Welcome to our 25th annual Agency Report Cards, in which we assess the performance of creative agencies across the country. As always, we aim to fairly and accurately reflect the year that was. This is no small undertaking since we spend months researching, reel watching, writing, editing and debating. It's not a perfect science, but we believe it's a comprehensive report packed with lots of data, information and analysis that readers will find valuable, informative and thought provoking.
Each card focuses on the U.S. performance of a particular agency, with regional highlights (from local offices) included for national agencies and global highlights for multinationals. Since we grade on a curve, we begin by determining an average revenue gain for the group. This year, the average gain for the 35 shops we evaluated was 7.6 percent, just a hair more than the 2006 average of 7.5 percent. (2005's average, coincidentally, also was 7.5 percent, down from 7.7 percent in 2004.) By comparison, the average revenue growth among the 14 media agencies we assessed was 14 percent.
The second most important factor in determining the numbers grade is revenue per employee. (This year's average: $286,000.) Since more than half of all revenue is used to cover staffing and related expenses, we use this data point as a rough proxy for profitability. We then assign a rank for the absolute increase in revenue for the year. This permits us to control for the fact that it's tougher for a large agency -- our largest this year was BBDO, at a revenue base of $773 million -- to post spectacular percentage gains. It also recognizes that a growth spurt at a relatively small shop -- our smallest, Bartle Bogle Hegarty, had revenue of $43 million -- may be modest in the grand scheme of things. Finally, we look at each company's ability to convert a dollar of client spending into a nickel or dime of agency revenue, via a billings-to-revenue ratio.
To determine creative grades, like most award shows, we judge work based on creativity, originality, positioning and strategy. We do not gauge effectiveness. And, as in previous years, we looked at nontraditional and integrated campaigns as well as TV spots and print ads. Generally speaking, the management grade reflects a combination of the other two grades.
As always, we welcome your feedback -- in print, in person or online.
CLICK HERE FOR THE 2007 AGENCY REPORT CARDS