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