Edition, August 28, 2002, Page 1
EPSTEIN REPLACES HUBBELL AT
Jerry Epstein, a former
counselor to Ronald Reagan who left Fleishman-Hillard after
17 years to form PeopleTrends in San Francisco, has been
named to replace Robert Hubbell as president and CEO of
PR21. Hubbell has left to "pursue other interests,"
the firm said, without further comment.
Epstein managed F-H's
Los Angeles office, eventually opening and overseeing the
firm's San Francisco, Sacramento, San Diego and Minneapolis
offices. He left F-H in 1999 to run PeopleTrends, a marketing
and human resources consultancy.
At F-H, he led the team
that worked to reposition Las Vegas as a family destination
and handled the 1994 World Cup and 2002 Japanese World Cup
Hubbell joined PR21,
a Daniel J. Edelman Inc. company, as president in January
2001. He was an EVP-managing director at Edelman and previously
VP of financial relations at Hill and Knowlton.
RL&M ADVISES TYCO
Robinson Lerer &
Montgomery is advising Tyco International in the aftermath
of its former CEO's indictment and rumors of a proxy fight
over seats on the company's board of directors.
New York-based RL&M,
a Young and Rubicam unit, was hired in early June by Bermuda-based
Tyco, after its stock plunged 80 percent on rumors of improper
accounting and CEO Dennis Kozlowski's highly publicized
resignation and indictment over allegedly evading more than
$1M in taxes.
Former Motorola president
Edward Breen was named CEO to replace Kozlowski last month.
The Aug. 21 Wall Street
Journal reported a potential proxy fight led by Tyco
investors to rid its 11-member board of nine members who
were appointed by Kozlowski.
RL&M's Walter Montgomery
has not returned calls from this NL.
RL&M is advising
Adelphia Communications in the aftermath of its July Chapter
11 filing and arrest of 77-year-old founder John Rigas and
his three sons, after the family was charged with looting
the company's coffers for personal investments.
Securities and Exchange Commission has approved the
Publicis-Bcom3 merger. Shareholders to vote with results
set for Sept. 20 announcement. Publicis would become 4th
largest ad/PR holding co.
MAKOVSKY HANDLES INTERPUBLIC
Makovsky & Co. is
handling communications for the Arkansas law firm Cauley
Geller Bowman & Coates, which is suing Interpublic Group
of Cos. in a class action on behalf of shareholders, CEO
Ken Makovsky told this NL.
the suit filed in U.S. District Court for the Southern District
of New York- that IPG defrauded investors by overstating
net income between Oct. 28, 1997 and Aug. 13 of this year.
It was the second class action suit against IPG since its
stock fell 23 percent earlier this month on news the company
would postpone its second quarter earnings announcement
for a week. Seven total suits against IPG have been filed
in the last week.
IPG later said it identified
$68.5 million of improperly expensed charges, mostly from
European operations, which will cause it to restate its
earnings back to 1997 and prior.
CGB&C has an Oct.
14 deadline to add plaintiffs to the suit and has a sign-up
form on its website. Makovsky said M&C is not reaching
out to shareholders for the work, but is mostly handling
media relations. He referred calls to Lisa Friedman, who
heads the account at M&C. She has not yet been reached.
CGB&C filed a suit against Omnicom executives in June,
alleging overinflation of OMC's securities.
Padgett has joined GCI Group to handle its effort
to offer IR services to biotechnology companies. Tom Reno,
GCI/New York president, called Padgett's "deep science
background" and "understanding of Wall Street"
a winning combination.
Padgett joins from Life
Sciences Consulting, and was involved in product development
work at Johnson & Johnson.
PRSA PAID BOLTON $283K IN
PR Society of America paid executive director Catherine
Bolton salary and bonuses totaling $283,000 in 2001, according
to the group's income tax return just released.
Also released were some financial statistics for the first
half, a break in recent PRSA practice. Revenues were down
$67,000 in the half to $4,473,241 but the Society added
$331,722 to net assets due to cost-cutting. Membership total
PRSA previously said (5/15 NL) that Bolton's salary for
2001 was $215,000. She had joined in September 2000 at a
salary of $200,000.
(continued on page 2)
Edition, August 28, 2002, Page 2
PRSA PAID BOLTON $283K
(continued from page 1)
Bolton said the additional
$68K in remuneration consisted of two bonuses for outstanding
overall performance and a $10,000 addition to salary since
she was not eligible for inclusion in the group's pension
plan in 2001.
She said that unlike
previous policy her bonuses are not related to membership
numbers or PRSA income. Former CEO Ray Gaulke had such a
Pension benefits of about
$20,000 a year started this year for Bolton. She will also
receive health and other benefits. Bolton's expense account
was not revealed in the tax return although Gaulke's once
was (it was $49,000 in one year).
CFO John Colletti was
paid $98,750 for eight months of employment.
This would indicate a
salary of $150,000 but Bolton said Colletti had also received
a bonus. He is a Certified Management Accountant.
Former chief administrative
officer Linda Burnett was paid $93,195 for nine months,
which included a bonus. She resigned in June.
Still unrevealed is the
settlement made to Gaulke, who left under an agreement with
PRSA in 2001 with four years still to go on his contract
of about $250K a year.
Payroll costs rose 14.4%
in 2001 to $4.01M or 43% of revenues of $9.1M. The average
payroll cost for associations in the $5-$10M range is 29%,
according to the American Society of Assn. Executives.
PRSA payroll costs were
27% higher than 1999 costs of $3.1M. A settlement was also
made with Dorothy McGuinness, 31-year veteran whose job
was eliminated in late 2001.
In its first intra-year
report since 1997, PRSA said cash/investments totaled $1.74M
as of June 30 vs. $1.11M a year earlier and $1.51M on Dec.
31, 2001. Accounts payable rose to $494,792 from $338,197
and accounts receivable declined to $164,445 from $193,298.
Expenses of about $9.5M are expected for 2002.
The Society gets the
bulk of its dues income in the first half. Dues income in
the half was $2.55M. It collected $3.15M in dues for all
PRSA did not provide
a current paid membership total. It counts as members those
who are up to three months in arrears on their dues.
Twelve manager-level staffers of PRSA met Aug. 26 at Bolton's
home in Lake Wallenpaupack, Pa. She also maintains a New
York apartment because of the distance her home is from
Shandwick has picked up the Little Tikes PR account
in a pitch that included five other shops. The firm's experience
in reaching "moms" via work for clients such as
Kraft, Cambell Soup and Enfamil was a reason for the win,
according to Laurie Yingling, communications manager at
LT. Sister Interpublic firm McCann-Erickson is LT's ad agency.
WS/Chicago will lead the LT account.
PRO-ISRAEL AD DRIVE IS IN
American Jewish groups
are backing a pro-Israel TV ad campaign to bolster support
for that embattled nation in the U.S.
The American Jewish Committee
is a driving force behind that effort. It recently sponsored
a poll that found American support for Israel is slipping
a bit as more respondents expressed "neutrality"
in the Israeli-Palestine conflict.
Kenneth Bandler, the Committee's
PR and communications director, has not returned a call
for comment. An AJC staffer did say that the kick-off date
for the multi-million effort has not yet been determined.
Political consultant Jennifer
Laszlo Mizrahi is developing the ad effort. She is a Democratic
consultant with close ties to former Israel PM Ehud Barak.
Laszlo Mizrahi has done work for clients such as American
Israel Public Affairs Committee, which bills itself as America's
pro-Israel lobby; Ford Foundation; American Cancer Society,
and the American Medical Assn.
The pro-Israel ad campaign
will position the country as a beacon of freedom in a rough
area of the world. It also will argue that Israel is committed
to the peace process, having already signed agreements with
former adversaries Egypt and Jordon.
The pro-Israel ads may
go head-to-head with those from Saudi Arabia. That Qorvis
Communications-developed campaign, pitching the Kingdom
as a reliable U.S. ally and partner in the so-called "war
on terror" is ready to run, QC CEO Michael Petruzzello
has told this NL.
The Saudi campaign will
run through Sept. 11, the one-year anniversary of the day
that 19 hijackers - of which 15 were Saudis-launched their
terror attacks on the U.S.
KCSA PR Worldwide chairman
Herb Corbin chairs AJC's PR and communications committee.
He referred questions to Bandler.
Corbin recently succeeded
Makovsky & Co.'s Ken Makovsky at the AJC post.
GRUBMAN PLEADS GUILTY IN CAR
Lizzie Grubman, a New
York publicist, pleaded guilty in a hit-and-run crash that
injured 16 people outside a Hamptons nightclub.
The judge indicated that
Grubman, 31, will get two months in jail, 280 hours of community
service and five years probation.
Grubman, who pleaded guilty
to third-degree assault and leaving the scene of an accident,
had faced a maximum sentence of seven years behind bars
if convicted of all 26 charges in the original indictment.
She remains free on bail
pending formal sentencing on Oct. 23.
"I just want to say
again I'm sorry for the people that I hurt in the accident
and I apologize to their families," she said.
Grubman, who uses Dan
Klores Comms. for PR, still faces at least eight lawsuits
Edition, August 28, 2002, Page 3
NYT TO REPORT
"Sunday Styles" section of The New York
Times will start publishing reports of same-sex commitment
ceremonies and of some types of formal registration of gay
and lesbian partnerships next month. On occasion, the "Vows"
column will be devoted to a same-sex couple.
reports will appear in the pages that currently are headed
"Weddings," and the heading will change to "Weddings/Celebrations,"
the Times announcement said.
Raines, executive editor of the Times, said: "In making
this change, we acknowledge the newsworthiness of a growing
and visible trend in society toward public celebrations
of commitment by gay and lesbian couples-celebrations important
to many of our readers, their families and their friends.
We recognize that the society remains divided about the
legal and religious definition of marriage, and our news
columns will remain impartial in that debate, reporting
fully on all points of view. The Styles pages will treat
same-sex celebrations as a discrete phenomenon meriting
coverage in their own right."
said the articles and pictures will be identical to those
the Times has used for weddings. As with weddings, the Styles
editors will decide which couples can be accommodated in
the available space. The criteria-the newsworthiness-and
accomplishments of the couples and their families-will be
the same as those that have traditionally applied to weddings.
Times will publish the selected announcements without charge.
To qualify for considerations, same-sex couples must fulfill
at least one of two requirements:
Celebrate their commitment in a public ceremony.
Enter into a legally recognized civil union (currently only
available in Vermont) or register their domestic partnership
(in those localities, including New York, that offer registration).
Garry, executive director of The Gay & Lesbian Alliance,
said The New York Times' decision to publish same-sex union
announcements is "nothing less than a watershed moment
in the pursuit of equality for the lesbian and gay community."
said GLAAD and the Times had been discussing this issue
for more than a year. She hopes the Times' decision will
cause other newspapers to follow suit.
ADDED TO SUNDAY MAGAZINE
New York Times Magazine is adding five new features,
including a 10-page photo section, called "Portfolio"
that will appear on a regular basis, starting Sept. 22.
will feature an "art gallery" of photos, taken
by award-winning photographers.
Moss, editor of the magazine, said this
new feature "expands on our ability to provide some
of the most highly regarded and stunning photographic works
being showcased today."
Sept. 8, another new feature, called "Diagnosis,"
will delve into real life medical puzzles, with a physician
taking readers through the process of diagnosing and treating
a specific ailment.
15, a section called "Page Turner" will focus
on young, artistic talent as they ascend into stardom via
movies, TV, books, art, music and theater.
Sept. 22, the magazine presents "Crash Course,"
its own version of an adult education primer, with the best
available thinking from leading academics on hot subjects
in the news.
year, a section called "Domains" will make its
debut. Articles in this section will offer a glimpse into
otherwise off-limits' quarters, showing how people in the
news-from figures in entertainment to sports, from politics
to business-live their lives, making the private public.
editors for each section are: Portfolio
Kathy Ryan/Ariel Kaminer; Diagnosis-Joel Lovell; Domains
and Page Turner-Megan Liberman, and Crash Course-Dean Robinson.
Gee was named editor
of Tampa Bay Illustrated, which will start publishing
eight times a year in January 2003.
Davis was named managing editor of the magazine, which will
be published by the Palm Beach Media Group, in Palm Beach,
editors will be based in the Pinellas Business Park, 11001
Roosevelt blvd., St. Petersburg, FL 33716. 727/456-0400;
editor Lee Canaan is seeking information about and invites
to press trips, hotels, travel, resorts and spa packages.
interest is worldwide, with emphasis on Asian, Mid-East
and European regions for a readership with generally affluent
photos are also welcomed by the syndicate, which produces
a monthly column that is sent to more than 1,200 newspapers
with a combined circulation exceeding 12 million.
who is also a founder and currently chief consultant to
Canaan PR, wants information sent to ENS, P.O. Box 276,
Murray Hill Station, New York, NY 10156. 212/679-9968; fax:
679-9969, or [email protected].
Associated Press has hired
51, previously at The Asbury Park (N.J.) Press, to
cover the higher education beat.
who will be based in New York, is replacing Arlene Levinson,
who is taking a leave of absence.
news continued on next page)
Edition, August 28, 2002, Page 4
STYLE RIVALS EYE STEWART'S
Washington Post said B. Smith, Christopher Lowell and
Chris Madden all have designs on the lifestyle crown of
a besieged Martha Stewart.
a former publicist and magazine editor, appears weekly on
HGTV and writes a column for Scripps Howard News Service.
She has produced 14 books and designs furniture and candles,
and is currently working up a magazine prototype for Hearst
works from home and a nearby office in
Rye, N.Y., which she shares with husband and partner Kevin
Madden, who is a former Conde Nast publisher of House
& Garden, Self and Bon Appetit.
a former ad executive, is host of his own TV show on the
Discovery Channel. His name is on bedding, bath linens,
paint and upholstered furniture sold by Burlington Coat
cover girl Barbara Smith, who has been called the black
Martha Stewart, hosts a half-hour syndicated TV show, "B.
Smith With Style," which has made her one of the most
prominent African American voices on style.
Stewart, Smith films from her own garden and kitchen in
Sag Harbor in the Hamptons. She also owns three restaurants
in Washington, New York and Sag Harbor.
Bath & Beyond, which markets Smith's ethnically inspired
bed linens, will add rugs, throws and pillows in September.
PLATT NAMED EDITOR
Lipson, publisher of Philadelphia magazine, has named
Larry Platt as editor-in-chief to succeed Loren Feldman.
who will take over on Sept. 9, said the monthly magazine,
which was started in 1908, will continue doing the service
coverage combined with an "emphasis on reporting and
telling our area's most dramatic stories of power, achievement,
pathos, and lifestyle."
said the magazine will be "dramatic, but not 'gotcha';
aggressive, but not superior in tone."
Platt had been editor-at-large for Philadelphia magazine
for 10 years.
EDITOR DIES IN
FALL FROM 15TH FLOOR
Myerson, 47, who was assistant business editor/weekends
for The New York Times, fell to his death from the
15th floor of the New York Times building on 43rd st. at
about 9:45 a.m. on Aug. 22.
who joined the Times in 1989 as a copy editor, had just
returned to work after attending his 25th class reunion
at Harvard Univ.
Salpukas, a Times business reporter, jumped off the George
Washington Bridge in January 2000.
wife, Carol Cropper, is a personal finance
editor at Business Week.
editor of Fire Chief magazine, is editor of Homeland
Protection Professional, a new magazine for the homeland
security market. He can be reached at 773/275-7898. The
magazine's website address is www.hppmag.com.
promoted to news editor
of Us Weekly.
just got her MBA degree, has rejoined The Associated Press
in New York.
has begun writing a new twice-a-week business column, called
"All Business," which is tied to current news
and trends. She will examine executive decisions, and analyze
everything from mergers to new products to technology advancements.
wants to get column ideas submitted to her
by e-mail at [email protected].
who currently writes the
"TechSmart" column in USA Weekend, a newspaper
supplement, is rejoining Ziff-Davis Media, in New York,
as editor-in-chief of Ziff Davis Internet.
who will continue to write his monthly column for USA Weekend,
will handle planning, developing and implementing Ziff Davis
Media's online editorial content.
Hood, a reporter
in PR Week's San Francisco bureau, is coming to New
York to become editor-in-chief of the paper's U.S. edition.
who starts Sept. 9, replaces Jonah
left to join Advertising Age as executive editor.
a former "Page Six" reporter for The New York
Post, has recently joined The Las Vegas Sun as
a gossip columnist. He can be reached at 702/259-4096.
resigned last May as executive editor/film for The Hollywood
Reporter, has joined Universal Pictures as SVP/media
FEWER ADS MEAN
FEWER BOOK REVIEWS
decline in advertising in The New York Times Book Review
is a troubling trend for book publicists and authors, who
rely on the literary world's bestread publication for reviews
to launch new books.
fewer ads, the weekly supplement has been running fewer
book reviews or running the reviews months later-when there
is room-but the "harm is often done by then,"
with films, initial sales can make or break a title because
cash-strapped publishers are quick to kill marketing dollars
for a book that fails to make a splash fast," said
newspapers have cut back on book reviews, including The
Philadelphia Inquirer, papers in Seattle, Boston, San
Jose, Chicago, San Francisco, Atlanta and Dallas, according
to the Authors Guild Bulletin.
Edition, August 28, 2002, Page 7
LEHMAN RAPS WPP
investment banking and stock brokerage house has criticized
the financial reporting practices of the WPP Group, owner
of Hill and Knowlton, Burson-Marsteller, Ogilvy PR Worldwide
and other PR operations.
London office, in a 25-page report for institutions published
Aug. 8, said WPP's free cash flow was "zero" in
2001 rather than the £504 million claimed.
hits the WPP reporting practices on new business wins, size
of debt, identity of acquisitions, share buy-backs, share
options to employees, and calculation of return on capital.
If WPP amortized
goodwill under the "normal" U.K. (FSR 10) accounting
rules, it would lower 2002 earnings by £260 million,
£274M in 2001. The company mostly does not amortize
goodwill. This totaled £4.45 billion as of June 30.
The U.K. pound is currently worth about $1.52.
report is called a review of "WPP's financial reporting
indepth" and not a "comprehensive discussion of
WPP's accounting." The conclusion reached is that WPP's
"commentary on its results is sometimes flattering
house also highlights "the important differences between
U.K. GAAP and U.S. GAAP (GAAP stands for generally accepted
of net income in 2001 under U.K. GAAP falls to $79.2M under
Even if goodwill amortization is removed, net under U.S.
GAAP would still be £50M lower, LB says.
An ad column
in the Aug. 21 Wall Street Journal was headlined:
"WPP's Sorrell Shines Amid Gloom." Written by
Erin White and Alessandra Galloni of the London bureau,
it uses the term "Sir" in referring to Sorrell.
WSJ/U.S. does not use the title.
in the story said Sorrell "Received Accolades for Accounting
says Sorrell's critics "call him a cut-throat deal
maker who littered his acquisition trail with enemies"
but that "investors say Sir Martin stands out for the
transparency of WPP's books."
and caution are popular with Wall Street," it adds.
Noted are that WPP waits a full year after an acquisition
before adding the revenue to its own; generally discloses
the revenue of companies it acquires; regularly discloses
future performance-related payouts; will report the cost
of stock options on results, and Sorrell will certify financial
results as required by a new SEC rule.
WPP defines free cash flow to include such items as cash
from the issue of shares and the sale of investments. Lehman
would include neither (thus lowering claimed FCF of £504M
by £96M). If working capital and movement in provisions
is also included, FCF "would be approximately zero,"
says Lehman. WPP contradicts itself by including proceeds
from investments in figuring FCF but not the costs of such
investments, Lehman notes.
return on capital of 10.8% but this is "incorrect,"
said the banking house. It's 8.4% by WPP's own definition
and 8% by LB's, it adds.
£150-£200M to buying back shares each year but
these are used to pay staff and should be a staff cost,
not a buyback. Shares have not been cancelled for three
years, LB says.
should be "cautious" on new business figures of
all ad agencies. WPP said it added $800M for Hindustan Lever
but the press said it was only worth $120-$150M. Issues
include when to count new wins and whether an agency admits
an account is lost or whether it merely says it's "inactive."
acquisitions of WPP (70 small purchases plus Tempus and
Young & Rubicam in 2000-2001) make its financial statements
"harder to understand" because it is "less
clear where growth is coming from," says LB. It calls
"somewhat unhelpful" the fact that WPP spent £700M
on acquisitions in 2001 and decided none were "material."
Also, it says, where revenues and profits are disclosed,
it's only for the year of acquisition.
it never has to amortize large acquisitions such as Tempus
and Y&R, pointing out that the goodwill on J.W. Thompson
and Ogilvy & Mather, acquired in the 1980's, is now
well below the current value of the brands. However, LB
figures that Y&R, purchased for £3 billion in
stock in 2000, now has a value of £1.8B to £2.1B,
meaning there could be a write-down of about £1B.
TATE CHAIRS WEST
POINT PA COUNCIL
vice chairman Sheila Tate has been named to chair the U.S.
Military Academy's Civilian Public Affairs council replacing
Burson-Marsteller vice chairman Stan Sauerhaft, who becomes
chairman emeritus of the West Point, N.Y.-based council.
advises the Academy's Superintendent and PA Officer and
assists with media relations, crisis communications, alumni
affairs, recruiting & admissions, and government relations.
Tate was press secretary for the first President Bush and
First Lady Nancy Reagan, and was previously vice chairman
of Hill and Knowlton's Washington, D.C., office.
based in D.C., is the public affairs arm of Interpublic's
The Academy is marking its 200th year.
RENNERT DIES AT 74
Vincent Paul Rennert, who spent his entire 36-year PR
career at Manning, Selvage & Lee, died Aug. 18, along
with his wife, Annetta, in Wareham, Mass., from injuries
sustained in a car accident.
Rennert, 74, was president of MS&L's international
division until his retirement in 1992. He previously headed
the firm's New York corporate practice.
Edition, August 28, 2002, Page 8
Brothers has criticized the financial reporting habits of
WPP Group while an article in the Wall Street
Journal praises them (page 7).
It's pretty obvious that
the WSJ piece, a dispatch from London, can't hold a candle
to the 25-page Lehman report, authored by some of the most
sophisticated analysts at the banking house.
The WSJ report is an unmitigated
puff piece of the type common in the U.K. trade and general
press. U.K. trade papers often openly describe themselves
as "supporters" of the industries they're covering.
The WSJ, headlining how
WPP CEO Martin Sorrell "Shines Amid Gloom," even
refers to him as "Sir," a title never used by
the WSJ when its U.S. reporters and editors are writing
Terry MacDonald wrote July 15 that he would not use the
"sir" moniker with Elton John, Paul McCartney,
Mick Jagger or anyone else.
to watch TV journalists during
interviews with John and McCartney mentioning their sterling
titles in every third sentence," he added.
"Your Highness, Sir
and Dame have no place in the American lexicon," wrote
MacDonald. "Our forebears fought a revolution so we
would never again bow to the Crown."
Another odd thing about
the WPP story is that the WSJ has been very tough lately
with the two big competitors of WPP-Omnicom and Interpublic.
first half report of WPP is yet another example of its inadequate
and misleading financial reporting habits.
-The first page of the
release reports revenue is down almost 2%..."and flat
in constant currencies." Whether it's "flat"
in constant currencies doesn't count. Foreign exchange effects
are real. Some analysts do not like references to "constant
-Profit before interest,
taxes, goodwill and impairment is reported. -Operating margin
is given pre-goodwill.
earnings are provided.
-Nowhere on the first
page is earnings-pershare provided. That can only be found
in a table on page 9. They're down 31% to 72 cents. Omnicom's
CFO Randy Weisenburger has said that EPS is the most important
single financial measurement.
wouldn't be so bad but the glossy 2001 WPP annual report
has 16 pages of text on the importance of "branding,"
saying that "every corporate action, every corporate
decision, every corporate communication will be seen as
a clue-as one of those all-important scraps and straws from
which people build brands."
Furthermore, the essay,
by Jeremy Bullmore, former J.W. Thompson creative head and
WPP director, says parent companies are increasingly identified
with their subsidiary companies. Anything the parent does
reflects on the individual "brands" and vice versa.
If this is the case, then
WPP's poor financial reports hurt not only its own reputation
but the reputations of Hill & Knowlton, Burson-Marsteller,
Ogilvy PR Worldwide, and all its advertising and PR units.
The essay advises marketers
to read The Cluetrain
Manifesto, calling this a "splendidly anarchic
rant" about the Internet. Bullmore says readers should
"feel free to ignore quite a lot of it." We hope
the authors of Cluetrain get to see this knock by a 33-year
Bullmore also mentions
No Logo by Naomi Klein, saying the book about exploitation
of foreign labor exposes the "double standards of multinational
corporations and the risk they run."
A final irony is that
Sorrell has pledged in full page NASDAQ ads to provide clarity
and transparency in his company's financial reports. He
is a director of NASDAQ (which is unreachable these days
by phone, e-mail, fax, messenger or carrier pigeon).
has done a service in taking an axe to the billions in "net
new wins" regularly claimed by the ad agencies.
Such figures are "not audited," it says in a massive
Non-ad agency sources
get "much lower reported
net new wins than the ad agencies," it notes. Among
questions it raises is when will the new billings take effect?
Budgets can easily be trimmed or erased. Advertisers habitually
say their new ad campaigns are the "biggest ever."
Also, ad agencies, instead of admitting an account is lost,
merely consider it "inactive" and fail to make
the deduction. PR firms tend to say they "completed
the assignment." But the fees are gone in either case.
The new billings figures
are exaggerated by a factor of about 10. Ad agencies these
days are getting close to 10% of the billings and only 1%-2%
if media buying alone is involved. A "billion-dollars"
in net new business is worth only a $100 million. Ad agencies,
if they weren't so hooked on exaggeration, would change
their method of reporting.
Investor, like Lehman Brothers with WPP, earlier this
year took issue with Interpublic's claims of "free
cash flow." Defining FCF as "cash from
operations less capital spending," Grant's said that
IPG, instead of having FCF of $249M in the first nine months
of 2001, had a negative cash flow of $712M for the period.
IPG's Sean Orr argued that Grant's was wrong and that there
wasn't enough publicly available information for Grant's
to make its statement.