The document provides an overview of the UK advertising agency industry. It discusses several key points: - The top agencies in the UK by billings in 2014 were Abbot Mead Vickers BBDO, McCann Erickson, and Adam & Eve/DDB. - Digital advertising has surpassed traditional media and now accounts for over 50% of UK ad spending, with continued growth projected. - Agencies have moved away from full-service models and now offer more specialized services, charging directly for work rather than through commissions. - Technological trends like the Internet of Things, augmented reality, mobile, and data-driven personalized advertising are influencing agency practices and campaigns.

1. UK Advertising 1
UK Advertising Agency Industry Investigation
Andrew Carl Hansen
ac.carl.hansen@gmail.com
MBA 520 Managing With Technology
M. Lapour
UK Advertising Agency Industry Investigation
January 24, 2016

2. UK Advertising 2
An advertising agency specialises in managing and running marketing and advertising
campaigns for client businesses. Full-service agencies offer a complete campaign solution
from planning through to delivery. Specialist agencies concentrate on a niche area of the
market, such as advertising to a specific demographic or offering a function such as art-work
or copy (Keynote, 2014). An agency can manage either a few client company accounts or
have many clients national or international where they manage accounts to provide creative
content and access to the media for the client (Reference for Business, 2016).
Competitive Environment
The United Kingdom is placed fifth amongst the world’s advertising nations (the USA
comprises one-third of the world market) and is second in Europe with an expenditure of
£18.55 billion in 2014 which is expected to top £20 billion in 2016 (Statista, n.d).
In terms of billings (the value of clients an agency can attract) Abbot Mead Vickers
BBDO is the lead agency with £468.29 million or 14.31 percent of the market in 2014. Its
closest rival is McCann Erickson with 8.49 percent share (Statista, 2014a). Competition in the
industry is moderate because large multinational firms dominate the market and quality,
rather than price, is the way in which firms differentiate themselves. Agencies do not fight for
one another’s clients. Quality and creativity is the arena in which rivalry is exhibited in order
to attract new clients (Bonner, Kristof & Olson, 2010). Agencies place great importance on
winning prestigious industry creative awards (Dan, 2012).
Figure 1: Leading creative advertising agencies in the United Kingdom (UK) in 2014, ranked by billings (in
million GBP). (Statista, 2014).
Abbott Mead
Vickers BBDO,
468.29
McCann Erickson,
277.88
Adam &
Eve/DDB**,
258.56
Rainey Kelly
Campbell
Roalfe/Y&R,
239.02
WCRS, 226.54
VCCP, 223.47Bartle Bogle
Hegarty, 221.01
Leo Burnett,
200.6
Publicis, 191.39
CHI & Partners,
187.32
Havas Worldwide
London, 162.9
DLKW Lowe,
160.02
Mother, 157.22
Grey London,
151.11
TBWA UK, 147.02

3. UK Advertising 3
In terms of market segments technology has played a large part in digital forms of
advertising surpassing traditional television, radio and print for the first time in 2015; making
the UK the first country to reach this milestone. Digital advertising spend is projected to rise
from 50% of all UK advertising spend in 2015 to 58.1% by 2018. The trend is different on a
global level where digital ads have a 29.6% share and stands at 31% of US spending
(eMarketer, 2015). The percentage growth change table below shows a decline in traditional
advertising. It shows that overall market growth is being driven by the demand for digital
advertising.
Total media ad spending growth (% change)
2013 2014 2015 2016 2017 2018
Digital 16.3 15.2 12.0 11.0 9.0 8.5
(of which) Mobile 125.0 90.0 45.0 35.0 26.0 22.0
TV 4.1 6.0 3.2 2.5 1.0 1.0
Radio -4.0 6.3 2.6 0.9 0.2 0.4
Outdoor 2.0 3.0 2.5 2.5 2.0 1.8
Print -6.3 -5.0 -3.9 -3.1 -1.7 -1.4
(of which) Magazines -5.0 -5.0 -3.7 -3.0 -2.0 -1.5
(of which) Newspapers -6.7 -5.0 -4.0 -3.2 -1.6 -1.4
Total 6.3 7.6 6.0 5.8 4.8 4.8
Figure 2. Total media ad spending growth (% change). (eMarketer, 2015).
Over recent years the industry has been moving away from the full-service model to
offer client businesses fewer services which has led to agency specialisms, such as digital
marketing campaigns. Income that used to be derived from commission paid for advertising
space is now instead earned from charging directly for labour costs and work on a campaign.
There has been an un-bungling of services which can result in a business employing a
different agency for each segment of its marketing activities (Arzaghi, et al, 2010).
Marketing is as seasonal as the businesses it represents and taking full advantage of
customer feedback and spending habits attempts are always made to launch campaigns when
they will bring the highest customer response that translates into sales. The marketing of
Christmas is one such example when outlets as well as marketers start as early as possible in
the lead up to Christmas in an attempt to interest customers. Taking full advantage of insights
from statistical sources can give campaigns an advantage such as optimising email for
smartphones when research reveals that the majority of customers regularly use their phone
(Taylor, 2011). Agencies supply a stream of revenue to other businesses such as commercial
radio and TV, magazines, regional and national newspapers (UK Government, n.d).

4. UK Advertising 4
Agencies rely on the health of their client marketing budgets and economic factors
can impact upon the effectiveness of advertising, especially during any economic turndown.
Periods of inflation result in high material costs passed on to the customer that can result in
lower sales. Recession results in lower business activity, the potential for higher
unemployment and less money for customers to spend on goods. Household income can put
the squeeze on luxury item purchases and if demand is low even highly persuasive
advertising campaigns might not be that successful (Marketing 101, n.d).
Industry Environment
The ultimate prime customer for agencies is the end consumer of the product being
promoted. A successful campaign strengthens the reputation and reliability of the agency and
attracts other business customers. Those businesses and organisations form the client base.
Advertising spend in the UK is spread across many industries. Consumables make up the
largest segment but governmental, retail, financial, industrial, services and durables go to
make up the mix of client types (Statista, 2014b).
Figure 3: Advertising spending in the UK from 2009 to 2012, by industry sector. Statista (2014b).
London based multinationals dominate the advertising industry and offer full
campaign services to top brand companies both in the UK and internationally. Although
many independently owned smaller agencies are potential acquisition targets for
multinationals there are established agencies in each region and 210 registered members of

5. UK Advertising 5
the Institute of Practitioners in Advertising (IPA) (UK Government, n.d). Of the fifteen
dominant companies the top three are Abbot Mead Vickers BBDO, McCann Erickson and
Adam and Eve/DDB (Statista, 2014a). The key suppliers for agencies are the owners of
advertising space. Premium spaces and premium broadcast sporting events attract extremely
high prices for space that advertisers are willing to pay due to the level of exposure their
advertisement would receive. Suppliers of advertising space are television channels, billboard
and print media. In recent years agencies have had their commission for purchasing space
squeezed down from five to around one percent (Garside, 2011).
Client pressure on agencies to offer as low a price as possible has led to restructuring
and cost-cutting in agencies to keep them attractive to clients on a value for money basis. A
positive effect of efficiency drives are improved reliability, some automated processes and
the introduction of best-practice which have made editing staff and graphic artists better
placed to respond to late-minute alternations. However, client demands to get things done
faster and for less cost cannot continue indefinitely (Isaac, 2015).
There are established national and international agencies that regulate advertising
standards. In the United Kingdom this is the Advertising Standards Authority that regulates
across all media. They act on complaints and police any breach of the UK Advertising Codes.
It is a self-regulatory body paid for by the industry with codes written by two industry
committees and operating under contract from Ofcom, a quasi-governmental organisation.
The ASA regulates to ensure advertisements are within the law, decent, truthful and honest
(ASA, 2015). The European Union also has a firm regulatory grip on the advertising industry.
The main directives that apply to advertising are the Audiovisual Media Services (AVMS)
Directive and the Unfair Commercial Practices (UCP) Directive. Current issues for Europe
are advertising of alcohol, advertising to children, advertising cars,
environment/sustainability and digital marketing (EASA, n.d). A major regulatory concern
for the industry are the new data-protection laws that will come into force across Europe that
is designed to protect consumer privacy and the use of their data. Advertisers would have to
seek consent from European users in order to use their data for targeted advertising. This is
likely to curtail a revenue stream just as marketers were hoping to sell online targeted
advertising campaigns. Yet another issue is the possible raising of the internet age of consent
from 13 to 16 years of age cutting off a potential teenage targeted market for advertised
goods (O’Reilly, 2015). Regulators have a huge influence on industry activity.

6. UK Advertising 6
Financial Aspects
The industry comprises many unlisted companies that have no legal requirement or
obligation to issue annual reports. Therefore, the pool of available information is limited. It is
possible to get an idea of the percentage size of spending within large advertising agencies
(Sickle, 2010) in order to best-guess where information technology expenditure would factor.
Figure 4: Sickles, K (Ed.)(2010). Marketing Consulting Firms in the New Decade. Retrieved on January 23,
2016 from the source for consulting website: sourceforconsulting.com
Published sources of detailed industry spending exist but command a high charge.
Redbooks, Advertising Age, Research and Markets, Plunkett’s Advertising Almanac and
Hoovers Advertising Agency Summary Report are all saleable commodities. The UK OSN
national statistics use broad industry sector descriptions in which it is difficult to identify
advertising agencies. However, the average IT spend compared with revenue for Fortune 500
companies is around 4% (Zhu, 2011). According to Gartner global IT spending is on the
decline to 3.5 percent in 2015 (Gartner, 2015). However, IT spending varies widely between
industries and their businesses.
Although no specific breakdown of capital expenditure is publically available it is
interesting to note that for every £1.00 capital equipment spend £9.50 goes on labour costs. In
2015-16 estimates place labour at 19.9% of industry revenue and capital intensity is low
(IBIS, 2015).
Account
management
20%
Marketing
27%
Sales
34%
Research
7%
Knowledge
management
12%
Very large consultant firms (more than 1000 consultants)

7. UK Advertising 7
Applications and technologies
Amongst independently owned UK advertising agencies the following percentage of agencies
77% use project management software (Benchpress, 2015). The following are in use:
Figure 5:Project Management Software in Use (by % of agency) – data taken from Benchpress (2015).
The following versions of accounting systems are in use, some less adequate than
others:
Xero 49% KashFlow 4%
Sage 21% Paprika 1%
Quickbooks 8% Zoho 1%
Spreadsheets 7% Paper records 1%
Free Agent/IRIS OpenBooks 8%
Figure 6: Accountancy Software in Use (by % of agency) – data taken from Benchpress (2015).
Although it is not possible to obtain industry specifics Roetzer does list the
various applications and technologies necessary for running a modern advertising agency. He
mentions this within the need for agencies to have a scalable infrastructure when looking at
their IT strategy. Marketers will need access to email, calendar and scheduling,
communications, data storage, marketing automation, online surveys, website analytics,
webinar and meeting software, such as GoToMeeting, internet marketing, such as Hubspot
and a CRM in addition to accountancy and project management software already mentioned
above (2011). Increasingly agencies are moving their IT infrastructure to the cloud or SaaS
(software as a service) solutions. It reduces the burden of maintaining networked hardware
whilst allowing collaborative working. Adobe, the creative software provider, recently moved
0 2 4 6 8 10 12 14 16
Streamline
Basecamp
Our own software
Harvest
TrafficLive
WorkflowMax
Spreadsheets
Affinity Live
Paprika
Trello
Teamwork
Synergist
Other
Project Management Software in Use (by % of agency)

8. UK Advertising 8
its operations and software solutions to the cloud (Nichvalodoff, 2014). Omicom (the parent
company of AMV BBDO) uses Veritas NetBackup in order to coordinate files and data and
to deal with the vast amount of file storage requirements the company has for media files.
Symantec Enterprise Vault helps them to archive emails in a repository that eliminates
duplicate emails and keeps storage size to a minimum (Bonner, Kristof & Olson, 2010).
Of the leading tools in use by marketers Google Analytics is used by over four-fifths
of websites but there is also Adobe Analytics for assessing website visitor behaviour.
Conversion optimization manages website visitor behaviour to have them interact with the
site and leave their details. Landing Page, by Wordstream, Optimzely, Unbounce and ion
interactive are the leading packages. Email is still of huge importance for online marketing.
MailChimp and Constant Contact are the leading tools. Search engine marketing is led by
Google Adwords followed by Bing and Yahoo, Wordstream, Wordtracker and BrightEdge.
Remarketing tracks a user and delivers specific ads for them on each site they visit. Google
AdWords remarketing is the leading tool. Hubspot, Act-On and InfusionSoft are all leading
marketing automation apps that bring together and manage all the mentioned activities
(Gudema, 2014). Productivity are as important as creativity tools in the industry.
Standards as they apply to technology
In the UK the industry has to conform to advertising guidelines administered by the
Advertising Standards Authority (ASA, 2015) and in Europe both the AVMS and UCP
directives are in force (EASA, n.d). A current issue is Europe’s consumer protection stance in
giving people the right to opt out of having their personal data used for targeted digital
advertisements (O’Reilly, 2015). This would have a direct impact on the use of the usefulness
of analytics. UK professional bodies such as the IPA and BIMA (British Interactive Media
Association) offer member training, seminars and papers on the digital agenda and represent
their members interests (IPA, 2015) (BIMA, 2016). The influence of regulatory authorities
and Europe cannot be ignored.
Trends and innovations
A hailed innovation is the emerging ‘Internet of Things’ (IoT) that will see all digital
devices connected and able to pass on behavioural responses and triggers that could be used
for individually targeted marketing to be served to individuals. (Gartner, 2014). Augmented
reality has moved from web to mobile to wearable devices recently and could offer a
sensually immersive experience for customers (Mangiaforte, 2014). As additive printing
technology continues to develop marketers have used 3D printing as part of creative

9. UK Advertising 9
marketing campaigns (Morris, n.d). The industry makes imaginative use of technology to
differentiate their campaigns.
The recent game changer for marketing is the use of mobile given the extremely high
level of smartphone ownership. It is thought that 2016 will see the use of proximity beacons
to get a precise location fix on a customer in order to tailor advertising and offers. Wearable
devices bring with them the possibility of measuring physical and emotional signals that
could be used to suggest services and products. Ad blocking is bringing about a focus on
video and interactive content on mobile in order to capture customer attention. Programmatic
data will be used to create more meaningful and directed campaigns to users. Cross-platform
marketing campaigns will use data to reach customers wherever they are to enhance
marketing-mix (Moores, 2015). Technology is being used to serve relevant advertisements to
consumers.
2016 is the year that marketers will be thinking about relevance, content, context and
delivery. Marketers have taken touchpoints and customer experience to the heart of what they
do. Omnichannel is bound to be the industry hotspot because it will deliver that integrated
customer experience as they move from device-to-device and this is already happening with
Dominos pizza company present campaign (Newman, 2015). To a certain extent the
customers have become the innovators through their interactive and collaborative use of the
web. Google has dubbed this group of people, ‘Gen-C: The Youtube Generation’ who,
regardless of age, create, curate and connect with others online (Think with Google, 2013).
The major industry thinker who defined the customer cycle and ‘moments of truth’ and
shared customer experience is Brian Solis (2014). The industry closely follows the annual
release of the Mary Meeker Internet Trends report (Constine, 2015). The trend is definitely
towards digital forms of advertising rather than TV and print.

10. UK Advertising 10
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12. UK Advertising 12
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