Ad Firms Forced To Verify Claims About Revenues
By NICOLE TAYLOR
Valued for an ability to pump up clients, the nation’s publicly held advertising and public relations agencies have had to rein in their self promotion.
The recently enacted Sarbanes-Oxley Act has forced Interpublic Group of Companies, Omnicom Group Inc., Publicis Group, Grey Global Group and WPP Group, which together own 11 of the largest ad agencies and 11 of the largest PR agencies in L.A., to withhold billings and revenue information for their subsidiaries.
Under the act, chief executives and chief financial officers are required to certify the accuracy of the company’s financial data. There long have been suspicions in the media that data for many operating subsidiaries were inflated.
“Ad agencies have a history of publishing billing numbers and often there is no verification,” said Ian McGregor, executive vice president in Los Angeles for McCann-Erickson. “A game is being played where people inflate (their numbers) to look better. The SEC is saying this information has to be accurate.”
The action has chilled the annual practice of ranking agencies by billings, a staple at trade and regional business publications.
Jack O’Dwyer, editor-in-chief of the PR Web site odwyerpr.com, went ahead with his annual rankings, including only independent firms that would disclose financial information. In addition to his ranking, O’Dwyer published an editorial attacking the holding companies as using the regulations as an excuse for not disclosing information in what he deems “the worst possible year in history for ad and PR firms.”
“They (parent companies) have nothing to worry about if they had true figures,” said O’Dwyer. “Ad Age and I caught them red handed all the time.”
Alison Fahey, editor of Adweek, was quoted in the New York Post as saying that Advertising Age and Adweek would compile their rankings using outside sources and not rely on what she termed the agencies’ “highly inflated” numbers.
“It is frankly a bit frustrating,” said Bonnie Goodman, general manager for Hill & Knowlton, a WPP Group unit, in Los Angeles. “It affects how people look at the industry. It hinders us from a marketing standpoint.”
The lack of information has caused regional business publications to alter or cancel their annual lists.
Crain’s New York Business will publish an article about the circumstance in place of its list of PR firms, according to Denise Southland, its research director. Southland said Crain’s was still unsure about their advertising list, but may use numbers from their sister publication Ad Age.
Mark Lacter, editor of the Los Angeles Business Journal, is also unsure about what to do with the rankings, which are scheduled for publication next month. “We’re currently reviewing our options to determine whether to run them,” he said. “If we aren’t getting information from the major players, the lists are not going to be very reflective of the industries.”
The Council of Public Relations Firms, a trade group, will publish an alphabetical list of the independent firms that submitted information in late April, according to Council President Kathy Cripps.
“My hope is that this can be resolved ideally this year and certainly by the time we’re doing ranking next year,” said Cripps. “These lists are very important to agencies and their prospective clients.”