Digital accounts for more than one quarter of U.S. agency revenues

Advertising Age looked at more than 900 ad shops for its 2011 Agency Report, and of the US$30.4 billion they made in revenue in 2010, 28% – US$8.5 billion – came from digital service

Advertising Age looked at more than 900 ad shops for its 2011 Agency Report, and of the US$30.4 billion they made in revenue in 2010, 28% – US$8.5 billion – came from digital services.

One point is clear: digital has become a standard tool across every agency discipline.

To be sure, six in 10 digital dollars – or $5.1 billion – last year went to digital-specialty agencies such as Publicis Groupe’s Digitas and Sapient Corp.’s SapientNitro.

The second biggest portion – $2 billion – went to agencies whose core business is direct marketing or customer relationship management. Ad Age estimates direct-marketing/CRM agencies generated 42% of U.S. revenue from digital services in 2010. (Distinctions blur between digital agencies such as Digitas, which began in 1980 as direct shop Bronner Slosberg Humphrey, and direct/CRM powerhouses such as WPP’s Wunderman network, which has amassed deep bench strength in digital.)

The remaining portion of revenue – roughly $1.4 billion – was spread across agencies focused on disciplines including advertising, promotion, health care and public relations.

Not surprisingly, startups tend to have a heavy digital focus. Pereira & O’Dell, a 3-year-old San Francisco ad agency, generated 55% of revenue last year from digital.

But agency titans are very much in the mix. Leo Burnett Worldwide/Arc, a Publicis ad/marketing-services agency, boasts it has “more digital experts (325 in just the U.S.) than most standalone digital agencies.”

Digital makes up a growing share of revenue across agency disciplines.

At McGarryBowen, an ad agency owned by Dentsu Inc., digital accounted for an estimated 24% of 2010 revenue, up from 20% in 2009.

Carlson Marketing, a loyalty management and marketing-services firm owned by Groupe Aeroplan, last year generated nearly one-third of U.S. revenue from digital, up from 25% in 2009.

Public-relations agencies have moved aggressively into social media, grabbing more digital dollars. Edelman, the world’s largest PR agency, said its digital revenue doubled in 2010; the firm generated 12% of U.S. revenue from digital services.

Ad Age DataCenter arrived at its estimate for digital’s 2010 share of overall U.S. agency revenue – 28% – through a bottoms-up analysis of agencies based on input from more than 1,000 agencies, agency networks and agency companies. The figure, as it happens, tracks with global claims of two agency giants: WPP and Publicis said digital accounted for 29% and 28%, respectively, of their 2010 worldwide revenue.

Wall Street places a premium on all things digital. But two agency firms – Omnicom Group and Interpublic Group of Cos. – decline to float a specific digital percentage, arguing that digital is too integrated in their offerings to be parsed out.

Omnicom president and CEO John Wren got to the crux of the matter on a call with stock analysts last October: “Fundamentally, I believe that anything that’s not digital will soon be digital or soon be very, very unimportant.”

To read the original article in Advertising Age, click here.

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