Worldwide advertising panorama | INA Global

Worldwide advertising panorama

Article  by  Tanguy DEMANGE  •  Published 10.08.2011  •  Updated 10.08.2011
An appraisal of the advertising world through a survey of the major global advertising groups: WPP, Omnicom, Publicis, Interpublic, Dentsu, Aegis, Havas and Hakuhodo, at the summit of a market that in 2010 amounted to more than $400 billion.

Summary

The pattern of the advertising business has changed considerably over the last twenty years, with greater concentration around a smaller number of players on a global scale, alongside independent agencies with more limited geographic activity (one or more countries) and/or more specialised output.
 
The world advertising market, estimated at around $442 billion in 2010 by ZenithOptima, is dominated by a small number of agencies that control two-thirds of it. At the very top, there are eight major groups. Six of them operate on a global scale with a global presence, two of them being American Omnicom and Interpublic, two British WPP and Aegis and two French Publicis and Havas. According to the ranking drawn up each year by U.S. specialist publication Advertising Age based on annual revenue[+] NoteRevenue or gross margin, the key value in the advertising business, corresponds to turnover minus the sums devoted to space-buying and technical services.X[1], WPP and Omnicom predominate with revenue around $12-13 billion dollars, followed by Publicis and Interpublic, half their size with revenue around $6 billion, then by Aegis and Havas, one sixth their size with  revenue close to $2 billion. Two Japanese groups Dentsu and Hakuhodo complete the picture but constitute an exception because their presence is limited to Japan (nearly 90% of their activity) and Asia. Their revenue ($3 billion and $1.5 billion, respectively) gives them the status of world players.
 
On the next rung down, there are some fifty groups of average size ($750-100 million in revenue terms), known as the independents.  Some are highly specialised, others not, and they may be establishedonly in their native countries, like Alliance Data Systems Corp. (United States), Asatsu-DK (Japan), Media Consulta (Germany) or Photon Group (Australia). Others are organised into small networks with a footholdin all continents but limited to a few countries. They lay claim to a great deal of creative expertise like Wieden & Kennedy (U.S.), M&C Saatchi (U.K.) Bartle Bogle Hegarty (U.K.) or Cheil (South Korea).
 
Finally, there are a number of local agencies, much smaller in size, some of which have nonetheless managed to build an international reputation, particularly because of their high degree of creativity, such as Ponce (Argentina), Taxi (Canada) or Famous (Belgium).
 
The present market pattern is the outcome of several waves of mergers and acquisitions kick-started during the 1980s by the Saatchi brothers (founders of Saatchi and Saatchi) with the takeover of major American groups (Compton Advertising, Ted Bates, Backer & Spielvogel, etc.). It carried on during the 1990s due to the appetite for expansion of the U.K.’s Martin Sorrell, the chairman of WPP (acquisition of JWT and Ogilvy). The latest wave unfurled in the early 2000s with the acquisition of Y&R, Cordiant and Grey by WPP, the takeover of Saatchi and Saatchi and Bcom by Publicis and of True North by Interpublic. One final move completed this train of events with consolidationin the digital sector (Digitas, 24/7, Razorfish, Doubleclick).
 
The global majors are organised as holding companies, listed on the stock exchange, managing and controlling several advertising networks, some generalised or specialised, some international or regional. The groups themselves do not deal directly with clients; it is the agencies forming the networks (sharing the name, management, philosophy and jointly held clientele) that constitute the operational level. WPP in the U.K. is the group with the largest number of networks (JWT, Y&R, Ogilvy, Grey, etc.) while Havas in France has the fewest (Euro RSCG). With several networks to run, the groups are able to manage the accounts of advertisers in the same line of business without fear of confidentiality or competitive overlap. This arrangement also enables them to operate in all communication sectors and handle all their clients’ expectations: advertising, space-buying, marketing services, corporate digital communication, healthcare, etc.

WPP (U.K.)

WPP (WPP Group plc.) is the leading global advertising group, managed by the iconic Sir Martin Sorrell (born in 1945), the former CFO of Saatchi & Saatchi (1977-1985). As of 1985, this Harvard graduate mounted a veritable advertising empire from a company in the south of England specialised in manufacturing metal baskets, Wire and Plastic Products (WPP), which he later repositioned in the advertising and marketing business. The group was built up by successive acquisitions (J. Walter Thompson in 1987, Ogilvy & Mather in 1987, Young & Rubicam in 2000, Tempus in 2001, Cordiant in 2003, Grey in 2004 and TNS in 2008), until it became world number one in 2009, with revenue of $13.6 billion (£8.7 billion).
 
As the acquisitions came in, the group took shape around four divisions:
  • Advertising, with revenue of $3.1 billion and five networks: JWT ($1.1 billion revenue), Young & Rubicam ($900 million), Ogilvy & Mather ($585 million), Grey ($505 million) and United/Red Cell ($86 million).            
  • Media, with revenue of $2.1 billion, with the M Group bringing together all the companies specialising in media counselling and advertising space-buying: Mindshare ($713 million), Mediaedge: circa ($595 million), MediaCom ($570 million) and Maxus ($90 million).
  • Marketing services, with revenue of $4.8 billion. These are all the group’s agencies specialised in public relations (Hill & Knowlton, Burson-Marsteller, Ogilvy Public Relations Worldwide, Cohn & Wolfe), marketing and digital (OgilvyOne, Wunderman, 141 Worldwide, G2, 24/7 Real Media), healthcare (CommonHealth, Sudler & Hennessy, Olgivy Healthworld, Grey Healthcare Group) and brand identity (The Brand Union, Landor Associates and Fitch).
  • Consumer surveys, with revenue of $3.6 billion through the Kantar Group and Millward Brown networks.
The group, which relocated its registered office to Jersey and its tax headquarters to Dublin, Ireland in order to reduce taxes while still remaining listed on the London Stock Exchange, has a workforce of 141,000 (including partners) in more than 2,400 agencies and 107 countries round the world.
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Omnicom (United States)


The U.S. Omnicom Group, Inc. found itself shifted down to second place in the world (after the purchase of TNS by WPP) and posted revenue of $11.7 billion in 2009. Since 1997, John Wren, loyal to the group after joining DDB in 1986, had become group Chairman and CEO. Omnicom was born in 1986 from a voluntary get-together between the independent advertising networks BBDO (Batten Barton Durstine & Osborne), DDB (Doyle Dane Bernbach) and Needham, Harper & Steers, to counter the galloping expansion of the British outfit, Saatchi & Saatchi. In 1994, the group acquired TBWA, which was subsequently organised in the form of a world network with effect from 1998 with the purchase of the international French group BDDP, and then merged with TBWA.
 
Omnicom is established in the three main industry sectors:
  • Advertising, with revenue of $3.9 billion via three main networks: TBWA Worldwide ($1.517 billion), BBDO Worldwide ($1.141 billion) and DDB Worldwide ($1.110 billion). Omnicom also owns three major advertising agencies that are not affiliated to any of the three networks. These are Goodby, Silverstein & Partners, Element 79 and 180 Amsterdam.
  • Media, with revenue of $1.3 billion, consolidated within the media counselling and space-buying division The Omnicom Media Group (OMG) made up of two main networks: Omnicom Media Direction (OMD) (730 million) and PhD (138 million).
  • Marketing services, with revenue of $6.5 billion, and activities in marketing, (Rapp, Proximity, Tequila), digital (Tribal DDB, Organic, Agency.com), public relations (Fleishman-Hillard, Ketchum, Porter Novelli) and brand identity (Interbrand).
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Publicis (France)

Publicis (Publicis Groupe SA) is the leading French advertising group and number three in the world since it edged ahead of Interpublic in 2009, with revenue of $6.3 billion (€4.5 billion). Set up in 1927 by Marcel Bleustein-Blanchet (1906-1996), Publicis has been chaired by Maurice Levy (born in 1942) since 1987.
 
The present make-up of the group is fairly recent. After a development phase in Europe during the 1970s and 1980s, Publicis only really got going internationally after 1987, driven by Maurice Levy who had just been put in charge.  Despite a setback in the United States (an exchange of cross-holdings with FCB that did not work out), the group started a policy of small selective acquisitions before making two major acquisitions: Saatchi & Saatchi in the U.K.in 2000 then the U.S. Bcom group in 2002 (the parent company of Leo Burnett, D’Arcy and Starcom MediaVest).  In 2006, the group went digital, in terms of the acquisition of Digitas in the U.S., followed by Razorfish in 2009.

Publicis is active in more than 100 countries, spanning all continents with 1,100 agencies and 45,500 employees. 

The group is structured around four pillars.
  • Advertising, with revenue of $2.3 billion, organised around three main advertising networks Publicis Worldwide ($875 million), Leo Burnett Worldwide ($777 million) and Saatchi & Saatchi ($650 million).
  • Media, with revenue of $1.5 billion, via Publicis Media Group, which consolidates the two media networks Starcom Mediavest ($806 million) and ZenithOptima ($779 million). 
  • Digital, representing $1.3 billion in revenue via the two digital networks, Digitas and Razorfish. It should be noted that the media and digital divisions operate within the same entity, Vivaki.  
  • Marketing services, with revenue of $1.2 billion. This includes agencies specialised in marketing (Publicis Dialog and Publicis Modem, Arc Worldwide, Saatchi & Saatchi X), public relations (MS&L, Publicis Consultants), and healthcare communications (Publicis Healthcare Communications Group).   
Publicis also owns Fallon, a network based in Minneapolis operating from regional platforms in London, Tokyo and Singapore; Bartle Bogle Hegarty (BBH), a network, 49% owned by Publicis Group, located in London, which possesses regional platforms in Singapore, Tokyo, New York, Sao Paolo and Shanghai together with ethnic communication agencies (Burrell).
 
The capital of Publicis is controlled by Elisabeth Badinter (the daughter of the founder Marcel Bleustein-Blanchet), associated since 2002 in a shareholders pact with the Japanese group Dentsu (on 5th November 2009, they held altogether 24.7% of the capital and 36.8% of the voting rights). 
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Interpublic (United states)

Interpublic (The Interpublic Group of Companies, Inc.) is the fourth largest global advertising group with revenue of $6 billion in 2009.
 
Interpublic is the oldest of the global advertising groups. It was set up in 1954 when the McCann Erikson agency (created in 1902) acquired the Marschalk and Pratt agency. Unlike what had been happening until then, the two agencies did not merge but were incorporated into a holding company that took the name Interpublic in January 1961. The originality of the model lies in the fact that the two agencies making up the holding company retained their autonomy and remained competitive with respect to one another. This system, which enabled the accounts of competitive businesses to be managed and thus increase the size of the agencies, has become the model for the sector.
 
From a New York base, Interpublic has developed both organically and by acquiringagencies like Campbell-Ewald (1973), SSC&B-Lintas (1978), Ammirati and Puris (1994) and DraftDirect (1996). After being market leader for some time, Interpublic was outdistanced by WPP then Omnicom, before briefly becoming front-runner again in 2001 with the purchase of TrueNorth (the parent company of the FCB network). Between 2003 and 2005, the group was hit by a series of financial scandals following improper tax returns. It gradually slipped back from first to fourth place in 2009, just behind the French group Publicis.
 
The group has been drastically reorganised and re-focused around the following business activities:
  • Advertising, with a revenue of $2.6 billion, with networks McCann Erikson Worldwide ($1.42 billion), Draftfcb ($885 million) and Lowe and Partners ($253 million). 
  • Media, with revenue of $1.2 billion and two principal networks under Mediabrands: Universal Media ($368 million) and Initiative ($248 million). 
  • Marketing services, with revenue of $2.5 billion and active indigital (R/GA, MRM), marketing (Momentum), public relations (Weber Shandwick, GolinHarris), healthcare (McCann Healthcare, DraftHealthcare) and brand identity (FutureBrand).
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Dentsu (Japan)

Dentsu (Dentsu Inc.) is the largest and one of the oldest advertising groups in Japan (the second largest advertising market in the world). In global terms, it holds fifth place with revenue estimated at $3.103 billion (¥291 billion). The group was created in Tokyo in 1901 by a journalist, Hoshiro Mitsunaga (1866-1945), who began by operating as advertising space manager and press agent before moving exclusively into advertising at the end of the 1930s. Since April 2009, Dentsu has been managed by Tatsuyoshi Takashima (born 1944).
 
Unlike its rivals, Dentsu is organised around a single network also under the name Dentsu, which accounts for 97% of the group’s revenue, i.e. about $3.03 billion, making it the premier advertising network in the world. This position does not prevent it working for advertisers belonging to the same business sectors (the group has more than 3,000 clients to its name. The rule is to compartmentalise the teams working for competitors. Another original feature: Dentsu is both a space broker and advertising space manager, a situation almost unthinkable elsewhere because of the risk of conflict of interest (Publicis is also in this situation, editor’s note). The group also has several departments like Dentsu TEC (sales promotion and events), Dentsu Public Relations (public relations), Dentsu Research (research), Dentsu Impiric (direct marketing), etc.
 
Although most of its business takes place in Japan (92%) where it has more than 32 agencies, over the years Dentsu has put together a robust network of subsidiaries throughout Asia, where it is the leading group (China, Singapore, Thailand, etc). The group was also tempted to develop internationally, but has been put off for some time by a setback in the purchase of Collett Dickenson Pearce in the U.K. in 1990. Faced with an inevitable slowdown in the Japanese market, the group is contemplating fresh acquisitions abroad. It already owns agencies in the U.S. and in Europe (Cayenne and Attik) and appointed a European manager in July 2009.
 
Listed on the Tokyo stock exchange since 2002, Dentsu holds 15% of the capital of the Publicis group. The group also has a minority shareholding in the Asian network Dentsu Y&R (with WPP).
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Aegis (U.K.)

Aegis (Aegis Group plc) is ranked sixth worldwide among the advertising groups, with revenue of $2.109 billion ( £1.346 billion). This British group emerged in 1988 from a rapprochement between the WRCS agency (founded in London in 1979) and the first independent French space broker, the SGGMD (Société Gilbert Gross Michel Doliner), founded in 1969 and parent company of the Carat agency. In 1990, the group officially adopted the name Aegis. In 2005, a bid was made for Aegis by Publicis and WPP (the latter being only interested by the survey branch). The bid failed with the arrival of Vincent Bollore, chairman and leading shareholder of Havas, who took 26.62% of the capital of Aegis and also became its leading shareholder. Since March 2010, Aegis has been managed by Jerry Buhlmann (born in 1959) who joined the group in 1999 when Aegis acquired BBJ, a company he had set up in 1989.
 
Aegis is established in 80 countries with around 16,800 employees and specialises in media counselling and space-buying as well as market research. The group is organised around two branches: Aegis Media ($1.29 billion in revenue) and Synovate ($816 million) devoted to market research. The Aegis Media network includes several agencies such as Posterscope for sales point communication and events and Isobar for digital (Isobar has been organised as a network since May 2010).
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Havas (France)

Havas (Havas SA) is the second largest French advertising group and the seventh largest in the world, with revenue of $2.01 billion (€1.441 billion). It is established in some fifty countries and has about 14,000 employees distributed among 351 consolidated companies.
In France, with 2,763 employees spread amongst 38 companies, Havas is practically on the same footing as Publicis.
 
Partly originating with the Havas Agency set up in 1835 (to become Vivendi in 1988), the group began operating in the press and advertising and prospered until the Second World War, before being nationalised in 1944. In 1975, it took on the name Eurocom in the form of a holding company encompassing all the subsidiaries specialised in the various communication businesses. It was floated on the stock exchange in 1982, which enabled it to start going international in Europeand set up partnerships around the world. In 1991 it acquired the RSCG group (Roux, Seguela, Cayzac & Goudard), heavily in debt, and founded the network Euro RSCG. In 2000 it also set up a media network, MPG, then acquired the American group Snyder, specialised in marketing services. From 1998 to 2001, Vivendi completely broke away from the advertising group, which took on the name Havas in 2002. Between 2001 and 2004, Havas went through stormy weather with the collapse of the world advertising market and a high level of indebtedness. With a low and attractive price on the stock exchange, the Bolloré group made its entry into the capital of Havas until it reached the status of leading shareholder with nearly 33% of the capital. Since 2005, Havas has been under the chairmanship of Vincent Bolloré (born in 1952) with Fernando Rodes Vila (born in 1950) as CEO. The Rodes family, the founders of Media Planning (MPG), has been associated with Havas, as a shareholder, since 1999. 
 
Havas, the smallest of the major groups with a complete service offering, has recently re-focused around a single advertising network, Havas Worldwide ($1.206 billion in revenue) and includes the network Euro RSCG Worldwide and the agency Arnold Worldwide. The group also includes a media network, Havas Media ($623 million), made up of the MPG network.
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Hakuhodo (Japan)

Hakuhodo (Hakuhodo DY Holdings) is the second largest Japanese group and the eighth largest in the world, with revenue in 2009 of $1.522 billion (¥143 billion yen). Since April 2010, the group has been chaired by Hirokazu Toda (born in 1949).
 
The current group was established in October 2003 by the rapprochement of Hakuhodo, the oldest Japanese group set up in 1895, and the Daiko Advertising and Yomiko Advertising groups. The three partners became subsidiaries of the newly formulated holding company (Hakuhodo DY Holdings) and established the first integrated media company in Japan, Hakuhodo DY Media Partners Inc.
 
The Hakuhodo group incorporates the networks Hakuhodo ($956 million revenue), Daiko Advertising ($217 million), Yomiko Advertising ($99 million). The group is mainly established in Asia but also owns agencies and partnerships in Australia and Europe (including France) under agreements with TBWA. It employs 3,130 staff round the world.
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Photo credits : InaGlobal / Official logos of mentioned companies

  • 1. Revenue or gross margin, the key value in the advertising business, corresponds to turnover minus the sums devoted to space-buying and technical services.
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