It is now more than 20 years since the passage of the Sarbanes-Oxley Act, a US federal law that mandated new financial reporting standards. The intent was greater clarity and transparency, but paradoxically the new law led the large advertising and public relations holding companies to become more opaque, declining to provide numbers for any of their operating units to various industry rankings.

To be clear, nothing in Sarbanes-Oxley prevents the holding companies from providing financial information about their individual agencies. Rather, it would hold them accountable for providing inaccurate financial information. So when they all decided to use SOX as a pretext for withholding this information, the obvious inference was that they were reluctant to provide accurate information, because to do so would have made it obvious that the pre-Sarbanes Oxley information they had provided was wildly exaggerated.

No plausible alternate explanation was provided by the companies involved. There were some concerns about providing numbers that did not conform to Generally Accepted Accounting Principles—an issue that would have been easily reconciled—but it seemed that most of them welcomed the opportunity to withhold financial information. And that refusal to provide numbers has persisted for more than 20 years.  

That has left publications like this one in a difficult position, faced with a choice of either producing partial rankings, excluding the holding company owned agencies (about half of the top 20), a decision that would distort any analysis of the size of the global PR business or of trends in the industry; or estimating the size of the holding company agencies based on background conversations and our own knowledge of the business.

The latter approach produces a ranking that is undoubtedly a better reflection on the agency business as a whole, but it has also led—over the course of two decades—to some inflation of the estimated numbers. 

In recent years, it has become apparent that the numbers for some of the largest holding companies simply do not add up. In some cases, the total estimated revenue of individual agencies exceeds the numbers reported for the holding company's public relations and public affairs business.

Without pointing the figure at any particular company, it should be obvious that a public company that reports $1.5 billion in PR revenues cannot contain PR agencies with $800 million, $600 million and $300 million each—especially since holding companies are reporting revenues, which traditionally are significantly higher than fee income as we define it in our ranking rules.

There are several reasons for the inflation that has occurred. For one thing, the starting point for all of these numbers was the pre-SOX reporting, which (see above) was at least suspect. For another, publications (including this one) have been generous in their interpretation of numbers provided on “background,” so that low single digits was often construed to mean 3-4% growth rather than 1 or 2%—a problem that compounds considerably over time. 

And so this year we took a hard look at the holding companies’ reported numbers, and made our own assessment of which agencies were included in those numbers, and their relative contributions. This process led to a substantial downward adjustment of many of the estimates we have made in previous years, with the downward adjustments varying slightly from holding company to holding company.

So it is that while we have reported estimated 2023 growth in the usual way for all of these agencies, even those that we believe grew in 2023 are now shown at a lower overall fee income than in our previous ranking. And of course, our estimate of the industry’s global size have been adjusted accordingly.

It is, of course, possible that these adjustments may be unfair to some individual agencies—although we believe that in most cases, the numbers remain somewhat generous, given the likely differences between revenues reported under GAAP rules and fee income as we define it.

And obviously, all of those agencies are free to report their actual fee income and correct any errors—in the way they have been free to do so for the past 20 years.