CLOSE-UP: LIVE ISSUE/AGENCY BILLINGS FIGURES - Billings as a measure leaves some wanting a new league. The system can be unfair - so should we use a new measure, John Owen asks

Whenever the latest set of quarterly agency billings figures are published in Campaign, the focus tends to be on the top of the table.

Whenever the latest set of quarterly agency billings figures are

published in Campaign, the focus tends to be on the top of the

table.



Is Abbott Mead Vickers BBDO still number one? Is Saatchi & Saatchi

climbing back up the table? And what will Martin Sorrell make of J.

Walter Thompson’s and Ogilvy & Mather’s performance?



This time, however, with Abbott Mead so far out in front it might as

well be in a league of its own, and with none of the three agencies

below making any headway, the excitement in the half-yearly figures

unveiled last week was generated by the smaller agencies further down

the ladder.



Rainey Kelly Campbell Roalfe’s performance, in leaping from 30th to 20th

place, was the main talking point. It achieved this feat by almost

doubling in size during the 12 months to June 1998 - growing by 82 per

cent from billings of pounds 32.61 million to pounds 59.55 million.



’Rainey Kelly joins top 20’ ran the Campaign headline acknowledging the

achievement. So is this a major change in the agency’s credentials? Or

should we be wary of reading too much into heavy fluctuations in

billings among medium-sized agencies?



After all, Rainey Kelly wasn’t the only agency in the 20-30 club to

record a huge change year on year. Leagas Delaney was up 59 per cent,

Delaney Fletcher Bozell 27 per cent and FCB 23 per cent; suffering the

flipside of the coin, HHCL & Partners was down 18 per cent and RPM3 17

per cent. Can these numerical ups and downs truly reflect the health of

the agencies concerned?



Jon Leach, the marketing director of HHCL, says unequivocally not.

’There are two problems with billings as a measure,’ he states. ’First,

it takes no account of margins. Second, agencies are always arguing that

we need to get more upstream. We charge clients a separate fee for

consultancy work and it accounts for about 15-20 per cent of our income.

Media billings only measure the executional side.’



Chris Macleod, the chief executive of CDP, which was down 7 per cent in

22nd place, agrees, adding that through-the-line activities such as

sales promotion, sponsorship and direct marketing often have higher

margins than above-the-line advertising - but don’t register in the

billings figures.



Despite his agency’s success in this quarter’s figures, Bruce Haines,

the Leagas Delaney chief executive, has a great deal of sympathy for

Leach’s view. Indeed, Haines believes Leagas Delaney is still

disadvantaged by the billings measurement, which has the added drawback

of focusing exclusively on work running in the UK.



’We have a disproportionate amount of overseas business for a shop of

our size,’ he points out, ’so this still under-represents our position

in the London market.’ Dissatisfied with a leap from 29th to 23rd, he

claims: ’On an income basis, we’d be well inside the top 20.’



Not wishing to appear churlish, Haines adds: ’We’re very pleased (with

the increase), it represents a move in our UK business. But as an

indication of the health of our business, I’ll continue to look at our

income stream.’ And he warns other agencies about succumbing to the

’machismo’ of size: ’A lot of agencies have got into trouble by looking

at what billings they have and running their businesses

accordingly.’



So should we be concerned for Rainey Kelly? Is it in danger of believing

the hype and getting too big for its boots? Not likely. Jim Kelly, the

managing partner of Rainey Kelly, is far from being carried away by last

week’s good news. ’We don’t look at billings, to be honest,’ he

says.



’It’s great to be in the top 20 but we’re under no illusions. You’ve

only got to look at the gap between us and the agency at number 19 to

realise how volatile the rankings between 20 and 30 are.’



He’s right: Young & Rubicam, in 19th position, boasts billings of pounds

110.83 million - almost double those of Rainey Kelly. From 20th to 30th,

the gap is just pounds 18 million and, as Kelly acknowledges, it is

still with these agencies, rather than the mainly multinational networks

above it, that Rainey Kelly has most in common.



For the bigger agencies, he believes, billings are still important

because ’some clients won’t consider you unless you’re a certain size’.

There is also more commission-based work in the larger agencies, whose

clients are more likely to spend all the year round.



The converse is true for smaller agencies - which is why they are much

more prone to fluctuations in billings from one period to the next and

why, in turn, they rely on the more stable fee system. As Kelly points

out: ’It depends on whether all our clients choose to spend at the same

time. You can be up during one half of the year and down the next. With

the Times, Scottish Courage and Vauxhall, we’ve had a very big first

half of 1998.’



So are billings a complete waste of time as a measure of success for

smaller agencies? The Institute of Practitioners in Advertising Council

has been debating this very issue of late, with income being suggested

as an alternative. The problem is, of course, that income figures can be

massaged in a way that objectively compiled billings figures cannot.



All of which leaves Kelly to shrug his shoulders and say: ’The market

isn’t crying out for a different measure.’



Steve Waring, a partner at the specialist advertising accountancy firm,

Willott Kingston Smith, agrees. He believes gross margins are a more

important factor - and his company accordingly provides Campaign with

the first publication of its annual report on agency incomes.



But he maintains there is still a valid place for the billings

table.



’Billings are a good indicator of an agency’s health,’ he says. ’They

should not be seen as conclusive evidence but generally those agencies

showing marked improvements in billings are the ones whose profits are

also rising.’



Topics

Become a member of Campaign from just £46 a quarter

Get the very latest news and insight from Campaign with unrestricted access to campaignlive.co.uk plus get exclusive discounts to Campaign events

Looking for a new job?

Get the latest creative jobs in advertising, media, marketing and digital delivered directly to your inbox each day.

Create an Alert Now

Partner content

Share

1 Job description: Digital marketing executive

Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).