Hispanic Clout Changes Ad Landscape

Multicultural shops face a downside

The sorry state of the economy has eaten up hours of talk at Advertising Week. But in the good news column—for some agencies, anyway—there’s this: ad spend targeting Hispanics has yet to slow down.

The 2010 U.S. Census laid bare what the industry has known for a while: the demographic is exploding. Hispanic consumers now number 50 million—or 1 in 6 Americans—accounting for more than half of the nation’s increase in total population.

So, while growth in general-market advertising is slowing, marketing expenditures targeting Hispanics continue upwards, albeit not at the double-digit increases seen before the recession. In the first half of this year, for instance, Procter & Gamble shifted budgets into Spanish-language media at the expense of general market consumer magazine and TV (both broadcast and cable). And financial services and pharmaceuticals, which traditionally have not been very active in the Hispanic marketplace, are now boosting their ad spends.

For some multicultural shops, however, the good news has a downside: As investment levels increase, so does interest from general-market shops with established, big-client relationships. And their deep pockets means they can lure talent from these smaller agencies. In August, research firm IBISWorld released a list of the top 10 U.S. industries in which the Hispanic market share is growing the fastest. No. 5 on that list? Ad agencies.

“You’re seeing a lot of general-market agencies building their business at the expense of multicultural agencies,” said one industry insider.

Given the changing U.S. population, it’s an obvious business expansion. Last November, for instance, Ogilvy created OgilvyCULTURE, a cross-cultural strategic service practice, picking up work from marketers such as Kodak, Ikea, and British Airways.

Roberto Orci, chair-elect of the Association of Hispanic Advertising Agencies, which hosts its annual conference next week in Miami—as well as president of L.A.-based Acento—notes that in certain areas in the U.S., and for certain brands, the Hispanic market is even being considered the general market. His agency, he adds, has participated in general-market reviews, and has gone up against general-market agencies in Hispanic reviews.

Ingrid Otero-Smart, CEO of Interpublic’s Casanova Pendrill, says her Costa Mesa, Calif. agency is more likely to have a client give new Hispanic work to one of its general-market agencies than it is for Casanova Pendrill to come up against general-market shops in a new-business pitch.

Hispanic consumers, as a group, now have more discretionary spending power than any other multicultural segment. Otero-Smart, Casanova’s Pendrill’s chief, seems less concerned about the encroachment of general-market shops on her turf than she is about marketers’ slowness in heeding the wake-up call delivered by the recent Census findings.

“One of the issues we face is, ‘How do we get marketers beyond the 4-5 percent levels of spending?’ Their budgets should be two-to-three times bigger,” she says. “Competition from general-market agencies would be a moot point if that was the case—there would be enough business for everyone.”