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Less is More | |||||||||||||
Today five holding companies, plus Dentsu, control more than 80% of all global advertising and media activities. Increasingly global advertisers are choosing to isolate their businesses with the assets of one or two holding companies. This gives them added leverage in negotiating compensation arrangements, plus they can also be more aggressive with regard to competitive conflicts. |
(Continued) Publicis' historically high margins were buoyed by their acquisition of BCOM3 (Leo Burnett and D'Arcy) and the improved performance of Saatchi & Saatchi. Still Omnicom continues to be the favorite of the global investment community, while Interpublic and Havas struggle to get their mojo back. Fortunately 2004 should be a good year for the entire industry. |
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| Publicis' 17.5% margins lead the league again in 2003, while the closely-held, thinly-traded Grey continued to anchor the group. In most cases the profit margins of the holding companies were dragged down by their non-advertising entities (i.e. PR, CRM/Direct, Interactive, Brand I.D., etc.). Interpublic's profits were adversely effected by the ongoing weakness in the Lowe Group and under performing acquisitions such as NFO and their Motor Sports business, both of which were divested for losses. |
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| What Constitutes a Fair Profit? | ||||||||||||||
| The 2003 A.N.A. Survey of Agency Compensation revealed considerable disparity between what advertisers view as a fair profit for their agencies, what agencies think they're entitled to, and what the agencies were actually earning. (Note the figures in the chart on the right are all based on advertisers' responses.) We believe it should depend on the size of the account and the magnitude of the agency's contributions to the business. On accounts billing less than $20mm with a full-service advertising agency the acceptable profit range should be higher than an account that bills $100mm or more. Furthermore if a brand's success can be largely attributed to advertising, that's also justification for a higher than average profit for the agency |
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| Related Subjects | Incentive Compensation | One of the best ways to handle this issue is to tie some portion of the Agency's income and profits to the attainment of certain defined goals. McBride & Associates has assisted several clients to structure equitable compensation agreements with their agencies. | ||||||||||||
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| © Copyright 2004 McBride & Associates |
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