Advertising and Marketing
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Industry Overview
The advertising and marketing services industry in the US includes about 35,000 companies that have overall annual revenue of about $80 billion. Major companies include Interpublic, Omnicom, Publicis, and WPP. The industry is fragmented: the top 50 companies have less than 40 percent of the market.
Competitive Landscape
Demand for advertising and marketing services comes largely from businesses that sell consumer products, entertainment, financial services, technology, and telecommunications. The profitability of individual companies depends on creative skills and maintaining client relationships. Large companies benefit from being able to serve the varied needs of major customers. Small companies can compete by focusing on niche markets or by offering lower pricing.
New competition for advertising and marketing business has come from database marketing companies, systems integrators, and telemarketers.
Products, Operations & Technology
Major services are advertising for print, broadcast, and online media (35 percent of industry sales), direct mail advertising (20 percent), and public relations (10 percent). Other services include display advertising, media buying (purchasing advertising time or space from media outlets and reselling it to agencies or advertisers), and media representation (selling advertising time or space on behalf of media outlet owners).
Advertising agencies have two main activities: developing ads for a variety of media and placing ads with media outlets. While agencies charge fees for a large number of services, the most significant share of revenues are from commissions on "billings," the amounts customers spend actually buying advertising time. Large agencies provide a full range of services; smaller ones tend to specialize in market or product niches. The largest advertising companies operate through dozens of small "brand name" agencies that provide the particular services that customers use.
Typically, a contract starts with a proposal from a client for advertising and marketing services. Once an agency learns its client's objective, it devises a broad strategy for accomplishing that objective. Besides purchases of media time and space, an advertising campaign might involve such tactics as publicity blitzes featuring celebrity ambassadors, "real people" testimonials, and peer-to-peer campaigns using the Internet. Creative talent is essential to a successful campaign, and large companies make heavy investments in personnel and technology in high-growth areas. The effectiveness of individual campaigns is carefully monitored.