Strongest growth in public relations
Growth was encouraging across all communications services sectors – Advertising, Media Investment Management, Information, Insight & Consultancy, Public Relations & Public Affairs, Branding & Identity, Healthcare and Specialist Communications – although this last sector lagged the others, particularly in the second half of the year.
Public Relations & Public Affairs was the fastest-growing communications services sector with constant currency revenue up 6.9% and like-for-like growth of 4.9%. Particularly strong were Hill & Knowlton, Burson-Marsteller, Ogilvy Public Relations Worldwide and Clarion in the UK. Overall operating margins for this sector remained flat at 16.6%.
New technologies and new media have, once again, demonstrated the power of editorial publicity through fast-growing new services such as MySpace, YouTube, Facebook, Flickr and Wikipedia, along with the risks and difficulties of making money on social networking sites through advertising, as even experts like Facebook have found on two occasions. In addition, Public Relations & Public Affairs have benefited from the impact of polling techniques, which have provided a more scientific basis for the industry. What you know is becoming more important than who you know.
Advertising and Media Investment Management revenue grew by over 4% in constant currencies and by 3.6% on a like-for-like basis. Operating margins rose by over 1 margin point to 17.5%.
In 2008, Ogilvy & Mather Worldwide, JWT, Y&R Advertising, Grey and United generated estimated net new billings of £865 million ($1.6 billion). GroupM, the Group’s media investment management company, which includes Mindshare, Mediaedge:cia, MediaCom and Maxus, generated estimated net new billings of £1.3 billion ($2.4 billion).
Information, Insight & Consultancy continued to show resilience in difficult economic conditions. On a constant currency basis, revenues grew 27.8%, largely as a result of the acquisition of TNS, with like-for-like revenues up 3.0%. Gross margin grew by 2.9% on a like-for-like basis. Overall operating margins fell by 0.2 margin points to 11.3%. This part of the industry certainly seems to have a lower ‘beta’, growing less rapidly in the upturn and more steadily in the downturn.
Branding & Identity, Healthcare and Specialist Communications was the slowest-growing segment of our business as the significant growth in direct, digital and interactive services was overpowered by slower growth in Healthcare and Specialist Communications. Revenues rose by 7.6% in constant currency and were marginally higher on a like-for-like basis. The Specialist Communications segment of our business includes a number of smaller companies, largely in the US and Western Europe, which have particularly felt the impact of the recent slow-down and recession. As a consequence, operating margins were down by 1.6 margin points to 12.6%.
Marketing services rose to almost 56% of our revenues in 2008, up from 54% in 2007, due to strong growth in Public Relations & Public Affairs and the impact of TNS on Information, Insight & Consultancy. This proportion should increase to around 62% in 2009, reflecting a full year’s contribution from TNS. It is no longer accurate to call us an advertising agency.
Constant currency1 revenue growth by sector %
Headline PBIT2 margins by sector %
Revenue by sector £m
- See definition in the Financial glossary.
- The calculation of headline PBIT is set out in note 31 of the financial statements.