Media Agency Report: Gold Rush Redux

The Bay Area boom is changing how the media game is played San Francisco is the most wired community in America. Almost every household is online, and e-commerce companies spring up daily. Those same businesses are looking for a way to get their name and message out to the public. They have little idea how to do it, but look to offline media advertising for the answer. In the long run, though, the most significant and enduring effect of the Bay Area boom may not be measured by numbers but by people. The Internet age is ushering in new concerns: the speed of delivery, the important of client selectivity, the difficulty of retaining clients and an increased focus on planning. San Francisco is the birthplace for many of these new media mavens and practices. The e-business explosion, which has occurred over the past three years, has made the Bay Area and Silicon Valley two of the most lucrative media agency markets in the country. There's gold in "them thar" hills, and media agencies are rushing to take advantage. Bay Area media specialists that had existing service offices in the market have added planning and strategic personnel. Those with no previous Bay Area presence have put down roots and begun hunting for new business with zeal. True North Communication's KSL Media competes here. It's grown from 10 to 16 employees in the past year. Bcom3's Starcom has placed its shingle on a San Francisco door, and Carat Freeman, the high-tech arm of global media independent Carat, opened a local office a little more than a year ago. Earlier this year, SFM Media/MPG brought the manager of its Los Angeles office, Kurt Olsen, to Northern California with the express intent to grab some gold of its own. The shop already has won business directly from advertisers, such as jobdirect.com and evoice.com, and in partnership with local ad agencies, including Havas sister shop AKA Euro. In fact, so important has the sizzling San Francisco region become that the West's dominant media agency, Interpublic Group of Cos.'s powerhouse, Initiative Media North America, has elevated its San Francisco office to a separate region, one of five Initiative sectors in the U.S., along with Los Angeles, Chicago, New York and Atlanta. "The San Francisco office is not a service office for us [anymore]," says Hank Cohen, president of West Coast operations for KSL Media. "Years ago, [the local KSL office] had a significantly heavy buying emphasis. Now it's planning and buying." San Francisco is ripe with business-to-business accounts, business-to-consumer accounts, application service providers, vertical portals and high-tech advertisers. And the business is not just coming from Internet-era advertisers. Local ad agencies are flush with dot-com dollars, which form a secondary pool of billings for media services companies that partner with them. From 1997 -'99, more than $1.3 billion in Internet-based dot-com assignments were awarded to San Francisco shops, say industry sources. Of the estimated $6 billion in total billings claimed by Bay Area shops in '99, at least 20 percent--and perhaps as much as 25 percent--comes from dot-com clients. "There was never any real business in San Francisco outside of banks, Clorox and those kinds of accounts," says Bob Hanley, a partner at Creative Media, part of Omnicom's PhD global media network. Creative Media, which buys for San Francisco-based Omnicom sibling Goodby, Silverstein & Partners as well as Leagas Delaney, has had an office here for 10 years. "The rise of the big creative agencies [in the market]--the Goodbys, the Chiats and all the wannabes--attract business. Because there are so many tech-driven accounts, it has conspired to make the business really healthy," notes Hanley. The high-tech boom is also incubating a new type of media planner, a far more wired, supersonic, strategically focused specialist. This is true of any shop with significant dot-com business, but it is especially pronounced in San Francisco, where cyberlife defines the city as much as the colorful cable cars. "When I think about San Francisco, I think about rocket fuel because of what's going on in that market. It's inspiring a new way to work for our business," says Steve Farella, chief operating officer of Havas media agency SFM Media/MPG. Dot-com planners are characterized largely by their ability to do business at the dizzying velocity of Internet speed, an accelerated pace where creative work is secondary and customer response is key. But they also bring a different point of view to their task, an Internet mentality that places a premium on interactivity and measurability. Jim Meskauskas, a buyer with Mediasmith in San Francisco, remembers working on accounts in the "good old days," circa mid-1990s, when clients presented a list of marketing objectives. The client and the shop would carefully plot how to introduce the company to consumers, and the whole process would take perhaps a year. "Now you have 30 days to do media planning," adds Meskauskas. "It's an extraordinarily short period of time, but it manages to get done." There are differences of opinion about the long-term effects of the dot-com revolution, but not this instant advertising aspect of it. Today, young startup companies expect to see their ads airing on television in a month or less. The highly publicized demand by TV stations for cash up front accentuates the intensity. "I don't see how we could ever go back," says Sarah Cook, associate director at the interactive planning arm of Starcom IP in San Francisco. "This pace is here to stay. Even if things slow down, agencies will be accustomed to a faster pace. It's forcing us to become more efficient." "It's frustration and pencil throwing and client swearing, but it's exciting--and it's never been exciting before," Meskauskas says of the recent changes in planning. "Media has gained a lot of attention because everything is response driven. Now people need to have proof that ads work. What matters is not that it's pretty, only that it works." Joy McBride, senior vice president and general manager of KSL Media in San Francisco, says she has seen more changes in media buying and planning in the past three years than in the two previous decades. (KSL handles roughly 50-60 dot-com clients around the country.) This is good news and bad news. While competition may be good for business, especially in Northern California, McBride says Internet time could have adverse affects on the planning process. "Part of what we do needs to be based on strong strategy," McBride explains. "We pride ourselves on doing a lot of research on target markets and media habits. We want to be good stewards of their budgets, but it's hard in a marketplace with all the dot-coms." "It puts us under the kind of pressures that would make a diamond blush," Meskauskas quips. Another problem in this new market? It's increasingly tough to make your message stand out from the other dot-coms fighting for the same ad space. Leslie Diard, who recently left the San Francisco office of Carat and took a job heading up the media arm for interactive agency Swirl, says shops and buyers are forced to look for new ways to make their spots resonate with consumers. "If you want your message to stand out, you have to constantly look for new ways to do it," Diard says. "It makes it difficult for advertisers, figuring out where to put the message, where it will have the most impact." Diard also believes it is tough to help new companies with the planning process when many partnerships are strained by deadlines and demands. "You need to be very careful with a lot of clients," she adds. "You want a partnership, but now it's often a fleeting relationship. The world has changed a lot. It's dynamic and exciting, but a bond with a client isn't as lasting as it once was." Scott Schuman, executive vice president of Hawk Media in San Francisco, agrees that media shops are trying to do too much work in too little time. The dot-com revolution certainly gives Hawk, which carved out a market niche as a media buying auditor long before the boom began, fertile new ground to till. "It's been great for business," Schuman says. "We have grown enormously over the past year." While many e-commerce companies have a reputation of reckless spending, Schuman said some dot-coms are trying to gauge if their ad expenditures are working. "They are recognizing they should measure the impact of the dollars where and how it is spent," Schuman says. "We've provided a degree of comfort for dot-com clients because if someone needs to get a TV or radio buy done, we can use a number of services, and we'll also watch their media." Audited or not, there's no shortage of work in the market. But like their counterparts at full-service shops, media agencies here also suffer from a shallow talent pool. There may be no shortage of gold, but there are precious few miners to dig it up. "The talent here, especially of the interactive buyers, is very shallow," Cook admits. "Getting work is simple, but the talent and quality of interactive planners is of a lower caliber." "In order to compete you need strong people," KSL Media's Cohen concurs. "That's been the biggest issue for myself and competitors. Finding talent." What's more, the rapid growth won't last forever. Most planners concede that dot-com business will taper off after companies get a better sense of their own value and stop reckless spending. "Things will continue to be good, they just won't be quite as good," Meskauskas says. "Now if you have a shingle on your front door, you can get a dot-com company. But it will get more difficult." For the moment, though, San Francisco glitters. And this second gold rush is likely to leave a lasting legacy in a new generation of media specialists comfortable with both the pace and the process of 21st-century media planning and buying. "It's not just about speed or marketing insight," concludes SFM Media's Farella. "It's also about people." Their numbers may be few--so far--but their impact could extend well beyond both their digital origins and their fabled city.

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Media Agency Report: Gold Rush Redux

Justin M. Norton

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Justin M. Norton