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Ad Firms Must Verify Revenue Claims

Ad Firms Must Verify Revenue Claims

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 Cos., Omnicom Group Inc., Publicis Groupe SA, Grey Global Group Inc. and WPP Group PLC to withhold billings and revenue information for their units.

Locally, Irvine’s Y & R; Cos. and Aliso Viejo’s Mendoza Dillon & Asociados Inc. are units of WPP and Irvine’s Foote, Cone & Belding Inc. is owned by Interpublic.

For this week’s Business Journal list, Y & R; and Mendoza declined to disclose billings data, but Foote, Cone did provide numbers for its OC unit (see story, page 22).

Under the act, chief executives and chief financial officers must certify the accuracy of the company’s financial data. There long have been suspicions in the media that data for many operating units 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 unit of Interpublic. “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 at some trade and regional business publications.

Jack O’Dwyer, editor-in-chief of the public relations 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.”

The lack of information has caused some regional business publications to alter or cancel their annual lists.

Crain’s New York Business, for instance, will publish an article about the circumstance in place of its list of public relations companies, 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.

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,” Cripps said.

Taylor is a staff reporter with the Los Angeles Business Journal.

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