It's been six years, but by one key measure, the marketing communications industry has worked its way back to where it was at the height of the Great Internet Bubble. This would mark a full recovery, and any business growth from here forward would take the industry into new record territory.
A good gauge to study is employment statistics. Employee counts in the labor-intensive marketing communications industry rise as business strengthens, since it takes more bodies to turn out more work. On the flip side, the employee count shrinks when business comes under pressure, since the only place a marcom company can save big money is that one place where it spends big money.
The industry, broadly defined, enjoyed a steady climb from early 1994, reaching its historic peak in December 2000. Internet-related companies, some with an interesting idea or two but no real business, were able to raise huge amounts of financing, much of it to be poured into advertising. Agencies and other marcommers complained that they couldn't hire people fast enough to do all the work (although they did find people to help rake in the money).
Then the party suddenly ended and the marcom world went through a three-year contraction, hitting bottom in January 2004. Since then, the general industry's three-year rebound has been sedate—employment is up almost 12 percent from the trough—compared to the three years leading up to the burst of the Internet bubble, when employment grew by more than 15 percent. Total employment levels remain slightly below their historic peak, but clearly there's been a recovery.
Or has there?
The largest component of this broadly defined marcom aggregate is advertising agencies. Agency employment accounts for a little less than a quarter of the total; marketing consultants comprise the next largest group; and market research and public opinion polling ranks third.
The agency sector was on the verge of recession in 1990, the earliest period for which data are available. From the bottom, in May 1994, however, there was a dramatic upsweep, almost without pause, until the summer of 2000.
Agencies that couldn't hire people fast enough on the ascending side of the curve couldn't trim staff fast enough on the way down. At the bottom, in January 2004, total agency employment had slipped below the levels of the early '90s.
Agency employment data for the 1990s have a downward bias because that includes the period where some shops split off their media departments into freestanding entities. But we have data for media shops and even if these folks are added back, the trend is not materially different.
Ad agencies are not even halfway back to their historic highs, though the broader group nearly is.
One big winner in this shift has been public relations. A lot of marketers, notably the pioneering dot-com companies, relied heavily on PR to create a buzz and get their stories told. The PR sector, though still much smaller than advertising, grew more than three times faster than advertising between 1990 and the peak. And even though both disciplines saw massive employee cuts after the Big Burst, public relations today, as measured by the body count, is 44 percent larger than it was in 1990, while advertising is up by only 14 percent.
Starting with the same employment statistics, the data for ad agencies and those for PR were adjusted to make it appear that these sectors were of equal size in January 1990. That's what the graph shows. From this common starting point, we can see how they grew relative to the other. Public relations saw a much faster increase than advertising and went through a steeper fall, but after the dust settled, PR held on to much more of its growth than advertising did.
The graph also compares these two marcom specialties with employment in the broader economy. Ad agencies have undergrown the economy, judging by employment trends, over the 16 years for which we have consistent data. PR, although pretty volatile, has grown much faster.
By and large, these data are just another way of showing something most marcom industry analysts already know: there is a significant shift away from mainstream advertising and towards some of the other marcom disciplines. —Alan Gottesman