2001: An Economic Odyssey

BOSTON-Recent layoffs and agency closings have rocked the industry, and executives predict rough going in the near future as clients’ advertising budgets dwindle and the dot-com frenzy continues to fade.

But executives at most New England shops are not predicting a slow down—adding talent and seeking ways to expand their offerings to attract new clients—and believe they may emerge stronger than ever.

“Clients are cautious about how they invest money and will continue to be more discretionary,” noted Laurel Rossi, executive vice president at Boston-based Hill, Holliday, Connors, Cosmopulos. Despite that, the Interpublic Group shop will continue to be aggressive in its growth plans, Rossi said, rebuilding its interactive service offerings and shoring up its West Coast operations through the recent acquisition of SF Interactive [Adweek, Feb. 28].

The economic downturn presages bad news for agencies; executives predict that the ad market won’t see a recovery until at least the third quarter this year.

“As far as American business goes, advertising and marketing communications is the first line item to be cut,” said Skip Pile, chairman of Boston consulting firm Pile and Co.

Pile doesn’t anticipate a repeat of the grim early-1990s recession, when a third of New England agencies went out of business. But a number of players are listing, and some, such as Lane Advertising in Salem, Mass., have already closed.

Most vulnerable are the mid-sized shops that employ 50 to 100 people. They can’t compete with larger agencies such as Arnold Worldwide, Mullen or Hill, Holliday, executives said. Smaller agencies, which tend to have close, long-standing relationships with their clients or specialize in niche services, are also well-positioned to ride out the storm, Pile said.

Bob Hoffman, president of Gearon Hoffman, a mid-sized independent agency in Boston, said that because his shop relies less on the slumping technology sector, he expects billings to remain at or above what they were in 2000. Gearon Hoffman plans to unveil new ads for Grolsch in the spring, as well as new work for Brown & Co., Capital Crossing Bank, Tufts Health Plan and other clients later in the year.

Gearon Hoffman will target new business in categories such as financial services and beverages—both of which have brought the agency success in the past. Hoffman doesn’t feel the slowing economy will affect business in these areas. The agency recently brought aboard former broadcast sales executive Robert Knight as a senior vice president, charged with kick-starting Gearon Hoffman’s new-business efforts.

“This is a fundamental business, and we have to stick to the fundamentals,” said Chris Colbert, president of Holland Mark Advertising in Boston. Holland Mark is in the semifinal round of the review for the $7 million account of Mohegan Sun Casino and continues to add seasoned talent, such as senior vice president/group brand director Pat D’Amico and associate creative director Vashti Brotherhood.

“The best edge against a questionable economy is a strong sense of what you do best and strong relationships in what you do well,” said Dick Emerson, chief operating officer of Toth Brand Imaging, Concord, Mass.

Despite the downturn, Emerson remains confident in his agency’s ability to attract and retain business. In Toth’s case, this means continuing work with lifestyle clients like Orvis and expanding work with long-standing clients such as Keds, Unionbay and Stride-Rite.

Dot-coms, most executives agree, are to be approached with extreme caution.

Holland Mark, though not focusing on Internet clients, is still working for online players, including Abridge.com, Goldpocket.com and Student.com.

Joe Grimaldi, chief executive of Mullen, an Interpublic shop, reports no slowdown in client spending. Significant efforts are on tap in the near future for Agere Systems, Rational Software and MangoSoft, all added last year by the Wenham, Mass., agency.

Last summer, however, Mullen cut back on its new hires, Grimaldi conceded.

“What we see is more hesitancy and nervousness than a downturn,” said Bill Cronin, president of Cronin & Co., Glastonbury, Conn.

Hoffman said competition is more intense among agencies than it was during the dot-com boom of the past few years, which created something of a complacent attitude among some agencies.

“There are some good opportunities,” Hoffman said. “I think New England is a lot better in its economic base than it was 10 years ago.”