Advertising shops are encouraged that this year is shaping up better than the last.
But that’s not saying a lot.
2009 saw ad spending retrench as companies cut budgets during the recession. Many companies brought their advertising in-house or cut back on campaigns.
Now those companies are looking at their options again.
It’s expected that advertising and marketing spending nationwide will total about $386 billion in 2010, up 1.2% from last year, according to the Bay Area’s Outsell Inc., which tracks the publishing and information industries.
Local ad shops handle a small portion of that.
According to this year’s Business Journal list, advertising agencies here saw $2.5 billion in capitalized billings in 2009 (see story, page 23). That’s down from about $2.7 billion in 2008.
“Last year was lousy, but we are cautiously optimistic about this year because we’re seeing things slowly turn around,” said Jim Harrington, president of Newport Beach-based O’Leary and Partners.
According to many agencies here, business has spiked in the past six months with new accounts coming to market and agencies pitching to win the business.
“We’re seeing more and more companies coming up for review than we have in probably 18 months,” Harrington said.
Marketing companies aren’t expecting to see an influx of big contracts, but instead are looking at one-off deals or smaller campaigns.
“We’re seeing a lot of companies who are looking for a project basis to get a feel for an agency, try it out and see how it works,” Harrington said.
This includes allowing an ad shop a chance to prove itself while a company still retains its agency of record, executives said.
Mandi Dossin, managing partner at Santa Ana-based DGWB Advertising and Communications, said her company is focusing on smaller projects.
“Instead of a big consumer campaign with TV, radio and print, we’re doing videos for salespeople,” Dossin said. “We have seen a lot of project work coming from clients who are choosing to date rather than jump into marriage.”
For the most part, agencies are just happy to see companies wanting to be back in the market after cutting back last year.
“We are seeing clients who were doing a little last year wanting to do more and clients who were dormant calling up with ideas in mind,” Harrington said.
But that influx of activity isn’t all good news for ad shops.
Some of the accounts up for review have been with local companies for years, prompting local agencies to fight to retain business.
“New business isn’t necessarily growth in the industry,” said Dan Olson, western region managing director of the Irvine office of New York-based Wunderman, the digital shop of Young & Rubicam Brands Inc. “It’s just changing chairs for the most part.”
Mazda North American Operations in Irvine recently put its $150 million yearly advertising account up for review after nearly 13 years with the Newport Beach office of Southfield, Mich.-based Doner Co.
A Doner spokeswoman said the agency intends to “vigorously fight for our business.”
The Irvine office of Young & Rubicam lost Ford Motor Co.’s Land Rover advertising account in 2008 when the automaker moved its North American headquarters to New Jersey and sold Land Rover and Jaguar to India’s Tata Motors Ltd. The New York office of Y&R now oversees Land Rover.
Many companies are putting their accounts up for review to seek more competitive pri-ces, while others are looking for fresh eyes.
“Companies are taking advantage of the low marketing environment to seek out new agencies,” said Sean Hardwick, senior vice president of the Irvine office of Chicago-based DraftFCB.
Advertising agencies also are dealing with the advent of social media and increasing spending in digital and online advertising, which has dramatically changed the industry in the past five years.
Companies are expected to spend $119.6 billion on online and digital strategies in 2010, up 10.6% from 2009, according to a recent study by Outsell. They will spend $111.5 billion on print advertising in 2010, down 3% from 2009 and marking the first year that digital advertising is expected to outpace traditional advertising.
“Everything is being challenged across the board,” Wunderman’s Olson said. “The marketplace is changing and technology is increasing so rapidly clients tend to look around to see what can be different.”
Advertising agencies that invested in interactive technology fared a bit better in 2009 than those who didn’t, sources said.
The local office of Y&R at the beginning of the year shifted control of its clients to the agency’s digital shop, Wunderman, as nearly 80% of the office’s business was digital.
In recent years, Wunderman has brought work to Irvine, while the Y&R side continued to shed automotive accounts.