As a succinct summary of the plight of Europe's agency groups, the candid observation of one network chief is hard to beat: "It's not a question of who's doing best but who's doing the least worst."
Global political turmoil, the relationship between Europe's economy and its troubled US counterpart, the paucity of significant new pan-European business as clients consolidate to cut costs, and the increasing capability of creative hotshops to snatch big pieces of business. All these things are combining to depress growth and spirits among the major players.
But what really makes agency managers despair is Germany. The country that was once Europe's economic engine room has become its millstone.
The continent's biggest marketing communications market - 20 per cent larger than Britain's - is in deep trouble. The fears elsewhere in Europe that the business-led recession could spill over and destroy consumer confidence has already become a reality in Germany.
The 10 per cent slump in its media market has never been matched in the UK, even during the darkest days of recession, and will certainly have been a factor in Zenith Optimedia's downgrading of Europe's ad market growth prospects from a 1.7 per cent increase for this year to a 0.7 per cent fall. Publicis is among the leading European agency groups which blames Germany for the dip in their figures.
As if Germany's plight isn't damaging enough for the big networks, their ability to protect themselves is hampered by Draconian redundancy laws and union power. "Agency offices in Germany can't create the economies of scale possible in the UK," Rick Bendel, the Publicis regional chairman for the UK and Northern Europe, says.
The other problem is the way the German ad system operates. It's far more regionalised even than the US, leaving small agencies highly exposed and unable to cope. "It's not that German clients aren't advertising but they aren't commissioning new work," a network regional director says. "That's OK if you're on commission - but few of us are any more."
Germany's recession stems from the problems of German manufacturing, which has traditionally been based on the production of premium products sold at premium prices. Eastern Europe and Asia have taken much of this business away, resulting in joblessness levels with which a hugely generous social security system can't cope.
"With the country close to deflation, the situation in Germany is about as tough as it could possibly be," Mike Waterson, the chairman of the World Advertising Research Center, warns. "What's more, it's unlikely to come out of it very quickly."
Elsewhere in Europe, fragile optimism is overlaid by large amounts of caution. While consumer spending is holding up in most markets, free-falling corporate profits are a Europe-wide phenomena. This has been a recession quite unlike any other. "In past downturns we just saw business move from above to below the line," a network head says. "This time the cuts have been right across the board."
Nevertheless, retail sales across the continent are on the rise - always a harbinger of returning confidence - as are TV bookings in Britain and France. PR, too, is staging something of a comeback.
However, any return of confidence would be obliterated by a war in the Middle East. Last month, Maurice Levy, the Publicis chairman, warned that an attack on Iraq would scupper any chance of an advertising recovery as spiraling oil prices and disruption to the world economy lopped up to two percentage points off the global GDP.
"If there's a quick war or no war a gradual recovery in Europe's ad market could be under way by the second quarter of next year," a senior network manager predicts. "If there's political turmoil, you can rule out any recovery until 2004."
For the time being, Europe's networks are having to do their best to manage growth in a zero-growth economy. The influence of client procurement departments is ensuring that most movement of pan-European business is driven by the need to achieve savings through consolidation within an existing network "club".
"All our big markets - the UK, Germany, Spain, France and Italy - are suffering from lack of growth," Mike Walsh, the Ogilvy group chairman for the UK, Europe, Africa and the Middle East, says. "There's very little business up for pitch."
Kate Robertson, who leads D'Arcy's European new-business drive, points out that until two years ago a top ten network would have been in contention for a least five substantial pieces of pan-European business and might have expected to pitch for three. "It's nothing like that today," she says.
Worse, the biggest players no longer have a monopoly on the biggest accounts. A few years ago, it would have been inconceivable that Amsterdam's 180 would be handling part of the worldwide Adidas account or that Unilever might use Mother in the UK.
Meanwhile, pressure on agency margins is relentless. A survey across 19 countries by the European Association of Communication Agencies found 38 per cent of clients asking for extra free services, 46 per cent asking for more under existing fee arrangements and 54 per cent asking to re-negotiate fee agreements. "There's no doubt that cost effectiveness is taking precedence over creativity," Dominic Lyle, the EACA director-general, says.
Against that background, the largely indifferent performances revealed in Campaign's European network league table are easily explainable.
BBDO Europe takes the number-one spot. According to Julian Ingram, the business development director for Europe, the Middle East and Africa, it's a testament to an adaptable and flexible structure and the network's ability to score in one of the only areas where it's currently possible to gain a competitive advantage - creative firepower.
Yet the figures need careful scrutiny and, in some instances, do not appear to make sense. "The figures stick out like a sore thumb," Bob Willott, the editor of the industry newsletter Marketing Services Financial Intelligence, comments. "The relationship between income and billings doesn't seem to stack up."
Whatever the veracity of some agency figures, it's clear that, in every case, the recession that struck Europe's adscene has ensured some things will never be quite the same again,
On the surface much will seem normal. Reports of mainstream TV advertising's impending death are much exaggerated. Indeed, as Waterson points out, giants such as Procter & Gamble and Unilever have been taking advantage of the downturn to gain massive share of voice. It's the "me too" brands - and the agencies handling them - that will suffer, he predicts.
What remains to be seen is what impact the success of small creative iconoclasts such as Weiden & Kennedy and Strawberry Frog will have. Ingram believes they're already proving that the lumbering structures of many major networks are unsustainable. A Europe-wide talent war, in which networks are losing their brightest would-be recruits to management consultancies, and even their own clients, isn't helping, he adds.
There are other imponderables. Will the ad investment that disappeared from Europe as US multinationals retrenched return or will a large proportion of it go to Asia where companies see the prospect of huge returns for a low investment? Has the recession forced clients so far down new communication routes they will not readily return to traditional ones?
BBDO believes the balance has irrevocably shifted. Proximity, its marketing services offshoot, provides 36 per cent of its revenue and is expected to be as large as its above-the-line business within three years.
Certainly, if the evolving relationships between Europe's agencies and their clients is properly managed, some rich veins of business are waiting to be tapped.
Turkey is emerging as a large potential market for advertisers while President Putin's move to make the ownership of Russia's TV stations more transparent is opening up an expanding media market. Meanwhile, many agencies believe there's still extra business to be had from pharmaceutical manufacturers. Although the pace of transferring many prescription-only medicines to over-the-counter status has slowed, the prospect of agency involvement with new drugs at the clinical-trial stage remains.
Just how soon that can happen depends on whether or not the lid stays on the Middle East power keg. "Our industry is very much a reflection of the times," Ingram says. "While political uncertainties remain, nobody knows where we'll end up."
TOP 20 EUROPEAN AGENCY NETWORKS RANKED BY INCOME (2001)
RANK AGENCY NETWORK (holding company) Income 01 Income 00 % change
euros (m) euros (m)
1 BBDO Europe (Omnicom) 756 739 2.2
2 Ogilvy & Mather (WPP) 750 659 13.8
3 Y&R (WPP) 741 796 -7.0
4 Euro RSCG (Havas) 730 752 2.8
5 McCann-Erickson (Interpublic Group) 679 709 -4.2
6 Publicis (Publicis) 600 570 5.3
7 Grey (Grey Global) 582 562 3.7
8 TBWA (Omnicom) 550 526 4.5
9 J. Walter Thompson (WPP) 537 516 4.0
10 DDB Europe (Omnicom) 500 488 2.5
11 Lowe Europe (Interpublic Group) 410 414 -1.0
12 Bates Europe (Cordiant) 399 375 6.3
13 Leo Burnett (Bcom3) 381 341 12
14 Leagas Delaney 345 428 -24
15 D'Arcy (Bcom3) 332 320 3.8
16 Saatchi & Saatchi (Publicis) 239 264 -10
17 FCB (IPG) 151 152 -0.5
18 Arnold (Havas) 118 133 -10.2
19 Scholz & Friends 79 84 -6.7
20 M&C Saatchi 51 47 7.8
RANK AGENCY NETWORK (holding company)
Billings 01 Billings 00 % change
euros (m) euro (m)
1 BBDO Europe (Omnicom) 5,550 5,480 1.3
2 Ogilvy & Mather (WPP) 7,125 6,525 9.2
3 Y&R (WPP) 13,110 11,435 14.7
4 Euro RSCG (Havas) 4,760 5,000 -4.8
5 McCann-Erickson (Interpublic Group) 4,655 4,650 0.2
6 Publicis (Publicis) 3,010 3,140 -4.1
7 Grey (Grey Global) 3,465 3,600 -3.8
8 TBWA (Omnicom) 4,105 4,065 1.0
9 J. Walter Thompson (WPP) 3,710 3,665 1.2
10 DDB Europe (Omnicom) n/s n/s n/s
11 Lowe Europe (Interpublic Group) 3,075 3,185 -3.5
12 Bates Europe (Cordiant) 3,480 3,295 5.7
13 Leo Burnett (Bcom3) 3,335 2,980 12.0
14 Leagas Delaney 1,255 1,755 -40.0
15 D'Arcy (Bcom3) 3,915 3,840 1.9
16 Saatchi & Saatchi (Publicis) 2,125 2,420 -12.3
17 FCB (IPG) 1,370 1,380 -0.5
18 Arnold (Havas) 835 980 -15.1
19 Scholz & Friends 625 665 -6.4
20 M&C Saatchi 440 400 9.0