Virgin Media and Sky's battle for dominance in the pay-TV sector fuelled strong growth at the UK's top two media agencies in 2007. Nielsen Media Research figures for last year reveal strong rises in both agencies' media spend.
Sky's agency MediaCom, which took the top agency spot for the sixth year running, and OMD, which handles Virgin Media's ad spend, benefited from the duel, posting rises in billings of £72.1m and £72m respectively, compared to 2006.
Virgin Media consolidated its media spend into OMD in 2007, while Sky is MediaCom's biggest spending client. Sky's media spend rocketed from £118m to £150m during 2007, while Virgin Media's spend increased from £9m to £66m, according to Nielsen Media Research.
In real terms, the rise of the top two agencies was surpassed only by Mediaedge:cia, which had a stellar year in 2007, with expenditure soaring from £319m to £408m, a rise of £89.6m, or 28%.
Tom George, managing director of MEC, said the agency's rise was due to hard work over the past few years and "very little slippage from existing clients".
"We had a fantastic year and it was down to investment in 2005 and 2006," he says. "What's vitally important is that if you are successful, then you have to look to defend what you have - retention becomes vitally important."
MEC successfully won 10 out of 13 pitches in 2007 and retained all but one account. Its resolve is currently being tested further by an ongoing pitch to retain its £20m Nationwide account.
It is, however, the MediaCom and OMD 2007 success stories, rather than MEC's, that point more towards an overall trend emerging from 2007. Client spend, according to the research, was, more than ever, channelled through the handful of agencies at the top of the league.
Billings at the top five agencies increased by £154m overall in 2007, compared to the next five (including MEC), which recorded a £7.5m decrease. Agencies ranked from 11th to 20th in the table were collectively £3.1m down, providing further evidence that clients are consolidating spend in the biggest agencies.
Neil Jones, managing director of Aegis agency Carat, says the dominance of the big four networks: Aegis, Omnicom, Publicis Groupe and WPP, is more prevalent than ever.
"There is definitely a premier league of agencies developing," he says. "If you look beyond the top six, there is a big gap, although there is still a role for smaller agencies to play. Now, big pitches always have a representative from one of the major networks."
One historic landmark for the industry was not represented in the league table: MediaCom becoming the first £1bn UK media agency. Nick Lawson, managing director of MediaCom, said that including online billings would see the agency easily surpass the £1bn mark in expenditure.
The exclusion of online and direct billings in the 2007 preliminary league table has, again, not gone down well with most agencies that see the absence of online billings as a critical issue.
Carat claims that it spent more than £150m on digital advertising in 2007, a growth of 73% year on year, while other agencies, whose reliance on digital is greater than others, continue to see the statistics as non-representative.
Zed Media's joint managing director, Kevin Murphy, says the industry should rely on more robust data that includes online ad spend.
"The move from offline to online has been well documented for all to see," he says. "For it (online spend) not to be included is the major issue at hand. If you have a successful year and then it's reported in the press that you're down, then you're going to be up in arms."
Interpublic Group did not enjoy a successful year. Universal McCann was down slightly - around £10m when its Manchester and London branches are considered, while Initiative lost £95m in billings, largely from the Johnson & Johnson and ICI accounts.
In general, agencies are keen to point out that their 2007 revenue was more diverse than ever before, with many reporting that as much as 40% of income comes from sources such as data, comms and insight.
David Moutrie, managing director of Brilliant Media's Leeds operation, said he was bemused to see that billings had fallen, citing a 10% rise in revenue as evidence of a far better year than indicated.
These factors suggest that the 2007 billings league table acts as one indicator of agency performance, but it is by no means a comprehensive one.
But media agencies have reason to be cheerful. Offline billings at the top 20 agencies increased by more than £140m last year, while digital billings continue to soar. And when Euro 2008 and the Beijing Olympic Games - expected to be massive drivers of ad spend - are taken in to account, more is expected from 2008.
THE UPS AND DOWNS OF AGENCY BILLINGS IN 2007
- Mediaedge:cia up £89.6m - Key wins: £65m BT, £10m Next
- MediaCom up £72.1m - Key wins: £11m Bose, £30m ICI Paints (European spend)
- OMD up £72m - Key wins: £18m Royal Mail, Virgin Media consolidation
- Initiative down £95.2m - Key losses: £30m ICI Paints (European spend), £40m Johnson & Johnson
- ZenithOptimedia down £20.2m - Key loss: £18m Paramount Pictures
- MindShare down £16.2m - Key losses: £250m Mattel (global spend), $600m (£305m) Samsung (global spend).