaks ( percent of respondents), 2003 59

What Can Advertising Do for You? (Table 32) 61

S7: "I have bought something in the last 6 months as a result of seeing it advertised." 61

S8: "Most advertising is not relevant to me." 61

Table 32: Perceptions of Advertising Relevance ( percent of respondents), 2003 62

Pop-ups Refresh the Parts Other Advertisements Cannot Reach (Table 33) 64

S9: "I don't mind seeing pop-up advertisements on the Internet." 64

S10: "I avoid Internet sites that have too many pop-up advertisements." 64

Table 33: Attitudes Towards Pop-up Advertisements ( percent of respondents), 2003 65

It's Good to Advertise (Table 34) 67

S11: "Advertisements are a good way of finding out about new products or services." 67

S12: "Advertising helps television companies make good programmes." 67

Table 34: Positive Attitudes Towards Advertising ( percent of respondents), 2003 68

CONCLUSION 70

9. Company Profiles 71

INTERPUBLIC GROUP OF COMPANIES, INC 71

Company Details 71

Advertising and Media Companies Owned 71

Strategic Direction 72

Profitability 72

Financial Results 72

Table 35: Financial Results for Interpublic Group of Companies, Inc ($m and percent), Years Ending December 2001 and 2002 72

Financial Results by Media Sector 73

Financial Results by Region 73

Table 36: Financial Results for Interpublic Group of Companies by Region ($m and percent), Years Ending December 2001 and 2002 73

OMNICOM GROUP INC 73

Company Details 73

Advertising and Media Companies Owned 74

Strategic Direction 74

Profitability 74

Financial Results 74

Table 37: Financial Results for Omnicom Group Inc ($000 and percent), Years Ending December 2001 and 2002 74

Financial Results by Media Sector 74

Table 38: Financial Results for Omnicom Group Inc by Media Sector ($m and percent), Years Ending December 2001 and 2002 75

Financial Results by Region 75

Table 39: Financial Results for Omnicom Group Inc by Region ($000 and percent), Years Ending December 2001 and 2002 75

PUBLICIS GROUPE SA 76

Company Details 76

Advertising and Media Companies Owned 76

Strategic Direction 76

Profitability 77

Financial Results 77

Table 40: Financial Results for Publicis Groupe SA (?m and percent), Years Ending December 2001 and 2002 77

Financial Results by Media Sector 77

Table 41: Financial Results for Publicis Groupe SA by Media Sector ( percent and ?m), Year Ending December 2002 77

Financial Results by Region 78

Table 42: Financial Results for Publicis Groupe SA by Region ( percent and ?m), Year Ending December 2002 78

Dentsu Inc 78

WPP GROUP PLC 78

Company Details 78

Advertising and Media Companies Owned 79

Strategic Direction 79

Profitability 79

Financial Results 79

Table 43: Financial Results for WPP Group PLC (£m and percent), Years Ending December 2001 and 2002 80

Financial Results by Media Sector 80

Table 44: Financial Results for WPP Group PLC by Media Sector (£m and percent), Years Ending December 2001 and 2002 80

Financial Results by Region 81

Table 45: Financial Results for WPP Group PLC by Region (£m and percent), Years Ending December 2001 and 2002 81

10. The Future 82

NEW MEDIA 82

11. Further Sources 84

Associations 84

General Sources 84

Bonnier Information Sources 85

Other Sources 86

EXECUTIVE SUMMARY

The advertising created by UK advertising agencies is amongst the best in the world. In 2003, the UK scooped 18 of the 38 Gold Lion awards for film at the Cannes Lions International Advertising Festival. The US came second, with 8 awards, with the remaining 12 shared between different countries including Argentina, Canada, France and the Netherlands. However, there is much more to the advertising industry than presenting a clever idea. Advertisers, having endured the economic slump that began at the turn of the century, are demanding a higher degree of effectiveness from their advertising. It is no longer about the pervasiveness of the brand, it is about sales and more — the cost of sales.

Expenditure on advertising decreased significantly in 2001, with the traditional media of independent terrestrial television and press display advertisements losing share to competitors that can deliver specific demographics — whether these be the local press, the Internet, specialist magazines or specific programmes on digital television channels. Advertisers are discovering that, rather than paying premium rates to reach a fraction of potential buyers among the mass television audiences, they can reach those buyers more cheaply by going where they themselves go — and that means the Internet and the digital television channels. At 7pm, advertisers are more likely to find their 16 to 35 year-olds online than watching Emmerdale on ITV.

The beginning of the 21st century gave the media an artificial boost. The dotcoms were being urged to spend up to 70 percent of their venture capital on promotion. This meant building their brand names as quickly and as widely as possible, which signified mass market advertising. The media suffered from withdrawal of investment in 2001, which, coupled with the economic downturn, brought them crashing down to earth.

However, it is no longer a question of simply waiting for the economy to recover and for advertisers to start spending again.The top communications companies do not believe that will happen in the immediate future and are looking at other markets and other revenue streams. This means that they are looking at how they can achieve better return on investment for their clients and are again turning their attention to the Internet. Dotcoms now are not buying advertising space; they are selling it.

The way in which agencies earn and report their revenues is also becoming more complicated. Agencies that buy advertising space are in charge of their clients' budgets and earn their revenues in the form of commissions from the media owner from which they buy the space. Other services, such as creative design or public relations, are paid for by the client in the form of fees. Agencies are keen to report billings — the advertising expenditure — rather than revenues, and, with the passing of the Sarbanes-Oxley Act in the US (for UK-based, yet US-owned companies), billings will be all they are permitted to publish.

The Sarbanes-Oxley Act on corporate responsibility for financial reporting was passed in the US in 2002, in response to the WorldCom and Enron debacles, in order to protect investors. It demands much more stringent accounting practices, with sign-offs from both the chief executive officer and chief financial officer of the company. The consequence of this is that UK companies with US owners may now not release financial information to the Press. This also affects the league tables produced by the Institute of Practitioners in Advertising (IPA), which, up until 2002, published an annual agency league table based on revenues rather than billings. The league tables for 2001 are the last that they will publish and are reproduced, with kind permission from the IPA, in this report.

In the UK, the Government is attempting to rationalise its various regulatory bodies and encompass the new media as well as the old by creating a new authority with regulatory powers, the Office of Communications (Ofcom). With the threat of restrictions being placed on broadcasters and advertisers from the EU, the industry is anxious to work with Ofcom in an attempt to maintain its present codes of conduct and to assume a greater degree of self-regulation.

The market for advertising agency services is certainly growing but changing. This Key Note Market Assessment report shows where these changes are happening and how agencies can apply their expertise.

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Last updated by Amanda Porteous August 2003