With the ad landscape here far more treacherous than it was just a year ago, Bay Area agencies are radically refocusing—in many cases reverting to the old-school virtues of grit and protection of turf that were often forgotten during the heady boom years.
As last week's closure of Lowe Lintas & Partners' office here makes clear, the post-dot-com devastation can be lethal. As of last week, two shops—Lowe and Leo Burnett Technology Group—had closed because of market woes. A number of others have cinched mergers: among them, Black Rocket joining the Euro network; Citron Haligman Bedecarré linking with AKQA; key staffers and accounts from Katsin/Loeb jumping to Gardner Geary Coll; and last week's deal joining Italia/Gal and Zuckerman Fernandes & Partners (see page 10).
A snapshot of some accounts in review last March—$70 million CornerHardware.com, $20 million CarsDirect.com, $15 million B2BStores. com, $10 million CreditCards.com, to name just a few—reveals the level of expectations that were dashed.
Now, several months into the "new" new economy, it's back to the future here. Client relationships are key, executives keep business opportunities under wraps for fear of losing out to rivals and even the largest shops are putting together teams to pitch the smallest accounts.
"When everyone gets something on the inside, mum's the word because they don't want the client to be flooded by proposals," said Rob Bagot, group creative director at GMO/Hill, Holliday.
What's more, the belt tightening continues—albeit at a slower pace. (FCB was the most recent casualty, trimming 12 percent of its staff.)
"There was a receptionist who answered calls, screened them, filtered out pretenders and gave the ones that seemed reasonably interesting to management to pick and choose from," said Wayne Buder, president of Odiorne, Wilde Narraway & Partners. Now, he said, "We're back to the basics: identifying prospects, cultivating relationships, crafting pitches. Instead of relying on the new-business guy, we've staffed a full department behind it."
Ward Hanson, a marketing professor at Stanford University, said ad spending is typically the first thing axed from company budgets during a market drop. "There was a customer acquisition race … five people trying for two seats on the table," Hanson said. "This is a challenging time for agencies because they are all going to have to focus on a measurable return on their investments."
"Everyone's attaching themselves to a revenue stream, because job security is attached to clients," Bagot said. "A deep relationship is important. With dot-coms, we were like subcontractors and didn't have much client contact. Now client contact is king because everyone is fearful."
Matt Hofherr, new-business director at TBWA\Chiat\Day, said a key problem is shops are chasing any piece of viable offline business—even if it is a questionable fit.
"There are very few pitches, and there is less screening," he said. "If you look at the criteria, it's 'Do they have cash?' People are chasing the money no matter how big or how small."
Hofherr admitted it's risky business—especially if the market picks up. "A lot of agencies will weaken their own brand because they chased the buck," he said.
At Butler, Shine & Stern, the dip has meant a new focus on business planning. "You need to have an aggressive, long-term new-business strategy," president Greg Stern said. "You also need to step up the level of service with existing clients. We have a diverse range of clients, and we don't want them looking elsewhere."
Given the premium on new business, agency officials agreed that shops must realistically assess their odds before pitching.
Even so, OWN&P's Buder said the upside is there is "sanity in the market again." People with a year of advertising experience are no longer demanding grand salaries, he said, and in general, employees are again "hungry for jobs and business."
In the long run, Buder suggested, the downturn may actually help agencies increase their revenue. "[This could] enhance agency profitability rather than drain it as agencies are being forced to work more efficiently than ever before," he said.
"We got a bit complacent," he added. "Now people are asked to do more with less and are actually rallying. Passion is back."