Things Are Finally Looking Up for the Area’s Ad Industry
One of the bleakest eras in the history of Southern California’s advertising industry appears to be ending.
After nearly five years of hemorrhaging that resulted in more than a dozen shuttered agencies, hundreds of lost jobs and millions of dollars in lost billings, signs are emerging that--despite Southern California’s unstable economy--the local ad business is starting to turn around.
No one is projecting booming growth this year. And few expect the industry to ever return to its heydays of double-digit growth. But a surprising number of agencies are starting to add staff--some for the first time in years.
Executives say some current clients are beginning to increase ad spending. And agency chiefs--who just three months ago projected a flat 1994--now say annual billings in the market could rise about 5% this year. That isn’t far behind 1994’s national ad growth, already projected to increase about 6% or 7%.
“The doom and gloom is gone,” said Brian Morris, chairman of the Western States Advertising Agencies Assn. and executive vice president of Dailey & Associates. “I don’t hear all the complaining that I did about layoffs and clients cutting back on spending.”
Several factors are behind the turnaround, key among them: The economy has improved nationally, and because most large Los Angeles agencies have national clients, they are seeing increases in ad spending. Also, some local companies that trimmed their advertising budgets are beginning to add to them, albeit slightly. And many agencies are adding business through diversification. Several have set up divisions to create infomercials--such as a BBDO unit about to create an infomercial for Apple Computer. Some agencies are also getting more into direct marketing.
“There is absolutely no question that things are turning around,” said Dennis Holt, president and chief executive of Western International Media, the nation’s largest media buying company, whose annual billings for fiscal 1994 are up 15% from the same period a year ago. As a result, the firm has recently added staff and expanded operations to several floors of a building across the street from its headquarters.
Western does not create ads but, like advertising agencies, it purchases broadcast time and print and billboard space for clients. Western’s size--more than $1.5 billion in annual billings--helps convince clients that it can swing budget media buys. Among its clients are Disney and Home Depot.
The advertising turnaround is particularly striking in the local broadcast industry. For the first two months of 1994, Los Angeles-area radio ad revenues were up nearly 10%, according to industry estimates. “And I guarantee you, March will also be up substantially,” said Howard Neal, vice president and general manager of radio stations KOST and KFI.
At the same time, television ad revenues in the Los Angeles market are up about 6% for the first quarter, executives say. Last year, local TV ad revenues were down 4.5% compared to 1992.
“In spite of all logic--with the natural disasters and the shattered economy--business is terrific,” said John Riedl, general sales manager at KABC-TV.
After a flat 1993, the ad agency Davis, Ball & Colombatto expects to post annual growth of at least 5% in 1994, said Brad Ball, co-president of the firm that recently won new clients Knott’s Berry Farm and China Airlines. But its increased billings for 1994 will also come from boosts in ad spending from current clients such as Ralphs and Chief Auto Parts, he said.
“Just the fact that we’re hiring says it all,” Ball said. New promotional activities by its retail clients will result in staff increases of about 10% this year, he said.
Similarly, Santa Monica agency Kresser/Craig expects that both its billings and staff will increase about 10% this year, Chairman Bob Kresser said. Among its clients that plan to boost ad spending in 1994 are Arco, Albertson’s and Kinko’s, Kresser said.
In 1993, when many clients cut ad spending, Kresser/Craig had a flat year and did not increase staff, Kresser said.
Despite the signs of an industry turnaround, few ad executives are eager to talk about it just yet, Kresser said. “As an industry, we’ve been through trying times for so long that no one is quite ready to say, ‘Hurray, hurray, it’s over.’ ”
At the Los Angeles office of BBDO, “the dark fear is gone,” Chairman Steve Hayden said. Still, he said, “we’re adding revenues but not profits.” While the agency saw its billings grow more than 50% last year with the addition of two new clients, it expects its 1994 profit to grow “maybe 2%, if that,” Hayden said.
David Park, chairman of the Advertising Club of Los Angeles who also sits on boards of two other regional advertising groups, says there is no doubt the turnaround has begun.
“Not only are we seeing growth from existing clients, but we’re also getting calls from prospective clients who we have not even tried to communicate with,” said Park, chairman of the Los Angeles office of DDB Needham.
This is not to say that local agencies are out of the woods. Since January, two agencies have closed due to lost business: Campbell & Wagman and the Colby Agency. Several others in Southern California are believed to be just one lost account away from closing their doors.
Even if the industry is turning around on the West Coast, some ad executives are still extremely concerned about the future of the industry as a whole. After all, clients are increasingly turning to alternative resources--such as talent agencies--to create ads. And while some agencies are working in conjunction with media-buying firms, others are competing with them.
“Yes, there are signs that things are getting better,” said Melvin Muse, chairman of Muse Cordero Chen, which creates mostly minority market advertising. “But it’s like a cancer patient lying in bed and having a sore throat go away.”
Briefly . . .
Los Angeles-based Stranger & Associates has picked up $4 million in business from four new clients: Asiana Airlines, Peninsula Beverly Hills hotel, Los Angeles Opera and retail chain Barbeques Galore. . . . The $5-million account for the Doubletree Hotel chain, now handled by the Los Angeles office of McCann Erickson, is under review. . . . The Venice office of Livingston & Co., which currently handles the $23-million anti-smoking ad campaign from the California Department of Health Services, has dropped out of the account review. . . . Ben & Jerry’s, the socially responsible ice cream chain, is about to kick off a $5-million ad campaign directed by Spike Lee and featuring such social activists as Pete Seeger and Daniel Berrigan.
