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Ad Agencies See Slight Drop in OC Billings, Employees

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Got recession?

The largest advertising agencies here saw billings drop last year as a marketing pullback by Corporate America peaked early in 2009 before giving way to a subtle rebound in the second half.

The 40 companies on this year’s Business Journal list of advertising agencies saw their Orange County capitalized billings—a measure of revenue—decline 3.2% to $2.5 billion in 2009.

Local employment was relatively flat at 1,538 workers.

The figures would have been worse if not for a trio of unique gainers: No. 2 Costa Mesa-based Pacific Communications, No. 4 In-nocean Worldwide of Irvine and No. 9 Irvine-based Future Ads LLC.

Without the three, the other 37 agencies saw a 12% drop to $1.9 billion in billings.

Innocean, which is part of South Korea’s Hyundai Kia Automotive Group and does work for Fountain Valley-based Hyundai Motor America Inc., doesn’t disclose billings.

The Business Journal estimates Innocean at $200 million in 2009 billings, up from an estimated $140 million a year earlier. Innocean’s billings are one of 13 estimates on the list.

Innocean is in the process of taking over Hyundai’s $400 million yearly account from San Francisco-based Goodby, Silverstein & Partners. It’s expected to eventually become the largest ad agency in the county based on Hyundai’s yearly spending.

Innocean also was among the few to add workers, going from about 30 to about 100 local employees in the past year.

“We are well over 100 (people) now and just finished the two biggest media events in the U.S. with the Super Bowl and the Academy Awards,” said Jim Sanfilippo, chief operating officer and executive creative director for Innocean.

Hyundai was a big advertiser during both events.

Pacific, Future

Another in-house agency, Pacific Com-munications, also provided a boost, with a 15% gain to $297 million in billings. Pacific is a healthcare marketer that’s part of Irvine drug maker Allergan Inc.

The agency, which competes with other ad shops for work from Allergan, saw budgets remain steady with a number of Allergan product launches, including cosmetic eyelash treatment Latisse.

Newcomer Future Ads was the biggest billings gainer by percentage and by dollar amount, jumping 636% to $78 million.

The company operates video game Web sites, where advertisers pay to get their messages before players drawn by free games.

Advertisers include Sony Corp.’s Sony Pictures Digital Inc., Lowe’s Cos., Experian Group Ltd., Electronic Arts Inc. and Konami Corp.

“There has definitely been a trend toward budgets going from traditional (advertising) to interactive,” said Jared Pobre, cofounder and chief executive of Future Ads.

As a whole, local agencies did better than the national trend, where total advertising spent in the U.S. dropped 9% in the 2009 from 2008, according to Nielsen Co., which tracks spending.

The year ended better than it started with national ad spending down 15.4% in the first half of the year, according to Nielsen.

The Bay Area’s Outsell Inc., which tracks the publishing and information industries, projects that the somewhat positive trend will continue with ad spending expected to rise 1.2% nationally in 2010.

“Last year was lousy, but we are cautiously optimistic about this year because we see things turning around,” said Jim Harrington, president of No. 10 Newport Beach-based O’Leary and Partners.

O’Leary reported a 7.3% drop in 2009 to $76 million in billings. Advertising employees fell 13.3% to 52 people.

Among agencies that provided numbers, 12 reported lower billings, 10 were up and five were flat.

The top of the list saw a shake-up.

The Newport Beach office of Michigan’s Doner Co. took the top spot from longtime rival No. 3 Wunderman Southern California, a unit of New York-based Young & Rubicam Brands Inc. that formerly went by Young & Rubicam Brands Southern California.

Donor took the spot despite seeing an 8.4% drop in billings to $303 million. Workers fell 22% to 80.

But that drop in billings was nowhere near the 42% decline seen by Wunderman.

It registered $210 million in billings in 2009, down from $371 million a year earlier—the largest decline on the list.

The Irvine shop’s drop in billings was due to its loss of Land Rover North America Inc., its last big automotive account.

Work for $110 million Land Rover account went to Young & Rubicam’s New York office.

Doner may not stay at the list’s top spot for long, as its primary campaign—the $150 million account from Mazda North American Operations of Irvine—has been put up for review.

The automaker hired Boston-based Pile and Co. to handle the review of its ad business, which Doner plans to defend “vigorously”.

A number of agencies are seeing clients begin spending again after virtually halting advertising during the recession.

“Some of the clients we’re speaking to say they are tired of sitting on their hands,” said Mandi Dossin, managing partner at No. 11 Santa Ana-based DGWB Advertising & Communications. “When you have cut every cost, you’re not going to save yourself into prosperity. Most are tired of doing nothing.”

The shop has seen a number of companies shop around projects, but that didn’t translate into numbers last year.

DGWB saw a 12.5% decline in billings to $70 million in 2009 and saw workers fall 14.3% to 60 people.

Download the 2010 OC’s Largest Advertising Agencies list (pdf)

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