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The new buzzword is ‘integrated marketing’



OC Ad Agencies’ Booming 2000 Numbers Mask a Slowdown That Began in the Fourth Quarter

The 50 largest ad shops in Orange County saw double-digit gains in billings and employees in 2000, as the industry remained hot from a booming economy.

The agencies’ combined billings for the year jumped 14% to about $2.9 billion. Comparing this year’s list total to last year’s, billings increased by 11%. Meanwhile, employment at this year’s 50 companies jumped 11% jump,though the total this year is just 1% higher than the year-ago list’s.

But the pace could slow in 2001.

“Come October and November it started to dawn on everyone that the ‘r’ word,recession,could be a reality,” said David Murphy, who was recently promoted to chief executive of No. 1 Y & R; Companies Inc., Irvine.

The spring crash of the Internet market coupled with a softening in the general economy and prospects of tighter consumer spending has thickened the air with caution. So far, ad shops report that business is holding steady, with the exception of dot-coms, many of which have disappeared from this year’s list.

And overall, ad execs say, there’s been a definite switch in attitudes.

“Everyone’s more cautious and concerned, trying to be more attuned to changes and shifts in the marketplace,” Murphy said. “The main thing we have to watch is consumer confidence.”

Added Chip Shafer, chief executive of No. 9 neoBrands and No. 18 Shafer Advertising: “If 2000 was manic, 2001 is depressive.”

The top eight agencies on the list held their spots from a year ago, with Y & R; still leading the pack with $555.8 million in OC capitalized billings, though it posted a 2% drop in billings from 1999 to 2000,the result of existing clients’ slightly constricting their ad budgets, according to Murphy.

The shop increased its employee count from 277 to 351 in 2000, expanded into a second building and won new business including two big accounts from Sony Electronics Inc. and Mattel Inc.,about $90 million in combined billings,and most recently, project work for Xerox Corp. involving promotional marketing. Young & Rubicam’s New York office, which holds Xerox’s creative advertising account, will assist on the work for an undisclosed amount.

The OC shop, which houses five Y & R-owned; marketing groups, has been expanding rapidly since moving to the area two years ago to follow client Lincoln Mercury.

“Orange County is beginning to attract a lot of large companies. Look at us: Lincoln Mercury, Mattel, Sony, Xerox,” Murphy said. “When you start to attract companies like that, you also start to attract talent who wants to work on those accounts. My goal is to shatter the so-called Orange Curtain.”

Rounding out the first five slots on the list are No. 2 FCB Southern California, No. 3 Doner, No. 4 Bates USA West and No.5 Pacific Communications. All except Doner, which stayed at $325 million in billings from 1999 to 2000, posted double-digit gains.

FCB’s 17% jump in billings was due mainly to growing work with existing clients Hilton Hotels Corp. and Sunkist Growers and new business wins, including Taco Bell’s national and merchandising business, Doubletree Hotels and Embassy Suites. The ad shop, which will move from its Costa Mesa digs to a bigger location in Irvine by April 1, also reported an 8% drop in employees, going from 195 in ’99 to 180 in 2000. Jim Harrington, president of FCB Southern California, said staff is split between its OC and LA offices, so it’s tough to determine the exact number at each. Still, he said: “This minimal reduction in staff (which happens to be at the more junior level) is quite low in comparison to the average annual attrition within our industry.”

Meanwhile, No. 3 Doner held at $325 million in billings from this year’s list to last and was noticeably lighter in the dot-com category. Fountain Valley-based PingPong.com (a $30 million account) and Newport Beach-based Winfire Inc.,both are now dead,and San Diego-based RealAge.com (a $20 million account) were among the Internet clients that fell off the OC shop’s list.

But Billy Fried, senior vice president, group manager and director of new accounts at Doner, said the ad shop never staffed up for the dot-com accounts and hasn’t “let a single person go.” He also said the shop made up the losses through wins, including Jenny Craig’s $25 million account and a $13 million chunk of business from FuturesNow.com, a futures and options trading site set to officially launch this fall. The shop, which retains the $250 million Mazda account, is handling the site’s launch advertising, which includes television, direct mail, public relations and sales promotions.

Plus, Doner will handle retail advertising for Lind-Waldock & Company LLC, a futures brokerage firm and sister company to FuturesNow.com, for an additional $2 million.

“We’re going to be much more careful about technology stocks, but we’re not abandoning technology by any means,” Fried said.

No. 4 Bates USA West reported a 25% jump in billings and 4% increase in employees,both the result of its success with Fountain Valley-based Hyundai Motor America, which increased its marketing budget, according to Tim Hart, the shop’s chief executive and president. Bates USA kept its focus on its interactive division last year and will grow its technology business this year, as it recently opened a new technology division called DWP//Bates Technology after acquiring Atlanta-based Donino, White & Partners, an agency specializing in business-to-business marketing for the tech sector.

In the meantime, No. 5 Pacific Communications dug deeper into its healthcare niche, boosting both its billings and employees by 15%. The ad shop, which also expanded its office space by 5,000 square feet, grew its business with existing clients like Irvine-based Allergan Inc. and garnered new work from Costa-Mesa based ICN Pharmaceuticals and Anaheim-based CareCredit.

In the meantime, OC’s Hispanic agencies,No. 5 Mendoza, Dillon & Asociados Inc., OC’s top Hispanic ad agency, No.10 Casanova Pendrill Publicidad Inc., OC’s second largest, and newcomer to the list No. 22 al Punto Advertising, Inc.,also showed gains. At Mendoza, which reported a 12% increase in billings and a reduced employee count (by one), retail clients such as Sears continued to increase budgets because they could track sales results at Hispanic-designated stores, according to Ingrid Otero-Smart, the agency’s president and chief operating officer.

Casanova, meanwhile, increased its billings 46% to $80.5 million and boosted its employee count by seven. Most of the jumps were attributed to new business associated with the shop’s acquisition by New York-based Interpublic Group of Cos.

Al Punto’s billings jumped from $15 million in 1999 to $17 million in 2000. The agency’s clients include The Pillsbury Co., Del Taco and Ocean Spray Cranberries.

No. 7 DGWB, which increased its business with Toshiba Corp. last year, and No. 8 Heil-Brice Retail Advertising, which reported a 20% growth in billings, both held their spots on the list from year-to-year. Heil-Brice has expanded its Hispanic work for longtime client Factory2-U Stores Inc. and won a few new clients, including a $30 million account with the Glendale, Calif.-based IHOP Corp. The agency also handles ethnic advertising for IHOP.

Newcomer No. 9 neoBrands muscled its way into the top 10 with $82.7 million in billings and clients like Fairfax, Va.-based webMETHODS Inc. and Denver, Colo.-based J.D. Edwards & Co. At the end of 1999, the 40-person shop, described as a brand consulting firm specializing in high technology, split from Shafer Advertising, which was bumped to No. 17 with $28.3 million billings.

Shafer now is running with a skeletal crew of about 11, having laid off an undisclosed number of employees and transferring many to neoBrands. The ad shop also recently lost longtime client Toshiba America Electronic Components, which decided to use in-house staff to focus on public relations and the Web. However, Shafer also reportedly won a $1 million to $2 million account with Santa Ana-based Simple Technology Inc.

Though rumors swirled in the industry that Shafer Advertising would close or be folded into neoBrands, Chip Shafer adamantly denied that either was planned.

“The Shafer brand has been around for 18 years and has a lot of credibility in the marketplace. We think it’ll grow again. This is a tough year for all advertising companies,” Shafer said. “Over the years, you learn to ebb and flow with the marketplace. This is an ebb year.”

He also said Shafer and neoBrands focus on two different areas of high technology and would “absolutely not” be merged.

A visit to Shafer Advertising on March 16 found things very quiet during the shop’s normal business hours. A front couch was wrapped in plastic and a former Shafer employee, who is moving over to neoBrands, said Shafer was vacating the Irvine digs at 18200 Von Karman Ave., but no one had been informed whether the agency was closing or where it was moving.

Other list jumpers include No. 35 Wirestone, which reported a 61% increase in billings to $11.3 million,the result of it merging with four firms and acquiring five more in 2000 to form its current shop with 19 ad employees. Also, No. 30 Pure Octane showed a 40% increase in billings to $14 million; No. 13 Johnson/Ukropina creative marketing reported 75% increase in billings to $47 million; and No. 17 Marshall Advertising & Design reported a 56% increase in billings to $31.2 million. The jump for Marshall was mainly the result of new client Universal Electronics, which specializes in interactive control devices for the cable industry, and increased business with existing client Yamaha Motor Corp.

Diana Marshall, the ad shop’s president, said Yamaha’s ATV and motorcycle sales both showed substantial gains, which were reflected in the amounts both categories spent on television advertising.

Other agencies that showed double-digit gains in billings include No. 12 Hobbs/Herder Advertising, No. 14 InterCommunications, No. 27 Point B Inc., No. 31 Strategies and No. 44 AMR.

Ad shops that showed dips in billings include No. 49 McAdams Group, whose six-person staff was reduced by one as billings dropped from $7.3 million to $6.5 million, and No. 34 Hunter Barth Inc., which dropped 21% in billings. Its staff went from 19 to 14. Dustin Phillips, public relations director at Hunter said the agency lost one of its biggest clients, Valley Forge, Pa.-based IKON Office Solutions Inc. But the shop countered the loss with new client wins, including Riccar vacuums.

Newcomers to the list include No. 45 Nu Visions Inc., which in April developed a Web site design division called NetZuppa and hired a top ad executive, Dominic Symes, from industry giant Saatchi & Saatchi to build business. Also joining were No. 22 al Punto Advertising, No. 9 neoBrands, No. 27 Point B Inc., No. 47 The Larson Group and No. 50 Strata-Media.

The effects of a softening economy began to show in the fourth quarter of 2000 and continued into the first quarter of 2001. But ad shops say they anticipate a turnaround by year’s end. Several agencies, for instance, report new business, including FCB, which was recently tapped to handle the Hong Kong Tourist Association’s U.S. advertising (a $2 million to $3 million chunk of business) and Casanova, which recently won the ethnic end of a reported $30 million to $50 million advertising contract with Verizon Information Services’ SuperPages, which includes yellow pages and SuperPages.com.

“I just don’t think it’s going to be all this gloom and doom that people are forecasting,” said Tim Hart, chief executive at Bates USA West. “Things will continue to stabilize, but all and all it’ll be a good year.” n

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