Promotion agency revenues hit an estimated $4.22 billion in 2004, up a respectable 12%. That’s less than half of the 26% increase agency execs had been expecting for 2004, but a steady increase nonetheless. Nearly half of U.S. agencies expect to boost revenues in 2005; and a quarter of shops say they expect a bump of 20% or more.

Meanwhile, other signs point to steady growth. Hiring has stepped up, especially at mid-tier shops, and agencies seem less frantic about chasing every RFP.

Agency revenues grew by an average 12% in 2004, with shops under $1 million reporting the biggest gains, according to PROMO’s survey of U.S. promotion agency executives. A third of all shops surveyed (34%) saw revenues rise 11% or more, but nearly as many agencies (29%) report revenues were flat — and a dismaying 12% said revenues fell 20% or more.

The 45% of shops that expect to grow this year think most of their added revenues will come from new clients. (Current clients boosted 2004 spending with 41% of agencies; 33% of shops say current client budgets were flat, and 24% say they fell in 2004, per PROMO’s survey.)

Agencies saw a lot more RFPs in 2004, especially in the second half of the year. Execs have gotten choosier about chasing business, and are concentrating, too, on keeping current clients.

Only 11% of companies added agencies of record in 2004, balancing out the 10% who cut some, per PROMO’s separate survey of marketing executives. Over 41% of marketers kept AORs status quo.

Hiring is heating up, with staffs increasing an average of 5%, per PROMO’s agency exec survey. Most of the hires are at mid-sized shops (averaging 15% for shops between $1 million and $10 million), and across the board for creative, strategic and account service.

Agency brass are investing in senior-level hires, with more VPs (65%) and directors (53%) getting raises than presidents and CEOs (43%), per PROMO’s bi-annual salary survey (July 2004 PROMO). Indy shops are investing in the business; CEOs in publicly held shops are conceding to 18-month reviews and funneling raises to their No. 2 sergeants instead.

Holding companies continued to consolidate below-the-line services. In March, Publicis Groupe merged Frankel, Arc (formerly Clarion), Semaphore Partners and iLeo North America to form Arc Worldwide (now headquartered in sister Leo Burnett’s Chicago offices). Omnicom Group keeps below-the-line shops together and continues to grow its Radiate Group, a network of 30-plus agencies across event, entertainment, online and automotive marketing. 141 Worldwide brought in Ogilvy & Mather veteran Rick Roth as CEO in December, a boon for integrating 141’s work with sibs Ogilvy (advertising) and Ogilvy One (direct).

Meanwhile, agencies are coming to terms with procurement. Nearly 43% of RFPs went through procurement departments last year, according to PROMO’s survey of marketing executives. (One quarter of companies sent all their RFPs through procurement; 35% of companies handled none of their RFPs that way.) Marketers’ criteria for choosing shops: Strategic work (2.4 on a scale of 5), followed closely by price (2.3), then creative work (2.1) and service (1.9).

“Procurement people are pushing for harder ROI measurement be-yond brand awareness, but clients sometimes hesitate to share their revenue data,” one agency president said. “It’s easier [to set measurement parameters] when clients bring us in earlier in the strategic planning process.” SNAPSHOT 2004

Revenues hit $4.22 billion, up 12%

Hiring is up, especially at mid-tier shops

Consolidation continues within holding companies

Procurement becoming de rigeuer Great Expectations: $$ Up

Revenues up more than 20% 31.2% Up 11-20% 8.7% Up 1-10% 10.9% Flat 29.7% Down 1-10% 2.9% Down 11-20% 2.9% Down more than 20% 7.2% Up an unspecified amt. 4.3% Down an unspecified amt. 2.2% Percent of agencies reporting revenue shift

Promotion agency revenues hit an estimated $4.22 billion in 2004, up a respectable 12%. That’s less than half of the 26% increase agency execs had been expecting for 2004, but a steady increase nonetheless. Nearly half of U.S. agencies expect to boost revenues in 2005; and a quarter of shops say they expect a bump of 20% or more.

Meanwhile, other signs point to steady growth. Hiring has stepped up, especially at mid-tier shops, and agencies seem less frantic about chasing every RFP.

Agency revenues grew by an average 12% in 2004, with shops under $1 million reporting the biggest gains, according to PROMO’s survey of U.S. promotion agency executives. A third of all shops surveyed (34%) saw revenues rise 11% or more, but nearly as many agencies (29%) report revenues were flat — and a dismaying 12% said revenues fell 20% or more.

The 45% of shops that expect to grow this year think most of their added revenues will come from new clients. (Current clients boosted 2004 spending with 41% of agencies; 33% of shops say current client budgets were flat, and 24% say they fell in 2004, per PROMO’s survey.)

Agencies saw a lot more RFPs in 2004, especially in the second half of the year. Execs have gotten choosier about chasing business, and are concentrating, too, on keeping current clients.

Only 11% of companies added agencies of record in 2004, balancing out the 10% who cut some, per PROMO’s separate survey of marketing executives. Over 41% of marketers kept AORs status quo.

Hiring is heating up, with staffs increasing an average of 5%, per PROMO’s agency exec survey. Most of the hires are at mid-sized shops (averaging 15% for shops between $1 million and $10 million), and across the board for creative, strategic and account service.

Agency brass are investing in senior-level hires, with more VPs (65%) and directors (53%) getting raises than presidents and CEOs (43%), per PROMO’s bi-annual salary survey (July 2004 PROMO). Indy shops are investing in the business; CEOs in publicly held shops are conceding to 18-month reviews and funneling raises to their No. 2 sergeants instead.

Holding companies continued to consolidate below-the-line services. In March, Publicis Groupe merged Frankel, Arc (formerly Clarion), Semaphore Partners and iLeo North America to form Arc Worldwide (now headquartered in sister Leo Burnett’s Chicago offices). Omnicom Group keeps below-the-line shops together and continues to grow its Radiate Group, a network of 30-plus agencies across event, entertainment, online and automotive marketing. 141 Worldwide brought in Ogilvy & Mather veteran Rick Roth as CEO in December, a boon for integrating 141’s work with sibs Ogilvy (advertising) and Ogilvy One (direct).

Meanwhile, agencies are coming to terms with procurement. Nearly 43% of RFPs went through procurement departments last year, according to PROMO’s survey of marketing executives. (One quarter of companies sent all their RFPs through procurement; 35% of companies handled none of their RFPs that way.) Marketers’ criteria for choosing shops: Strategic work (2.4 on a scale of 5), followed closely by price (2.3), then creative work (2.1) and service (1.9).

“Procurement people are pushing for harder ROI measurement be-yond brand awareness, but clients sometimes hesitate to share their revenue data,” one agency president said. “It’s easier [to set measurement parameters] when clients bring us in earlier in the strategic planning process.”

SNAPSHOT 2004

Revenues hit $4.22 billion, up 12%

Hiring is up, especially at mid-tier shops

Consolidation continues within holding companies

Procurement becoming de rigeuer

Great Expectations: $$ Up