Increased coordination

Less flexibility

Many major companies use an advertising agency to assist them in Adve rtis in g Age ncies developing, preparing, and executing their promotional programs. An ad agency is a service organization that specializes in planning and executing advertising programs for its clients. Over 13,000 U.S. and international agencies are listed in the Standard Directory of Advertising Agencies (the "Red Book"); however, most are individually owned small businesses employing fewer than five people. The U.S. ad agency business is highly concentrated. Nearly two-thirds of the domestic billings (the amount of client money agencies spend on media purchases and other equivalent activities) are handled by the top 500 agencies. In fact, just 10 U.S. agencies handle nearly 30 percent of the total volume of business done by the top 500 agencies in the United States. The top agencies also have foreign operations that generate substantial billings and income. The top 25 agencies, ranked by their U.S. gross incomes, are listed in Figure 3-6. The table shows that the advertising business is also geographically concentrated, with 20 of the top 25 agencies headquartered in New York City or the surrounding area. Nearly 40 percent of U.S. agency business is handled by New York-based agencies. Other leading advertising centers in the United States include Boston, Chicago, Los Angeles, Detroit, San Francisco, and Minneapolis.10

During the late 1980s and into the 90s, the advertising industry underwent major changes as large agencies merged with or acquired other agencies and support organizations to form large advertising organizations, or superagencies. These superagencies

Gross Income





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