Agency reaction to billings tables has long hovered between
ambivalence and hypocrisy. They hype the figures when they're good and
hail them as an acknowledgement of advertising's influence on the
When they're bad, they are dismissed as an anachronism and an irrelevant
throwback to a time when the commission system ruled. Income is what
matters, they insist.
While this is true and billings are dead and buried as far as being an
accurate guide to the industry's overall health is concerned, it still
has a disconcerting way of rattling its coffin lid. So much so that the
latest AC Nielsen MMS figures showing that more than two-thirds of the
top 30 creative agencies and half the top 30 media shops have
experienced falls in billings over the year to June 2001 look like an
ominous warning from beyond the grave.
Agency chiefs may dispute some of the methodology that goes into the
compilation of the figures (see page 20). Nevertheless, they add weight
to a growing belief that recession has arrived. It may not be as long or
as painful as the one that occurred a decade ago. But recession it most
Consumers still show a propensity to spend and a reluctance to save; the
property market, no longer fuelled by City types with fat bonuses to
spread around, faces a slump. The danger of what has so far been a
crisis in corporate confidence spilling over into the consumer market is
now very real.
True, there are flickers of light within the gloom. Unlike last time,
the latest downturn isn't taking place against a background of high
interest rates. And the latest MMS data includes the residual of the
dotcom fallout and reflects an adjustment after what has been an
exceptionally good time for the industry. What's more, most major
agencies still do business with solid "bricks and mortar" companies
acknowledged as undervalued in terms of market capitalisation.
A rise in their share prices is in everybody's interests.
For the time being, though, agencies are in for a torrid time. Some
report clients are even trying to renegotiate fee-based assignments.
And, with TV spots now 25 per cent cheaper than a year ago, advertisers
can maintain a presence while diverting the saved money into profit.
No wonder Sir Martin Sorrell warns that the situation will get worse
before it improves or that others are following the example of his WPP
by diversifying into more recession-proof offerings such as direct
marketing and sales promotion.
Write off this year, expect no major improvement until autumn of next
year and batten down the hatches in the meantime seems to be the
That may force a few tough calls. Some fear the current downturn could
reduce the UK agency workforce by up to 15 per cent either through
redundancy or non-replacement. Meanwhile, Nabs reports a 60 per cent
leap in referrals during the past six weeks. It looks like a harsh
- Caroline Marshall is away.