MEDIA FORUM: Do billings reflect the reality of media agencies? - Why are media specialists reluctant to declare their income figures? Is it modesty or do they have something to hide? Alasdair Reid reports

Some people say that the league tables published annually in Campaign's Top 300 report are a matter of life and death. That (to borrow the words of a Liverpudlian Scot once revered in sporting circles) is nonsense.

Some people say that the league tables published annually in Campaign's Top 300 report are a matter of life and death. That (to borrow the words of a Liverpudlian Scot once revered in sporting circles) is nonsense.

Of course it's nonsense. They're far more important than that.

There are always those who are tempted to dismiss the rankings as an irrelevance. Or no more than a bit of harmless fun. But those same people will doubtless be obsessed with their league position. It's something you tend to feature in credentials material or in pitch presentations. It matters a lot for internal morale too. The raw numbers may not say very much about agency culture or branding but they do say an awful lot about status and your general place in the pecking order.

Strange, then, that the billings remain the currency used by the industry to calculate that pecking order. Billings are a notoriously inaccurate marker. Or, to be more accurate, 'declared billings' figures are a notoriously inaccurate marker. Agencies routinely make them up. They rarely bear any relation to the media spend figures as measured by MMS.

And aren't they increasingly irrelevant anyway? Haven't media agencies been evolving from old-fashioned haggling specialists into brand communications strategists and consultancy companies? Don't many agencies have tons of planning-only business? Surely billings no longer reflect the reality of the industry.

In this year's Top 300 entry form, Campaign invited media specialists to give us their income figure. Only six responded. The issue was also debated recently by the media policy group within the Institute of Practitioners in Advertising - and according to some reports, it was dismissed within a couple of minutes.

Is that true? If so, why? Jim Marshall, the chief executive of MediaVest, states categorically that this version of events is well wide of the mark.

'The truth is that it only took a couple of words and the second one was 'off',' he reveals. 'I'm not at all sure there is any real argument in favour of releasing an income figure. I sort of understand why it's relevant for (creative) agencies where billings are less relevant. I know that people are talking about media companies becoming more like brand consultancies but the truth is that we are all primarily planners and buyers of media. Where media companies have acquired consultancy expertise it is always directed to the effective planning and buying of media. And people talk about the fact that they have planning-only business these days. But it's not beyond the wit of man to find a way of representing that.'

Marshall argues that how agencies run their business is precisely that.

Their business. And if you want league tables to reflect scale in the marketplace, then billings are a far more appropriate measure. However, some observers insist that there's another issue here - transparency.

Oliver Cleaver, the European media director of Kimberly-Clark, isn't a great fan of the way some specialists do business. 'Income figures are usually far higher than net commissions, indicating that there are separate income streams,' he explains. 'It's not just the interest they can accrue by the very fact that they are handling vast sums of money. Much of it is what they call 'vendor incomes'. This is any situation where an agency can earn an additional commission or an over-rider, for instance, where you are able to offer a media owner increased volume or a higher share. It needn't be additional commission. It can take the form of free space or bonus inventory that is charged on to the client. Or rebates for poor placement. All these deals are hidden.'

Some would argue that this is an ugly legacy inherited from the days when the big advertisers were first beginning to centralise their billings.

The more ambitious media specialists effectively 'bought in' the huge centralised accounts by offering to do the business on tiny margins. The gamble was that what they'd lose in commissions, they'd recover through a myriad of different ways of 'working' the larger sums of client money at their command.

But the business has moved on. Or at least it should, in theory, be moving on. And some observers believe that, while the industry is content to scrape extra margin in this way (and at the same time denying that reality), then it's always going to struggle to evolve. Increased transparency would be a great step forward, Cleaver asserts.

'The sad part is that I wouldn't mind being ripped off if the money was being reinvested. I'd like to see people with MBAs working on my business.

I'd like to see more proprietory software and research. Their cleverest people spend most of their time sending invoices back and forward to media owners and hiding these figures from us. These are the very same people who talk about the business moving forward, who talk about commitment from both sides, a Rolls Royce service and business-building partnerships.'

David Pattison, the chief executive of New PHD, was one of the six to submit an income figure. Transparency, though, wasn't a defining factor - and he certainly doesn't want to come across as 'holier than thou'.

He states: 'One of the upsides, of course, is increased transparency but that's not the main reason we're doing it. It just feels that the time is right. A fair amount of what we do has a media turnover element to it but whereas five years ago probably up to 95 per cent was commission for media planning and buying, it's now nearer 60 per cent. We are the biggest planning agency in the country (New PHD plans on business worth a total of pounds 800 million in media spend) and the truth is that our business is much more than a commission income-driven business and therefore income is a better measure of the size of a media company.'

But Steve Allan, the chief executive of MediaCom, can't really see the purpose of declaring an income figure. He says: 'We all have to file company accounts so it all comes out into the public domain anyway. I know it's sometimes difficult to break the figure out but these days most media agencies are separate limited companies. And our attitude is that we always share the economics of our business with clients. As a business, media planning and buying companies are perhaps uniquely obsessed with measuring themselves. You don't see it so much in other industries. If you are trying to show that you are a successful company income is one measure - but if you are looking at media clout and you want to show negotiating power, billings are still a better indicator than income.'



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