Ad Shops Eke Out Billings Gain, Add Workers

The pressure was on Orange County’s advertising shops last year.

Clients were more demanding. Reviews were more competitive and agencies had to be more resourceful to land and keep business.

Some, such as OC’s largest shop, Young & Rubicam Brands Inc., and OC’s second biggest firm, Foote, Cone & Belding Inc. in Irvine, will now have to make up for the loss of big clients. In FCB’s case, the work was snatched up by a smaller competitor.

Still, the 50 shops on this year’s Business Journal list managed to eke out a 2% gain to $2.5 billion in OC capitalized billings. That figure includes eight estimates for firms that declined to give numbers.

Local ad shops seem optimistic. They grew their advertising staffs by 8% to 1,682.

The county lagged the national ad spending trend, which rose 9.8% to $141 billion, according to a recent report by TNS Media Intelligence/CMR, a New York-based media spending tracker. The summer Olympics and presidential election, which most of OC’s shops didn’t benefit from, helped contribute to the national gains.

2005 ad spending also is expected to rise on a national level,albeit at a slower pace. U.S. ad spending is expected to jump 5.1% to $150 billion, according to a TNS forecast.

Locally, OC ad executives also say they’re feeling good about 2005.

“The outlook this year is very promising,” said Ray Baird, president of Irvine-based RiechesBaird Inc. “Probably the best we’ve seen since the bubble burst. That being said, most clients are demanding (return on investment).”

Eyes certainly will be on OC’s top three ad shops. No. 1 Y & R;, No. 2 FCB and No. 3 W.B. Doner & Co. in Newport Beach again held their spots in 2004. All three declined to report billings results and are Business Journal estimates.

But big changes could play out in 2005. The main reason: Y & R; recently was hit with a one-two punch that severely reduces its estimated $475 million in OC billings.

The shop lost Ford Motor Co.’s $100 million account for Jaguar Cars, which is part of Irvine-based Premier Automotive Group, and the $100 million account from Sony Electronics Inc.’s U.S. arm in San Diego. Sony decided not to renew its contract with Y & R;, which ends on March 31.

David Murphy, Y & R;’s managing partner overseeing the Irvine office, last month dismissed speculation that the office was in trouble.

“The office is about 350 employees strong,” Murphy had told the Business Journal in February. “After Sony and Jaguar, our capitalized billings are well over $250 million.”

Plus, Murphy said that Y & R;, which is part of Britain’s WPP Group PLC, has “strong and growing relationships” with its remaining clients.

They include Ford Motor Co.’s Land Rover North America, Callaway Golf Co. and Mattel Inc.

Still, Murphy said the office stands to feel an impact from the Jaguar and Sony losses.

He declined to give specifics. But expect changes to follow, as they did when Y & R; client Lincoln Mercury shifted its headquarters from Irvine to Ford’s operations in Detroit in 2002 and left holes in Y & R;’s West Coast hallways.

To help offset the losses, Y & R; recently was named agency-of-record for Microsoft Inc.’s Xbox and MSN divisions.

Meanwhile, FCB, which had an estimated $410 million in OC billings last year, has seen some changes of its own. President Jon Tracosas, who came onboard in 2003, continues to revamp and grow the shop. He said later this year he expects to add staff based on new, undisclosed work.

“In terms of ’05 new business, we’re in the final stages of negotiations on a significant assignment,” Tracosas said. “Several others we are pursuing, but we can’t yet discuss them.”

Last year, FCB brought in a new executive creative director, Erich Funke, after Bill Cimino left. The shop also won three accounts, including San Diego’s Infommersion Inc. That win will help offset the loss of Kawasaki Motors Corp. U.S.A., which now works with No. 9 O’Leary and Partners.

Doner earned its No. 3 spot with an estimated $350 million in billings.

In all, 27 agencies saw increases, seven reported declines and eight saw no change. The others are Business Journal estimates.

Among the movers was O’Leary and Partners, which posted an 8% increase in billings to $79 million and a 9% jump in ad workers to 51.

Last year, the shop had to bolster staff after taking on Kawasaki, part of Japan’s Kawasaki Heavy Industries Ltd.

O’Leary continued to nab folks from FCB, the former stamping grounds of O’Leary president Jim Harrington and executive creative director Scott Montgomery.

In 2004, the shop hired about five workers, including Deidre McQuaide, John Brooks and Bruce Barta, all formerly from FCB, Harrington said.

Besides Kawasaki, O’Leary’s other wins included Santa Ana’s Ingram Micro Inc. and West Coast Charters in Santa Ana. It lost creative work from the National Association of Realtors.

“Our one client loss was more than offset with several new business wins, coupled with increases in business from existing clients,” Harrington said.

O’Leary is gearing up to expand its offices and move to “new space in Newport Beach in April to better accommodate the growing needs of our agency,” Harrington said.

No. 7 Santa Ana-based DGWB Advertising Inc. posted a 19% jump in OC billings to $88 million. President Mike Weisman said that in the past year the shop hired about 13 workers, including a chief financial officer and chief marketing officer.

DGWB picked up some new accounts, including Hilton Garden Inn and Aliso Viejo-based Marie Callendar Pie Shops Inc.

Other big movers include No.12 al Punto Advertising Inc., which saw a 40% spike in billings to $42 million. The shop, which boosted its worker count by 56% to 39, had several big wins last year, including Irvine-based Kia Motors America Inc.

Kia’s former ad shop was No. 6 Mendoza, Dillon & Asociados Inc. of Irvine, a unit of WPP Group. Mendoza quit the account last summer after it moved into offices next to WPP sibling Y & R;, which handles auto competitor Land Rover North America.

No. 19 Rauxa Direct of Costa Mesa said billings rose 61% to $21 million. Chief Executive Jill Gwaltney said the shop, which has been “under the radar,” brought in new business and expanded work with current clients.

She declined to give names, but the shop’s client roster includes Verizon Communications Inc.’s wireless unit and Washington Mutual Inc.

Rauxa Direct was among six ad firms that debuted on this year’s list.