Billings nose-dive as recession hits

LONDON - The gloom is compounding for Britain's agencies with new figures that highlight for the first time how the current recession is decimating agency billings.

More than two-thirds of the top 30 creative agencies and half of the top 30 media shops have shown a fall in billings, according to reports by AC Nielsen MMS.



What is worrying industry senior executives is that the figures cover the 12 months to June 2001 and do not reflect the most recent threat to adspends in the face of possible recession.



Even Abbott Mead Vickers BBDO, the largest agency in the UK, has suffered an 8 per cent drop in billings for the period, while Zenith, the biggest media shop, has also struggled, seeing its billings tumble by 13.84 per cent.



The figures are bound to increase concerns among agency chiefs about what might happen if the decline in corporate confidence starts hitting consumer spending.



"Because consumer confidence is high and the housing market is intact there's a widespread feeling that there will be lots of business by the fourth quarter - but I see no evidence of it," the head of one top ten agency warned.



Hamish Pringle, the IPA's director-general, said, "I suspect we're seeing the effects of a softening market."



However, industry leaders insist that what appears to be a downturn for agencies is really a readjustment following the dotcom implosion and the upsurge in advertising activity around the Olympics and the millennium.



Bruce Haines, the president of the IPA, said, "The big issue here is that the first six months of 2000 were bumper months. Growth rates were between 11 and 15 per cent year on year. Those rates are clearly unsustainable. Going forward, growth rates are looking more normal. This is a wholesale correction."



Malcolm Earnshaw, ISBA's director-general, labelled the financial pressures on the UK operations of US-based multinationals, the bursting of the dotcom bubble and the depressed state of a car industry forced to slash prices as possible factors that may have contributed to the drop in billings.



But he added, "There's also a structural move in the marketing mix. Companies are experimenting with different media. There's a feeling that smart marketers don't rely on television so much any more. This is bound to impact on the MMS data."



Martin Jones, the owner of the AAR, said he believed the figures reflected the end of an agency "elite" and a trend for clients' business to be spread more evenly among a greater number of shops.



"A few years ago the same half-dozen agencies were contesting the big accounts - now lists include agencies of all kinds," he commented.



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