OPINION: Little joy for agencies as overall spend increases

It is encouraging to be able to report, courtesy of the specialist accountant, Willott Kingston Smith, that the marketing services industry enjoyed its best year since the start of the decade as clients spent more, agencies made better profits, more people were employed, productivity per employee increased and the overall cash position improved (see feature, p32).

It is encouraging to be able to report, courtesy of the specialist

accountant, Willott Kingston Smith, that the marketing services industry

enjoyed its best year since the start of the decade as clients spent

more, agencies made better profits, more people were employed,

productivity per employee increased and the overall cash position

improved (see feature, p32).



The UK economy is benefiting from stagnant inflation and low interest

rates, but this optimism does not yet extend meaningfully into the

advertising industry.



Clients of the top 50 groups have spent 10 per cent more than in the

previous year, nudging pounds 20 billion in total. Of that, however, the

industry retained pounds 191 million in pre-tax profits - a margin of

less than 1 per cent. There is little cause for celebration and the

results fall far short of the 80s boom years.



More serious still, the encouraging figures disguise a shift in the

allocation of marketing spend between different sub-sectors, with direct

marketing and media independents gaining at the expense of ad agencies.

Here is incontrovertible proof that many clients care less about the

medium and more about the message.



Media independents have been doing exceptionally well, although their

rate of growth now seems to be slowing down, possibly because

‘dependants’ are fighting back, and possibly because the independents’

gross margins are slipping as they chase more volume.



Overall, thanks to the strong management and creative abilities at

Abbott Mead Vickers BBDO, Simons Palmer Clemmow Johnson, Howell Henry

Chaldecott Lury and several other prominent agencies, there is still

plenty of evidence to point to outstanding creativity being linked

directly to financial success. That may not be what the clients’ finance

directors expected to hear, but it is a deserved and continued relief

for those who wish to enjoy working in the advertising industry.



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