Overview: Extreme Makeover

Posted on by Chief Marketer Staff

NO ONE COULD accuse the promotions industry of standing still.

There are several new names among the top of the PROMO 100 this year, seeded among the mainstays. Witness the agencies that have jumped (not grown) into the spotlight on the merits of their work — Civic Entertainment Group, Eric Mower & Associates, Velocity Sports & Entertainment. Add in the agencies that seem to spring from nowhere — ePrize, The Marketing Arm, Mr. Youth — whose growth propels their ascent.

Then look at the extreme makeovers — Momentum Worldwide, Aspen Marketing Group, Arc Worldwide — that put new faces even at the helm of familiar shops.

The ranking has gotten almost volatile, with more changes from year to year than ever before. We attribute that to two factors: Our emphasis on quality of campaign work — which can vary widely from year to year — and the meteoric growth of a handful of agencies, big and small.

Seventeen agencies showed triple-digit growth in net revenues from 2002 to 2004 — five of them among the 50 biggest agencies. Fifty-six agencies showed double-digit growth. In fact, seven of the 10 biggest agencies (net revenues of $91 million to $365 million) showed double-digit growth, ranging from 10% to 35%.

Financials have always been slippery — the PROMO 100 has a long history of agency execs accusing their competitors of fudging revenue reports — but this year we have more estimated data than ever before. Credit the Sarbanes-Oxley Act, now in its third year of limiting financial data from publicly held companies. Our formula measures net revenues, two-year growth, and quality of work, in equal portions (See How We Did It, p. 43). This year, for the first time, we had to use three years of revenue estimates to calculate our two-year growth estimates for the 21 agencies that are part of publicly held networks. That means the net revenue figures and the two-year growth numbers are estimates, not verified data — and that’s two-thirds of our formula. This fact reinforces our belief that the rankings should reflect quality of work as much as financials. The proof, after all, is in the pudding.

Newcomers

Four agencies are new to the Top 10 this year:

ePrize rose to No. 3 from No. 12 with strong two-year growth (289%, to $14.2 million) and campaign work beyond its core competency of online games, including a road trip and online effort for Gap and an online and in-market summer event for Tanqueray gin.

Aspen Marketing Group jumps to No. 4 from No. 52 with decent two-year growth (66%, to $59.4 million), an impressive turnaround after some stumbles in 2002-03 integrating acquired agencies.

The Marketing Arm springs onto the ranking at No. 6 with the fastest two-year growth rate (770%), driven mostly by acquisition. Parent Omnicom Group bulked up the sports marketing shop by folding in three other agencies (USM&P, Davie-Brown and Millsport) and forming Promo Link under The Marketing Arm.

Civic Entertainment Group, our Agency of the Year, rose to No. 10 from No. 21 last year, thanks to stellar creative that took top marks among all agencies this year (see story on p. 28). Growth was strong (64%) on the small revenue base that topped $3 million in 2004.

All Over the Map

Agencies in the New York City-Connecticut corridor are faring especially well, demonstrating solid growth and strong campaign work. Connecticut has long been a promotions hub; New York is a popular event-marketing center, from Central Park concerts and Times Square p.r. pranks to pop-up stores that garner national attention.

Business is good elsewhere, too. Midwest shops ePrize and GMR made our top five. Chicago is home to Aspen Marketing Group, Draft, Promotion Group Central, Arc Worldwide’s headquarters, The Marketing Store and 141 Worldwide’s base (New York operates separately). The Marketing Arm and TracyLocke hail from Dallas, despite TracyLocke’s strong presence in its Wilton, CT, office. AMP and Arnold Brand Promotions anchor Boston’s community, and Virginia is home to PowerPact and RedPeg Marketing (formerly Momentum Marketing). While only two Top 25 agencies are based in California (Seismicom and EMAK, formerly Equity Marketing), there are 13 California shops on our list. Most of the big networks maintain at least one California office.

Slippage

Five agencies fell out of the Top 10 this year:

AMP, our 2004 Agency of the Year, fell from No. 2 to No. 18 with mid-range two-year growth (25%) and 24th place for campaign work.

PowerPact fell from No. 4 to No 14, with modest two-year growth (67%) and lower marks for its campaign work (No. 15 this year, down from No. 5 in 2004).

EastWest Creative fell from No. 6 to No. 32, with slow two-year growth, given its revenue base (20%, to $14.8 million) and lackluster campaign work compared to its No. 1-ranked work in the 2004 listing.

Draft slipped from No. 7 to No. 12; its large revenue base (a chart-topping $365 million) kept its two-year growth rate relatively low (20%).

Arnold Brand Promotions dropped from No. 8 to No. 30 with a middling two-year growth rate (21%) and less-impressive campaign work than its 2004 showing, where it ranked second for quality of work.

All across the chart, most of the agencies that fell in the rankings slipped on quality of work. Some didn’t show us their results; others didn’t have permission from clients to present their best work. Much of the work reviewed was solid, block and tackle stuff, but was limited in scope or imagination. It begs a few questions: Are marketers squelching creativity? Are agencies too understaffed — or under-trained — to brainstorm beyond the basics?

Agencies overall are showcasing more trade show, business-to-business and employee-audience work. Velocity handled FedEx’s Most Reliable Player b-to-b effort and the Olympic Hopefuls program that touted Home Depot staffers competing in the 2004 Games. 141 Worldwide handled Boeing’s presence at the Farnborough (Germany) Air Show. Wunderman handled Microsoft’s Windows Mobile b-to-b pitch to decision makers at the top 25 mobile-operators worldwide. Five other agencies sent trade show work; two sent campaigns they’d run for clients’ staff (one was a company picnic). Are agencies picking up these assignments to compensate for a slowdown in consumer work, or are marketers genuinely putting more into their trade, staff and b-to-b promotions?

The latter, because of consumer marketing clutter and a general push towards integrated marketing, says Tom Hansen, senior VP-executive creative director at Wunderman. “If you’ve got a message and limited dollars, it makes sense to say the same thing to various audiences. Clients used to have five or six agencies and in-house divisions handling different parts. Now they’re comfortable putting the hammer on one or two of their mainline agencies and saying, ‘Make this resonate with everybody,’ including retailers, the sales force and employees.”

Agencies with events, promotions and meetings expertise court those integrated projects, says 141 Worldwide President Jay Farrell. When consumer marketing budgets shrank, shops began “more outreach to spread the [promotion marketing] gospel to these areas,” Farrell says.

Meanwhile, packaged goods veterans now in b-to-b jobs bring a consumer marketing mentality, he adds: “That has clients rethinking how they do business.”

Rank by Revenue
2005 Rank AGENCY 2004 U.S. Net Revenues 2-Year Growth %
$20 MILLION AND UP
1 Draft * $365,430,000 20%
2 Digitas, Inc. 245,000,000 23
3 Wunderman * 194,476,560 10
4 Bensussen Deutsch & Assoc. 137,000,000 35
5 Jack Morton Worldwide* 114,330,000 9
6 The Integer Group* 100,000,000 4
7 Arc Worldwide* 98,000,000 7
8 TracyLocke* 96,000,000 27
9 GMR Marketing* 91,300,000 29
10 Momentum Worldwide* 81,000,000 43
11 Aspen Marketing Group 59,371,116 66
12 Marketing Drive Worldwide* 59,000,000 -31
13 Publicis Dialog* 55,384,000 63
14 Hawkeye Communications* 53,400,000 -14
15 Ryan Partnership 52,554,000 21
16 Alloy (AMP Agency) 52,384,000 25
17 DVC Worldwide* 50,150,000 6
18 Marketing Arm* 45,675,000 770
19 141 Worldwide * 45,200,000 8
20 The Marketing Store 42,586,000 22
21 EMAK Worldwide 40,185,000 9
22 Alcone Marketing Group* 39,500,000 25
23 CoActive Marketing Group 33,500,000 43
24 Summit Marketing 32,834,931 2
25 J. Brown Agency* 31,165,000 8
26 Gage 30,914,000 -31
27 The Spark Agency 29,762,000 13
28 Arnold Brand Promotions* 29,500,000 21
29 Zipatoni* 28,000,000 1
30 Mars Advertising 27,100,000 14
31 Jack Nadel 26,888,000 33
32 Octagon* 26,733,192 45
33 PromoWorks 23,563,000 323
34 Eric Mower & Associates 23,370,740 24
35 Marden-Kane 21,862,502 5
36 Colangelo Synergy Marketing 21,646,562 17
$7 TO $19 MILLION
36 Saatchi & Saatch X 18,768,134 80%
37 National Tour $17,500,000 40
38 EastWest Creative 14,751,779 20
39 Relay Sponsorship & Event* 14,300,000 186
40 ePrize 14,223,048 289
41 Velocity Sports & Entertainment 13,739,000 94
42 Malone Advertising 13,029,319 77
43 Noble World Communications 12,895,194 19
44 The GEM Group 12,695,483 0
45 BDS Marketing 11,250,742 -12
46 Source Marketing 10,760,000 31
47 PowerPact 10,568,167 67
49 Mastermind Marketing 9,910,000 19
50 Strottman International 9,909,000 49
51 Promotion Group Central 9,592,890 359%
52 BFG Communications 9,311,429 160
53 Pierce Promotions & Event Mgmt* 9,050,000 51
54 The Guild Group 9,010,000 -18
55 Media Logic 8,787,330 11
56 Active Marketing Group 8,081,000 258
57 RedPeg Marketing 7,733,075 151
58 Campaigners 7,658,391 58
$3 TO $7 MILLION
59 PriceWeber Marketing $6,644,000 -6%
60 Big Communications 6,555,455 685
61 Shumsky 6,500,000 8
62 Eventive Marketing 6,198,000 77
62 Don Jagoda Associates 5,711,687 -12
63 Cramer-Krasselt Company 5,548,000 40
64 Harwood Marketing Group 5,442,668 46
65 Latitude 5,300,000 47
66 Renegade Marketing Group 5,193,950 11
67 TSE Sports & Entertainment 4,861,500 87
68 Seismicom 4,579,908 99
70 Marketing Werks 4,223,602 114
71 Marlin Entertainment 4,135,000 83
72 Pro Motion 4,060,213 148
73 Tipton & Maglione 3,345,000 -14
74 Promote It International 3,200,000 184
75 Civic Entertainment Group 3,175,877 349
76 The A Team 3,145,000 31
77 The Regan Group 3,042,532 16
78 Marketing Connections Group 3,020,949 -62
$1.5 TO $3 MILLION
79 Ventura Associates $2,902,000 9%
80 Concept One Communications 2,766,000 68
81 B.A.R.C. Communications 2,627,276 -10
82 Next Marketing 2,600,000 -11
83 Three Wide 2,410,766 11
84 Firehouse 2,376,000 149
85 IMC 2,264,862 -23
86 Penn Garritano 2,150,997 40
87 Vertical Marketing Network 2,140,336 37
88 Roundhouse Mktg & Promotions 1,849,604 -13
89 Ott Communications 1,837,327 -50
90 Marketing Edge 1,828,532 54
91 Makai Events & Promotions 1,805,457 47
92 Brand Fuel Promotions* 1,800,000 52
93 Centra Mktg & Communications 1,752,051 83
94 Mr. Youth 1,425,560 435
UP TO $1.4 MILLION
95 Marketing Lab $1,357,130 67%
96 Object 9 1,351,141 39
97 LeadDog Marketing Group 1,321,644 485
98 Alpha Marketing 910,491 30
99 Grand Central Marketing 874,799 93
100 Nine Two (formerly tkmw) 684,239 39
*Indicates a PROMO estimate for revenue and two-year growth
Rank by Growth
RANK AGENCY 2004 U.S. REVENUE 2002 U.S. REVENUE 2-YR % GROWTH
1 The Marketing Arm* 45,675,000 5,250,000 770.0%
2 Big Communications 6,555,455 874,534 649.5
3 LeadDog Marketing Group, Inc. 1,321,644 225,982 484.8
4 Mr. Youth LLC 1,425,560 266,470 434.9
5 Promotion Group Central, Inc. 9,592,890 2,089,758 359.0
6 Civic Entertainment Group 3,175,877 706,783 349.3
7 PromoWorks 23,563,000 5,576,960 322.5
8 ePrize, LLC 14,223,048 3,660,810 288.5
9 Active Marketing Group 8,081,000 2,258,000 257.8
10 Relay Sponsorship & Event Management* 14,300,000 5,000,000 186.0
11 Promote It International 3,200,000 1,125,485 184.3
12 BFG Communications 9,311,429 3,587,114 159.5
13 RedPeg Marketing 7,733,075 3,079,136 151.1
14 Firehouse, Inc. 2,376,000 956,000 148.5
15 Pro Motion, Inc. 4,060,213 1,637,176 148.0
16 Marketing Werks, Inc. 4,223,602 1,976,130 113.7
17 Seismicom 4,579,908 2,297,983 99.3
18 Velocity Sports & Entertainment, LLC 13,739,000 7,092,000 93.7
19 Grand Central Marketing, Inc. 874,799 453,525 92.9
20 TSE Sports & Entertainment 4,861,500 2,600,000 86.9
21 Marlin Entertainment 4,135,000 2,260,000 82.9
22 Centra Marketing & Communications, LLC 1,752,051 960,000 82.5
23 Saatchi & Saatchi X* 18,768,134 10,413,248 80
23 Eventive Marketing, Inc. 6,198,000 3,492,000 77.5
23 Malone Advertising 13,029,319 7,350,000 77.3
25 Concept One Communications 2,766,000 1,644,686 68.2
*Indicates a PROMO estimate for revenue and two-year growth
Rank by Campaign Work
RANK AGENCY REPRESENTATIVE CAMPAIGN
1 Civic Entertainment Group Save Our History (The History Channel)
2 Eric Mower & Associates Learn with Friends (Fisher Price, for Wal-Mart Stores)
3 Arc Worldwide Say Hello to Ted (United Airlines)
4 Colangelo Synergy Marketing Guinness St. Patrick’s Day (Guinness & Co.)
5 Momentum Worldwide Unexpected Summer (Coca-Cola Co.)
6 Marden-Kane Camp eBay (eBay)
6 Mr. Youth Pink launch (Victoria’s Secret)
8 Velocity Sports & Entertainment FedEx Most Reliable Player (FedEx)
9 Grand Central Marketing Speed in the City (NASCAR)
10 141 Worldwide 84 Lumber Classic (84 Lumber)
10 EMAK Worldwide Spider-Man 2 (Burger King)
10 GMR Marketing Axe Dark Party (Unilever)
13 Marketing Store McDonald’s Monopoly Best Chance 2.0 (McDonald’s Corp.)
14 TracyLocke Pepsi iTunes (Pepsi-Cola Co.)
15 PowerPact Don’t Just Cook, Create (Tone Brothers’ Spice Islands)
16 EastWest Creative Tu Musica, Tu Pasion (Tecate)
16 Octagon NASCAR Nextel Cup (Nextel Communications)
16 Seismicom Samsung Vans Warped Tour (Samsung)
16 Zipatoni Taste It All (Miller Brewing Co.)
20 CoActive Marketing Group Xtreme Nutrition (Fresh Express)
21 ePrize How Do You (The Gap)
21 National Tour The Nextel Experience (Nextel Communications)
21 Noble World Communications Start Healthy (Gerber Baby Products)
24 AMP Agency mtvU Campus VJ Search (MTV Networks)
24 Arnold Brand Promotions Tyson and USA Gymnastics (Tyson Co.)
24 Draft 24/24. Milk Your Diet. Lose Weight! (MilkPEP)
24 IMC Dentyne Yahoo IMVironments (Cadbury Adams USA)
24 Wunderman Catch Me if You Can (American Institute of CPAs)

How We Did It

PROMO 100 rank is based on three equally weighted factors: U.S. net revenues, two-year growth, and quality of campaign work.

U.S. Net Revenues

Agencies report their U.S. net revenues for the most recent three years, as verified by an outside auditor or a copy of the agency’s tax return. “Net revenues” are the same as “gross profits” as reported on tax filings; they do not equal total billings, which often include pass-through expenses. Agencies report billings and revenues, but only net revenue data impacts rankings.

PROMO uses U.S.-only net revenues and not worldwide figures, in order to more accurately compare U.S. agencies. A few agencies (Momentum, 141 and DVC) have significant business overseas (see chart on p. 44).

This year, 22 agencies did not provide verifiable revenue data. For most, their parent companies — the four publicly held agency networks — forbade it, citing the 2003 Sarbanes-Oxley Act governing financial disclosures. PROMO estimated these agencies’ net revenues using our estimates from 2002 and 2003 and factoring in account wins/losses, acquisitions and spending fluctuations among current clients.

This is the third year that PROMO has had to estimate revenue for these agencies, so the revenue and two-year growth data come with this caveat: These numbers are not verifiable. All estimates are marked with an asterisk.

Two-year Growth

PROMO calculates agencies’ growth from 2002 net revenues to 2004, then rank shops based on that two-year growth rate. This is a more even-handed measurement than one-year growth, since a single big project or new-business win can skyrocket a shop to the top of the growth charts.

Campaign Work

Agencies submit case studies of three campaigns from 2004. Each PROMO editor rates each campaign on a scale of 1 to 5, based on strategy (and its applicability to the brand), execution, creativity, scope of the work (both breadth of disciplines and number of markets) and — crucial to any promotion — results.

Results are often confidential; they are used only for scoring and are not reported in PROMO.

Agencies that show strong results for a range of clients using a mix of disciplines tend to score highest. Agencies with limited work (all for a single client, or in few markets, or with a narrow range of disciplines, such as sampling or online sweeps only) score lower.

The Final Tally

Scores for U.S. net revenue, two-year growth and campaign work are added together as equal parts of an agency’s total final score. To set the Top 25 ranking, PROMO’s editors also consider recent account wins and losses; industry awards; management stability; average length of service with clients and agency-of-record status; and breadth of marketing services.

FYI: Productivity

While they don’t impact scores, we also include per-employee revenue figures in the ranking (beginning on p. 46). The Marketing Agencies Association Worldwide (MAA) estimates that the average net revenue per employee at a U.S. promotion agency was $120,000 in 2004, down 4% from $125,300 in 2003. That decline could be due to a variation in the number of agencies in MAA’s annual survey. But “times are tougher on agencies, and clients are demanding more from their agency,” says Strottman International CEO Ken Strottman, who leads MAA’s research. MAA suggests that a 25% margin above or below that benchmark is within the “reasonable range” of revenue productivity per employee. Results outside this range may be questionably high or inefficiently low, per MAA.

Worldwide Net Revenue
Octagon* $117,000,000
The Marketing Store 101,307,000
DVC Worldwide 94,545,100
Ryan Partnership 54,983,000
EMAK Worldwide 53,723,000
The GEM Group 28,207,663
ePrize 14,223,048
Velocity Sports & Entertainment 14,395,000
*Indicates a PROMO estimate

UNDER THE RADAR

Six agencies lay low this year, some with explanations. Other reasons shops may decline to enter: a bad year (or more) of business; past rankings brought no leads and too many sales calls; missed PROMO’s deadline

Carlson Marketing Group
did not enter; no client permission to share work

Javelin
did not enter; in quiet period of acquisition negotiations

WatersMolitor
did not enter

Wencel/Hess
did not enter

SJI Promotions
did not enter

Modem Media
did not enter

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