The state of the advertising industry

Is it a case of companies or, in advertising parlance, clients getting smarter or is it a long overdue overhaul of how the advertising arena works?

Whatever the reasons are, over the past few years, major advertising agencies that have been in existence for decades have been closing shop.

The reasons are a combination of corrupt practices of some people in the industry, economic numbers that do not merit large sums placed in advertising and the changing technological landscape.

Advertising is usually the first to go during bad times as marketers press the panic buttons and cut budgets.

Millions of people around the world depend on advertising and its immediate affiliate industries: print and broadcast media, publishing, printing, film, print and production houses among others. Imagine the repercussions of such closures.

Biggest shocker

JWT Chicago was the largest office in the network’s global agency network, boasting over 800 employees and well over $100 million in billings during its heydays.

The office was the primary agency for Kraft, Nabisco, Philadelphia and other brands, and also was one of Miller Beer’s busiest agencies.

After 118 years of existence, it closed down in 2009. Today, it’s a 50-person, four-client operation functioning in New York that’s gambling on the Illinois Lottery business for survival.

The other three remaining accounts of the agency are Kimberly-Clark’s feminine-care, Nestle ice cream, a small HSBC digital assignment and a tourism business.

Just last month, Campaign Palace, an Australian agency, renowned for award-winning ads, closed its doors after 40 years. The shop was a training ground for some of Australia’s most renowned advertising talents.

Over four decades, the agency that flourished in the backstreets of Melbourne created ads that were consistently voted the best by its peers.

The agency where everyone in the Australian ad industry wanted to work in also spawned a number of successful new agencies ran by former staff: Whybin TBWA, BMF and M&C Saatchi.

Following its sale to George Patterson Y&R and a string of account losses, the agency finally closed its doors this year, with its remaining clients absorbed by other WPP-owned agencies.

Requiem for some PH agencies

Exactly a year ago this month, AB Comm, which used to hold office in one of Makati’s posh buildings, shut its operation after 17 years.

In a statement, founding president Tom Banguis said the “financial returns and professional satisfaction from running it have diminished.”

Prior to its closure, AB Comm had a staff of 60 during its heyday.

Previous to AB Comm’s exit, some ad agencies did massive retrenchment and “creative” measures to stay afloat.

Four to seven local and multinational ad agencies moved out of their chic Ayala-Paseo-Legaspi Village addresses to tighten their belts and neutralize ad budget woes.

A couple of years back, an agency gave the pink slips to several key people sending shock waves to the industry used to enjoy huge production budgets for TV commercials.

Another ad agency, often the subject of coffee shop buzz, had deep management, and media payment issues.

Creative Response, Dentsu Indio (after 16 years) and MAD (acronym of its owners Maranan, Aquino, Abunda, Del Carmen) have joined the list of those who have stopped or will stop operating.

Hard-hit agencies either merged, downsized or scaled down their manpower to avert heavy overhead and operational costs.

What ails the industry

What ails the ad industry? The shutdown and ongoing troubles of some local ad agencies raise questions about their survival as what is happening now, not only in the Asia-Pacific region but also on the global scale.

“We are partly to be blamed,” one retired head of an ad agency says. “Some ad agencies had it coming,” he says.

“We had a management with outrageously big salaries, perks and representational allowances, producers padding cost estimates in-cahoots with insiders and shady people on the payroll of some production houses,” he reveals.

“We are not competitively creative, we are run by AEs,” he continues.

In-house creatives

The proliferation of in-house creative departments by some businesses, media networks competing directly with creative ad agencies and freelancers selling their work at rock-bottom fees are also hastening the demise of legitimate ad agencies.

With the pie growing smaller and smaller every year, it is common for a new business pitch to have more than five ad agencies scrambling and bidding to win the account.

What’s more, the worst scenario is about to unfold or already beginning to cast its frightening shadow.

Some clients are now opening up their businesses to independent agencies on a per project basis and thinking of doing away with long-term contracts.

With a free-for-all and unwieldy set-up, unscrupulous marketers can also do damage: pitch their business then steal ‘losing’ bidder’s ideas behind their backs.

Good and the bad

What should advertising agencies do to be competitive? As technology gives people more viable options and created a “consumer democracy,” everybody now has more choices.

In Ad Age, an article said: “Traditional marketing is not dying, it is dead.”

“In these changing times, ad agencies must give value to marketers other than the usual. If they want to survive, old-style, one-size-fits-all mass marketing and advertising can’t do this anymore,” says a top Filipino marketing director formerly based in the greater China market.

With the rapid changes that are happening in advertising, how are local ad agencies adapting to the rapidly changing business environment?

Questions like, how good or bad are agencies today now that the landscape has changed?

“We tailor-fit solutions to a particular brand. We are not a redundant, cut-and-paste brand solution ad agency,” says a multinational client services director of a multinational ad agency.

Noy de Liaco, former corporate communication director of Nestle Philippines, says a good ad agency must be “a true partner interested in the client’s business, curious about its consumers and looking for answers how it can grow the business together.”

A bad agency is peopled with “sycophants, order-takers, second-guessers, lacks initiatives and does not really care about the client’s business,” he says.

Margot Torres, former Philippine Association of National Advertisers (Pana) chairperson and a driving force in the marketing and advertising industries says an ideal agency is a brand steward and a business partner.

“The agency should be responsive to the needs of its client and changing consumer needs,” she says.

“Ad agencies must be committed to excellence in its craft and to the growth of its people and that partnership. Choosing an agency is based on the people behind it (particularly the local agency for a multinational network) since they are the team who will work with you,” she stresses.

VP and Head of McDonald’s Marketing, Torres places high value on the agency partner with disciplined processes, invests in strategic insights as well as adapts to the changing digital landscape.

UP Mass Communication Prof. Eleanor Agulto, former ECD [executive creative director] of Bates-Alcatara and now with Catalytx, says, “A good agency is a true partner of its clients, giving them sound strategies, great creatives and cost-efficient production and media plans.”

“It must be a well-managed business, keeping a healthy bottom line, a good corporate citizen, espousing truth and values in advertising even as it sells brands. It is bad if it doesn’t treat or pay its people right,” she says.

For marketing consultant Willy Arcilla, a bad agency only sells ads.

“A good agency does not sell its ads, but sells its client’s product or service. As David Ogilvy famously said, “If it doesn’t sell, it’s not creative.” Or as Leo Burnett also said, “We want consumers to say: ‘That’s a hell of a product’ instead of ‘That’s a hell of an ad.’”

To be competitive these days, the best agency is one that can “develop campaigns that transcend boundaries in a global market, endure the vicissitudes of time and the vagaries of competition,” Arcilla says.

Good ad agencies know how to get the most “bang” for their clients’ buck, no matter how big or small. A bad agency does not do enough research on the front end and little post-campaign measurement on the back end,” says Joel Villaflor, a Fil-Am creative director and entrepreneur.

PR person Bing Kimpo says a good agency does not act as if it has a monopoly of good ideas and shut others out. To survive, ad agencies must encourage and embrace ideas that come even from the outside world: partners and suppliers. A bad one lives under a rock of self-absorption shooing away suggestions “not invented here.”

For Globe corporate communications head Cris Lacuna, the ingredients to become a successful agency is do quick turnaround time, have 24/7 availability, understand clients’ needs, aside from making negotiations easy and clear.