A Few Big Gainers Propelled Regional Shops’ ’04 Growth

A handful of particularly big gainers, with revenue growth of 20 percent or more, were what drove the top 60 regional agencies in the U.S. to post slightly better overall revenue growth than that of Adweek’s 33 graded national shops in 2004.

An analysis of the 10 largest regional shops in each of the six regions shows that their revenue growth averaged 9.6 percent, compared with 7.7 percent for the national agencies. The average growth ranged from 17 percent in New England to 5 percent for Eastern shops. But taking the biggest percentage gainer out of each region drops the overall average growth to 6.5 percent.

For each region’s biggest revenue gainer by percentage, getting at least a piece of big-spending national clients was key. Those shops included two ethnic-targeted agencies (Lopez Negrete in Houston and Carol H. Williams in Oakland, Calif.) and three others that also have grown with national accounts—McCarthy Mambro Bertino in Boston, Zimmerman & Partners in Miami and Omnicom Group’s Element 79 Partners in Chicago.

National clients and their bigger budgets are obviously the fastest road to growth, but having a strong local base remains the bread and butter for most shops in the regional category. Independent Cronin & Co. in Glastonbury, Conn., for example, boosted revenue by nearly 11 percent, to $9.2 million, largely by staying local. Its wins were led by a $12 million account from Amica Insurance in Lincoln, R.I., and regional dairy Garelick Farms, a $3 million piece of business.

While 2004 clearly represents only another small step toward recovery, the overall gains among regional shops, and particularly the solid numbers reported by agencies in the Southeast and New England, would appear to lay to rest the perennial notion that the regional, small-to-midsized agency is a 20th-century dinosaur.

“Regional agencies are definitely still alive in ’05,” said Judy Neer, a principal with consultancy Pile and Co. in Boston. “There are many, many clients out there who want their agency to be local, who don’t want one of the big guys and think there is an advantage to no holding company.”

In fact, despite the homogenization of the U.S. culture, regional personality still plays a role in where business lands, consultants said. “There are clients in the Midwest [and] the South that expressly don’t want to deal with an East Coast, New York attitude,” said David Beals, a principal with Jones Lundin Beals in Chicago. “Some companies also say people on the West Coast are too laid back and flaky,” he added.

Through agency reports, sources and its own estimates, Adweek calculated revenue and billings for 60 regional shops—10 in each region. For all 60, total revenue for 2004 was up 9.6 percent (to just more than $2 billion), while total billings grew 9.8 percent (to $17 billion). The average revenue gain in 2004 for Adweek’s 33 graded national shops was 7.7 percent, according to figures compiled through agency reports and sources. The 20 regional shops that received Report Cards [Adweek, April 25] had an average revenue growth of 10.7 percent.

The numbers show that 14 of the 60 regional shops were flat or down for the year, with Ackerman McQueen in Dallas, stung by the October 2003 loss of its $70 million Six Flags account, dropping 33 percent of its revenue to $18 million. The biggest gainer by percentage was Carol H. Williams, up a whopping 85 percent to $29 million.

Williams expanded primarily by expanding its work for General Motors and McNeil Pharmaceuticals, according to Lynn Holman, svp of creative intelligence and strategic initiatives. The GM relationship started with regional work in 2002 for GMC, and the shop has gradually been assigned more regions and divisions, Holman said. Similarly, MMB in Boston last year parlayed project work for Subway in Milford, Conn., into the $40 million “Choose well” campaign still on air. Subway’s lead agency is Omnicom’s Goodby Silverstein & Partners in San Francisco.

“Regional agencies tend to be more willing to take on some clients on a project basis, which has helped them survive those difficult years,” Neer said.

MMB’s 46 percent revenue gain (to $20 million) led the way in New England, followed closely by Modernista!’s 44 percent increase (to $26 million). Without their gains, the region was up 8 percent.

While agencies on the coasts continue to be the focus for a large number of national clients, Beals pointed to two one-time regional players, Omnicom Group’s GSD&M in Austin, Texas, and MDC Partners’ Crispin Porter + Bogusky in Miami, as examples that big advertisers will follow good work anywhere. “You only need a few of those for marketers to open up their perspective a little bit,” Beals said.