Top of Mind at Midsize Shops

Survey: Economy, war and SARS are biggest concerns

Despite fears to the contrary, the conflict in Iraq and consequent threats to boycott American products did not do much damage to midsize ad agencies, according to an e-mail survey released this month by ICOM, a global network of independent shops. And ironically, the study reveals that the SARS epidemic has boosted ad-industry prospects in some Asian markets, as clients have kept production and meetings close to home.

In a survey conducted just prior to the war, a third of responding agencies said that while the prospect of war was a concern, the struggling economy and general uncertainty about the future were bigger contributors to an overall troubling outlook.

“While the economy continues to be in the doldrums, there are nevertheless some bright spots,” said Gary Burandt, executive director of Rollinsville, Colo.-based ICOM, which has 70 members in 50 countries. In all, 27 ICOM members responded to the survey.

Twenty-three respondents said any consumer boycott of American goods had not made an impact on their business. (Two respondents said it was too early to tell, and another two said there had been some impact.)

In the Philippines, one ICOM member noted that SARS actually increased local business, since marketers and their staffs were not traveling to Hong Kong, Bangkok or Singapore, and postproduction that might have gone to Hong Kong stayed in-market.

One-third of respondents said the economy was still their greatest concern, and seven respondents said SARS was their biggest business worry.

Anthony Smee, principal of ICOM member Smee’s Advertising in London, said there may be good business opportunities on the horizon as the U.S. and U.K. governments pump money into the Iraqi economy, and clients that had held up budgets now appear to be releasing them.

Joe Phelps, CEO of The Phelps Group in Santa Monica, Calif., who earlier this year had forecast delayed growth because clients were holding back on spending, said he has seen some positive signs. “Our general outlook for business is good,” Phelps said in a statement. “Our top line is up more than 20 percent over last year, and we’re receiving an abnormal number of new-business inquiries.”

But overall, the soft economy looms over everything else in the U.S. and abroad, Burandt said. The survey found that European members, for example, still worry most about the general business condition. Almost half of the American respondents also cited the business impact of SARS.

The effects of the economy on agencies have been so profound, Burandt concluded, that there has been a paradigm shift in the way ICOM members do business and the way they view hiring.

“Agencies have been running lean and mean for a long time now, and they have staffed for the valleys and used freelancers for the peaks,” he said. “What we’ve been hearing is that even when the economy improves, that dynamic in terms of when and how to hire people will stay in place.”

—David Kaplan