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• Article | Journal of Current Issues and Research in Advertising | 2013

  How Concentrated Is the U.S. Advertising and Marketing Services Industry: Myth vs. Reality?

  Alvin J. Silk and Charles King III

  We analyze changes in concentration levels in the U.S. Advertising and Marketing Services industry using data from the U.S. Census Bureau's quinquennial Economic Census and the Service Annual Survey. These data, heretofore largely ignored, allow us to redress some of the measurement problems surrounding estimates found in the existing literature. The data available permitted concentration levels to be tracked for the period 1977–2007 in the case of advertising agencies and for 1997, 2002, and 2007 for the other industry sectors. Firm level concentration, as measured by the Herfindahl-Hirschman Index (HHI) and concentration ratios (CRs), varies across the nine sectors comprising the industry, but all are within the range generally considered as indicative of a competitive industry. At the holding company level, the four largest organizations account for less than a quarter of the industry's total revenue, a share that changed little over the period 2002–2009, but one that is approximately half of estimates frequently cited in the trade press. The persistence of a diverse and relatively unconcentrated size structure appears quite consistent with other research on the underlying economics of this industry.

  Keywords: concentration levels; data; U.S. Census Bureau’s quinquennial Economic Census and the Service Annual Survey; measurement problems; Herfindahl-Hirschman Index; concentration ratios; Advertising; Advertising Industry; North and Central America;

  Citation:

  Silk, Alvin J., and Charles King III. "How Concentrated Is the U.S. Advertising and Marketing Services Industry: Myth vs. Reality?" Journal of Current Issues and Research in Advertising 34, no. 1 (2013): 1–28.

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• Article | Foundations and Trends in Marketing | 2012

  Conflict Policy and Advertising Agency-Client Relations: The Problem of Competing Clients Sharing a Common Agency

  Alvin J. Silk

  What restrictions should be placed on advertising agencies with respect to serving accounts or clients that are competitors of one another in order to avoid conflicts of interest? In recent decades, the advertising and marketing services industry has undergone a number of structural changes that forced an ongoing re-examination and modification of traditional norms and policies emphasizing exclusivity in agency-client relationships. A typology of conflicts that has arisen in the U.S. shows the variety and complexity of contemporary conflicts. Cases of conflicts reported in the trade literature are used to illustrate policy issues as well as the spillover effects and resolution of disputes. To cope with these developments, two significant changes in conflict policies evident in current U.S. practice are identified. First, safeguards to preserve proprietary information that function as organizational, location, and personnel mobility barriers among quasi-autonomous units within a mega-agency or holding company have become an essential component of conflict policies. Subject to the protection against security breaches afforded by safeguards, rival clients may be served by separate organizational units that are under common control and/or ownership. Second, a family of hybrid conflict polices has evolved that feature elements of the split account system long practiced in Japan, augmented by safeguards that serve as partial substitutes for the umbrella prohibition on serving rivals imposed by exclusivity. By relying on safeguards and splitting account assignments in a variety of ways among different organizational units within a given mega-agency or holding company that may also serve rivals (or across different mega-agencies or holding companies), clients exert a measure of control over the access of those agencies to confidential information while also offering them incentives to avoid conflicts of interest. Findings from the existing body of conceptual and empirical research bearing on the sources and consequences of conflicts are reviewed and directions for further research are discussed.

  Keywords: advertising agency; competitors; marketing services industry; structural changes; agency-client relationships; hybrid conflict policies; safeguards; Advertising; Advertising Industry; Europe; Latin America; North and Central America;

  Citation:

  Silk, Alvin J. "Conflict Policy and Advertising Agency-Client Relations: The Problem of Competing Clients Sharing a Common Agency." Foundations and Trends in Marketing 6, no. 2 (2012): 63–149.

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• Article | Review of Marketing Science | December 2012

  The Unbundling of Advertising Agency Services: An Economic Analysis

  Mohammad Arzaghi, Ernst R. Berndt, James C. Davis and Alvin J. Silk

  We address a puzzle surrounding the shift from bundling to unbundling of U.S. advertising agency services and the slow pace of change over several decades. We model an agency’s decision as a tradeoff between the fixed cost to the advertiser of establishing a relationship with an agency and pecuniary economies of scale from media services provision. Using micro-data from the U.S. Census of Services for 1982–2007, we find agencies are more likely to unbundle with increasing size, diversification, and higher media prices and less likely with increasing age, larger media volume, and an interaction between media prices and volume.

  Keywords: bundling; unbundling; advertising agency services; fixed cost; diversification; higher media prices; volume;

  Citation:

  Arzaghi, Mohammad, Ernst R. Berndt, James C. Davis, and Alvin J. Silk. "The Unbundling of Advertising Agency Services: An Economic Analysis." Review of Marketing Science 10, no. 1 (December 2012).

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