This is the 26th time we have conducted this annual exercise to assess the business performance of the country's top ad agencies. After many weeks of gathering data, watching reels, looking at Web sites and debating the merits of agency strategy, we are confident this collection presents an insightful picture of the fortunes of the 25 companies covered.
The agencies are chosen on the basis of two factors: size and influence. On the list are the 13-largest agencies in the U.S., and 12 from among the 50 largest that we deemed to be influential to the industry, primarily because the quality and nature of their work sets a standard others follow.
We begin with the most basic indicator of performance: revenue growth. The average growth rate for the agencies in 2008 was 8 percent. Only one agency saw revenue fall and two star performers saw revenue grow by more than 20 percent. The average growth rate in 2007 was 12 percent.
Although revenue growth is the most important factor in assigning grades for financial performance, we also look at each company's revenue gain in the context of the agency's size. Since the biggest outfit is 19 times larger than the smallest, it wouldn't be fair to use only the growth rate (where the small companies would have an edge) or only absolute dollar growth (which favors the big guys), so we make an adjustment for growth relative to size.
We also look at profitability. To do this we calculate revenue per employee, on the assumption that the higher this ratio, the more profitable the agency. We also include a factor that recognizes changes in profitability year over year. Scores for these individual characteristics are combined in a weighted average formula, and letter grades are assigned after an editorial review of all the numbers.
Assessing creative performance is, naturally, a subjective exercise. In examining each agency's reel, online work and print output, we look for originality, accurate messaging and quality of production. Campaigns that clearly exerted an influence over what followed are also awarded extra credit.
The grade for management reflects financial and creative achievements as well as how well executives handled management and client issues and other agency developments.
We hope that these cards provide a useful basis for gauging the progress of the industry in 2008. Certainly there is a wealth of basic -- and not so basic -- information and data for anyone making strategic decisions about agency business in 2009 and beyond. Let us know if you agree -- and if you don't.
'08 FINAL GRADES:
LEO BURNETT: C
EURO RSCG: B-
HILL, HOLLIDAY: B
MARTIN AGENCY: B+
PUBLICIS USA: B+
SAATCHI & SAATCHI: C+
HOW THE REPORT CARDS WORK
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