Media shops make ad agencies look feckless andflabby

A study of last week's Marketing Monitor report from Willott Kingston Smith could leave you thinking that ad agencies and media agencies have very little in common.

About as little in common, in fact, as the approaches taken by the former Big Brother contestant Jade Goody and the US runner Deena Kastor to the London Marathon. Goody, famous for being both fat and stupid, justified her reputation by declaring on the start line that her preparation regime consisted of just four training sessions and a diet focused on "eating curry and Chinese and drinking". This considered, she did well to last 21 miles before collapsing. Kastor, on the other hand, eschewed the chow mein, prepared hard and smashed her own US marathon record to win the women's race.

Willott Kingston Smith's report, which focuses on productivity and profitability across the advertising and media industry, chides ad agencies for feckless, Goody-like behaviour as staff costs increase and profitability falls. "Efforts need to be made to find ways to demonstrate value and so increase income while finding creative ways to reward and retain staff, without necessarily throwing cash at the problem," the report warns.

Meanwhile, media agencies are praised for maintaining employment costs at around £38,000 per head while increasing profit margins from 14.9 per cent to 15.4 per cent since the previous report in autumn 2005. Staff productivity is up at media agencies, the report says, with staff costs representing 55 per cent of gross income, compared with 57.3 per cent at ad agencies.

The report provides every indication, then, that media agencies remain leaner and better-run businesses than their creative counterparts. Continuing to vindicate the pioneers who pushed for the great separation of media from creative.

It throws up some areas of concern though, not least pressure from clients to lower costs while staff demand more money. The answer might seem obvious, but it calls for bravery and strength from agency management: "Holding the line on price is the best way to maximise profits, and agencies with the confidence to do this will reap the rewards."

Easier said than done, perhaps, but at least agencies that are part of the larger networks are making savings from the consolidation process, especially on the buying side.

Yet the generalist media agencies now face a struggle to staff up on digital skills, with expertise relatively thin on the ground and sky-high salaries being demanded. Expect this to drive up costs over the next three or four years until a generation of well-trained graduates rises through the ranks. So, while media agencies are still lean and can afford the odd splurge, it's not quite time for Goody-style beer and curry every night.