21st Annual Report Cards: From the Editor

Click here for the 2003 Agency Report CardsWe have good news, and we have bad news.The good news is that our 33 nationally ranked agencies posted an average revenue growth of 8.6 percent in 2003. That's a marked improvement over a year earlier, when the average gain was 1.6 percent. It's good to see agencies growing again and getting their strength back. But that 8.6 percent figure will come as bad news to those agencies that did well but didn't keep pace - at least in the following pages, where we grade on a curve. You see, in 2002, you got an easy "C" for holding steady. The year before that, when the average was a 3.5 percent decline, you got a B- just for showing up. That's far from the case for 2003, as you'll see. But as usual, year-to-year revenue growth is just the starting point. To determine the financial grades, we also consider revenue-to-staff ratio to get a handle on profitability; organic growth from existing clients and cost-cutting initiatives also come into play. More good news/bad news: This year, due to developments in the marketplace and the evolution of many agencies, we decided to grade the top 20 "regional" agencies rather than the top 10 shops in each of six markets. More than a few onetime-fledgling regional shops have grown into bigger, stronger competitors, and the gap between the ones in the top third of the pack and those toward the bottom of the list was getting bigger. They no longer competed against each other in new-business pitches, and some became twice, even three times the size of other regionals - judging them against each other became outdated, even unfair. So now we've created a pool of 20 agencies - our new "regional" group. Their average revenue gain in 2003 was 7.9 percent. We've made a few other changes to our annual analysis. While the report cards primarily reflect U.S. performance, we've added global highlights to give a sense of how the agencies did overseas. We've also grouped agencies and their grades by holding company to see how they compare against their siblings. The good news is, the industry has turned the corner. The bad news is, we still have a way to go. - Alison FaheyNUMBERSSome 2003 revenue results were provided by the agencies; most were not. We also gathered information from our own reporting, syndicated data and other sources. Revenue represents the actual top-line income of each agency; billings, a somewhat more nebulous number, were prorated to credit an agency for client spending while the agency worked for that client. (An agency that won $100 million at midyear would show a gain of $50 million.) Staff counts are as of year-end 2003. Agencies were ranked on three criteria: revenue growth, revenue per employee and the conversion of billings to revenue. Then a composite rank was calculated, weighting revenue growth the most, staff efficiency somewhat less and the billings conversion least. Letter grades correspond to the composite ranks. Client spending estimates are based on TNS Media Intelligence/CMR data. CREATIVEConsideration is given to quality, range of products worked on, clarity of message, production values and consistency of execution. Each shop submitted seven TV spots and seven print ads that appeared during 2003. MANAGEMENTGrades reflect how well executives handled client and management issues, agency developments, finances, merger and acquisition activity, and other strategic matters. REGIONAL HIGHLIGHTSFor national agencies, we break out significant activity in regional offices.GLOBAL HIGHLIGHTSFor global shops, we outline key events in offices around the world. THE FINAL GRADEThe average of numbers, creative and management.Click here for the 2003 Agency Report Cards

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21st Annual Report Cards: From the Editor

Alison Fahey

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Alison Fahey