Digital Saves The Day: Agency Revs Rose 8.6 Percent In '07 Amid Tepid Traditional Ad Spend

This story was written by David Kaplan.
Although ad agencies' digital revenues have been growing significantly over the past few years, they tended to remain a small slice of the total spending pie. Last year was different, as AdAge's Agency Report demonstrates, showing digital revenue assuming a more prominent place in ad firms' overall business. Despite moderate spending by clients in general, digital revenues proved high enough to offset pullback in traditional ad expenditures in 2007, helping provide a collective 8.6 percent boost by the 860 shops participating in the AdAge survey. While that's a modest drop from the prior year's 8.8 percent growth, it's worth noting that last year was the beginning of what many consider to be the start of an agency downturn.

-- Specifically, the big four ad holding companies - Omnicom Group, WPP Group, Interpublic Group and Publicis Groupe - last year brought in 12.3 percent of worldwide revenue from digital advertising. And for traditional U.S. agencies in general, digital supplied an average of 10.2 percent of each company's revenue.

-- Some, like Goodby, Silverstein & Partners received 52 percent of their revenue from the interactive side of the business. Meanwhile, WPP Group, which has been particularly aggressive in building up its digital services through several large and small acquisitions, said worldwide digital revenue for media buying holding company Group M last year jumped 53 percent to $238 million. AdAge estimated that digital comprised more than 11 percent of Group M's revenue last year.

-- As for the Top Digital Agencies, Digitas, which was bought by Publicis at the end of 2006 and is seen as the kick off for last year's M&A frenzy over independent interactive shops by large traditional firms, topped the list, rising 34 percent with $345 million in revenue. At number two, Avenue A/Razorfish, which was acquired by Microsoft (NSDQ: MSFT) when it acquired aQuantive for $6 billion last May, rose 27 to $299 million. Omnicom's Rapp Collins, at number three, had one of the biggest leaps of any shop within a traditional structure, growing 90 percent with $204 million.

By David Kaplan