Digital accounts for more than one quarter of U.S. agency revenues

April 25, 2011  |  Bradley Johnson for Advertising Age  |  Comments

Advertising Age looked at more than 900 ad shops for its 2011 Agency Report, and of the US$30.4 billion they made in revenue in 2010, 28% – US$8.5 billion – came from digital services.

One point is clear: digital has become a standard tool across every agency discipline.

To be sure, six in 10 digital dollars – or $5.1 billion – last year went to digital-specialty agencies such as Publicis Groupe’s Digitas and Sapient Corp.’s SapientNitro.

The second biggest portion – $2 billion – went to agencies whose core business is direct marketing or customer relationship management. Ad Age estimates direct-marketing/CRM agencies generated 42% of U.S. revenue from digital services in 2010. (Distinctions blur between digital agencies such as Digitas, which began in 1980 as direct shop Bronner Slosberg Humphrey, and direct/CRM powerhouses such as WPP’s Wunderman network, which has amassed deep bench strength in digital.)

The remaining portion of revenue – roughly $1.4 billion – was spread across agencies focused on disciplines including advertising, promotion, health care and public relations.

Not surprisingly, startups tend to have a heavy digital focus. Pereira & O’Dell, a 3-year-old San Francisco ad agency, generated 55% of revenue last year from digital.

But agency titans are very much in the mix. Leo Burnett Worldwide/Arc, a Publicis ad/marketing-services agency, boasts it has “more digital experts (325 in just the U.S.) than most standalone digital agencies.”

Digital makes up a growing share of revenue across agency disciplines.

At McGarryBowen, an ad agency owned by Dentsu Inc., digital accounted for an estimated 24% of 2010 revenue, up from 20% in 2009.

Carlson Marketing, a loyalty management and marketing-services firm owned by Groupe Aeroplan, last year generated nearly one-third of U.S. revenue from digital, up from 25% in 2009.

Public-relations agencies have moved aggressively into social media, grabbing more digital dollars. Edelman, the world’s largest PR agency, said its digital revenue doubled in 2010; the firm generated 12% of U.S. revenue from digital services.

Ad Age DataCenter arrived at its estimate for digital’s 2010 share of overall U.S. agency revenue – 28% – through a bottoms-up analysis of agencies based on input from more than 1,000 agencies, agency networks and agency companies. The figure, as it happens, tracks with global claims of two agency giants: WPP and Publicis said digital accounted for 29% and 28%, respectively, of their 2010 worldwide revenue.

Wall Street places a premium on all things digital. But two agency firms – Omnicom Group and Interpublic Group of Cos. – decline to float a specific digital percentage, arguing that digital is too integrated in their offerings to be parsed out.

Omnicom president and CEO John Wren got to the crux of the matter on a call with stock analysts last October: “Fundamentally, I believe that anything that’s not digital will soon be digital or soon be very, very unimportant.”

To read the original article in Advertising Age, click here.

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“Fundamentally, I believe that anything that’s not digital will soon be digital or soon be very, very unimportant.”

I think that is about as accurate and responsible a claim as Bill Gates telling us we would never need more than 128k of memory. People in such positions should think a bit more before speaking. Magazines, newspapers, billboards, and snail mail will continue to be important mediums and will likely outlast anyone reading this.

Digital is great and very measurable sure, but to think that it reaches everyone is very naive in my opinion. Equally as naive is the assumption that there won’t be something to come along and eclipse digital advertising as we now know it.

Monday, April 25 @ 2:34 pm | Reply

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