Structure of the Advertising Industry

Broadly speaking, since the 1980s, most advertising agencies have tended to move towards a common structure. Whereas in the past, each individual agency offered a variety of different marketing services under a single roof, the rapid expansion of the media industry since the mid-1980s (for example the proliferation of cable and digital channels), as well as the refusal of clients to pay for services they didn't require, encouraged most large agencies to spin out their more specialised in-house departments as separate agencies in their own right. At the same time, while the number of individual agencies has as a result increased, ownership of those agencies has concentrated dramatically. Massive consolidation within the industry has led to a huge number of mergers and acquisitions, and the creation at the top end of the market of a small group of major holding companies, each of whom owns or controls a large number of separate agencies. There are still independent owner-operated agencies out there, but in far fewer numbers than ever before, and most are small by comparison with the group-owned brands.

Holding companies. Sitting at the very top of the industry pyramid are a small number of holding companies. There are now just four major international groups, Omnicom, WPP, Interpublic and Publicis Groupe, each of whom controls a huge number of different agency brands spread all over the globe. Generally, the holding company doesn't involve itself too much in day-to-day marketing, but works with its subsidiary businesses to encourage intra-group synergy and to develop strategy. At the next level, there are a small number of mid-size holding company groups, such as Havas, Aegis, and the Japanese groups Dentsu and Hakuhodo DY. Although each of these controls several brands, their range is more limited, either in terms of geographic reach (in the case of the Japanese companies, who tend to operate mainly in Asia) or the range of services they offer. There are also a few smaller holding companies such as MDC in Canada or Chime Communications in the UK, who resemble their larger rivals in terms of the number of different brands they control, but on a very much smaller, sometimes more specialised scale. (See here for major holding companies and independent marketing groups).

Advertising Agencies. The term advertising agency (or sometimes creative agency) is generally applied to a company whose main role is to conceive and create large-scale marketing concepts for its clients. Traditionally, advertising agencies come up with the core idea for a marketing campaign and then create a series of advertisements which address that idea across different media. They tend to specialise in what is called above-the-line marketing: ads which address a mass market through the four major media of television, print, radio and outdoor (posters). The tool most commonly associated with the traditional advertising agency is the 30-second television commercial. However, the explosion of digital marketing, often considered one of the below-the-line disciplines, has changed the nature of the traditional advertising agency. Increasingly these companies are being pushed by their clients to provide excellence in digital marketing as well as the more established mass market media. 

There are three sorts of traditional advertising agency. The most important are the 14 or so worldwide networks, such as BBDO, McCann Erickson, Leo Burnett or Saatchi & Saatchi. Each of these operates a global network, comprising local branded offices in as many as 100 or more different countries. The networks have grown up primarily to serve multinational client companies such as Ford or Procter & Gamble, who wish to provide a consistent marketing message in all the countries in which they operate. 

At the next level are "micro-networks", sometimes known as multi-hub creative networks. These are a comparatively recent invention, similar in most ways to the major networks, but operating a far smaller network, with perhaps only four or five worldwide offices, usually in key regional centres. They generally offer a tailored service for more demanding multinational clients, usually with the hallmark of noteworthy creative work. Examples include Bartle Bogle Hegarty, Wieden & Kennedy and M&C Saatchi. Sometimes they will be employed by a client to come up with the core idea for a global marketing campaign, which will then be executed or adapted for local markets by the regional offices of one of the worldwide networks.

The majority of advertising agencies, however, comprise a third type: standalone companies, sometimes independent, sometimes owned by one of the major groups. They tend to operate only in their own country, although they may have links to agencies in other markets. The bigger of these standalone agencies are often able to offer a wide range of other marketing skills beyond creative advertising (including those described below). In that case, they sometimes refer to themselves as full-service agencies. Others, usually smaller more entrepreneurial agencies, specialise in out-of-the-ordinary creative concepts, mainly for television, and are sometimes referred to as creative boutiques. (See here for major advertising agencies).

Last full revision 22nd April 2008; updated 27th July 2010

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