INSIDE ADVERTISING: Ad Shop Executives Unleash 2004 Forecasts
By JENNIFER BELLANTONIO
Loosen your seatbelt: The rough ride could be over.
Orange County advertising shops are looking at 2004 with renewed optimism after staring down an uncertain road the past few years.
There’s reason for the optimism.
U.S. advertising spending jumped 6.1% in 2003 to $128 billion, outpacing 2002’s 4.2% increase, according to TNS Media Intelligence/CMR, a New York-based company that tracks media spending.
Internet, cable television and Spanish-language media advertising showed double-digit gains.
“The robust growth in 2003 ad spending is a result of the overall health and growth of the economy, the rising level of consumer confidence … and the improvement in overall corporate performance,” said Steven Fredericks, chief executive at TNS Media, in a statement. And the election in November surely will give a boost to ad revenue.
The news is welcome for OC ad shop executives, who were asked by the Business Journal to discuss what they see unfolding in 2004.
Mandi Dossin
Partner,
DGWB Advertising
Santa Ana
What’s your outlook for 2004?
Well, housing is strong here, so with innovative refinancing consumers are able to consolidate debt and have the discretionary spending they need to maintain their lifestyles. There are some great leases out there for automobiles, making for movement in that sector. And manufacturing is picking up, a very good sign. And, although it took a dip in February, consumer confidence is trending up.
Then there’s the whole area of luxury goods. This is an interesting dynamic, where consumers will cut costs in areas that are less important to them, but spend a lot more on things that are more important to them.
Businesses are beginning to spend more on infrastructure and advertising again; we have received a lot of new business calls already this year and current clients are ramping up. We believe the “hunker down” days are mercifully coming to an end.
The fast-food restaurants we manage,KFC, Wienerschnitzel and Pat & Oscars,are showing some nice annual sales gains. Consumer electronics is heating up. Technology spending is expected to increase after several dismal years.
All in all, we are pretty bullish on the year ahead. Leading indicators expect ad spending to increase 5% to 8% in 2004, which is good for us.
Is competition heating up?
I can’t remember a time when it wasn’t competitive. That said, smaller agencies are dropping away, and big fish are being swallowed whole by the holding corporations such as Omnicom, so DGWB, as a full-service shop that remains independently owned and operated, makes us somewhat of an anomaly.
What we have seen are the global agencies chasing after small pieces of business that they are not really set up to manage effectively, just to show growth, or to give their employees a break from working on cars, I guess.
What’s hot in the advertising industry?
The days of relying on a 30-second commercial or print ad are long gone. Because there are now so many ways for people to receive information, traditional media alone is often not enough; brands are made or broken at the experiential level.
So we have seen an explosion in non-traditional efforts, such as the community events we participate in for our fast-food restaurant clients, the chat lines we have set up for patients to communicate directly with the doctors at St Joseph’s, or the climbing contests that our Cynic unit helped set up with adventure gear seller REI to hype the climbing movie, “Touching the Void.”
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Billy Fried
Principal,
Spasmodic
Laguna Beach
What’s your outlook for 2004?
Primarily a very weak dollar, which is helping exports and bringing foreign tourism back.
After being in the doldrums the last few years, we’ve gotten off to a blazing start. Everybody is busier from producers to editors to advertisers.
Is competition heating up?
It’s no different. Everyone is chasing a finite number of accounts. But many people are getting out of advertising and into pyramid schemes. It’s the hot new sector and outplacement for ad folks.
Pyramid schemes also are known as network marketing,Amway, Mary Kay cosmetics and so on. A friend of mine (in the biz) just attended a giant convention for one that sells bundled energy, DSL and wireless in Dallas. He ran into a ton of ad folks who lost their jobs or freelancers who have seen their work diminish.
What’s hot in the advertising industry?
Real estate, real estate, real estate. Just look around.
But it’s as dull and boring as ever. Agents and builders do nothing to differentiate themselves, and are too cheap to pursue professional help.
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Jim Harrington
President,
O’Leary and Partners
Irvine
What’s your outlook for 2004?
The economy is stable and growing. Consumer confidence is up. Plus it’s an election year, which are all positive signs of economic growth. Additionally, it’s an Olympics year, which means plenty of marketing opportunities to advertisers who usually target lighter television viewers.
It’s going to be a good year, because we are anticipating that 2004 will be a strong year for our clients’ businesses. Many of our clients are showing increased sales for the first quarter and are anticipating continued strong sales for the balance of 2004. And when they prosper, we prosper, too.
Is competition heating up?
Competition is heating up because all businesses benefit in a strong economy.
What’s hot in the advertising industry?
Retail, automotive and real estate, which are driven by strong levels of consumer confidence.
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Dan Hoover
President, creative director,
Estey-Hoover Advertising
and Public Relations
Newport Beach
What’s your outlook for 2004?
We’re seeing indications that 2004 will be stronger than 2003. First, the economic outlook in Orange County seems to be improving, with a boost in spending on marketing and advertising. Second, the technology sector, one of the areas we specialize in, has picked up.
All Estey-Hoover accounts are national or international companies. We feel the impact more from the domestic economy than the local one. We are seeing significant budget increases from some of our key accounts. And in the first two months of the year we signed several new accounts, including creative and branding work for computer maker eMachines, consultant Accessio, a consulting firm that specializes in helping European companies gain access to the U.S. market, and German hair care products maker CEHKO.
Is competition heating up?
There always is competition. It seems there are more “boutique” companies that specialize in one area of marketing or another,branding or design, for instance. Our true competition comes from the full-service companies and other American Association of Advertising Agencies members that offer everything from branding to creative to public relations to competitive analysis.
The movement of some major auto business to Orange County in recent years has enabled a few of the big agencies to remain in the market. There has never been a real “trend” in marketing services in this county, other than the fact that the bigger you are, the harder it is to break into the marketplace. This county’s marketing executives appreciate great service that doesn’t cost them an arm and a leg.
What’s hot in the advertising industry?
Technology is on the rise again, especially consumer-oriented products. The tech trends we have noticed are the adoption of technology into everyday life. Everyone has text messaging phones and palm pilots.
The other sector is consumer goods,especially nutraceuticals and healthcare products.
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William Johnson
President, creative director,
Johnson Gray Advertising Inc.
Newport Beach
What’s your outlook for 2004?
Being an election year, there will be the excitement of change, as well as the anticipation of new and fresh opportunities. Standing on the verge of a potentially new economic landscape, I think all of us, both businesses and consumers, have the opportunity to reap tremendous rewards in the coming year and years to follow.
2004 looks to be a very promising year for Johnson Gray and our clients. Based on our aggressive new business initiatives, we have seen, and continue to see, a strong flow of new clients, new projects and exciting opportunities.
Our current clients are showing increases in their budget activities and this, in conjunction with our recent acquisition of new accounts, is putting us on track to see a 15% to 20% increase in our gross billings in 2004. In a market where some companies are struggling to stay afloat, we feel confident and strong moving into the year.
Is competition heating up?
I wouldn’t look at it in terms of heating up or cooling off. Competition in our industry is an ever-present entity, an entity that is a constant factor in all the work that we do. In fact, competition in our business is what we feel keeps us on our toes and forces us to reach and surpass our goals and expectations.
What’s hot in the advertising industry?
Obviously the Internet still is a growing arena of opportunity and endless potential. While traditional advertising remains strong, the Web continues to grow as an extension of all of us. It is a realm that offers infinite access to every target market, every niche and every demographic.
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David Murphy
Chief executive, president
Young & Rubicam Brands
Irvine
What’s your outlook for 2004?
Recently we’ve seen advertising outpace economic growth, and many analysts predict this trend to continue throughout 2004. This is encouraging considering the improving economy, relatively stronger consumer confidence and continued resiliency of consumer spending.
Reasons to remain cautious, however, include a less favorable employment outlook, due to the lack of new jobs, and a surge in consumer debt (the latest figure from the Federal Reserve tops $2 trillion, reflecting a doubling of consumer debt in less than 10 years).
Consumer confidence has a critical effect on our industry. While it began the year strong, it tends to slip with reports of the soft labor market. The country needs job growth to maintain the recovery.
In terms of profitable growth for our client partners, external factors center on the following formula: Jobs create wealth Wealth inspires confidence Consumer confidence fuels spending Spending improves the long-term health of our clients’ brands and the agency.
Is competition heating up?
Competition just isn’t heating up,it’s approaching full boil.
The window of opportunity to own a meaningful product advantage is diminishing due to much shorter and faster product life cycles and new entrants. As a result, nearly all sectors remain very aggressive.
Innovation is key. In the face of intensifying competition, inventive ideas remain one of the most important weapons in protecting the client’s revenues and profits and furthering the brand’s value.
Now more than ever, agencies must know how and when to harness the full range of communications channels. There are huge rewards for marketers who create exciting, differentiated products at a good price. Specific examples include the new Range Rover, Sony’s new T1 digital camera and Mattel’s “My Scene” Barbie.
In stark contrast, the idea of “playing it safe” is the riskiest strategy of all.
What’s hot in the advertising industry?
Online advertising continues to be strong, and we expect it to surpass levels achieved during the dot-com boom (with reports indicating that by 2005 Internet advertising in the U.S. will reach $8.6 billion). Cable and network television advertising also is expected to realize steady gains (with more than 10% increase in spending expected, compared to 2003).
Some of the biggest media reviews this past year came from McDonald’s, Masterfoods, Coca-Cola, America Online, Gap, Nextel Communications and Miramax, just to name a few. So it’s clear that packaged goods, fast-food restaurants, consumer beverages, retail, telecom and technology remain hot sectors.
Automotive advertising also remains robust, with furthering integration among traditional, direct and digital initiatives,something we experience firsthand working in partnership with Land Rover and Jaguar. Another rapidly growing sector is pharmaceuticals.
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Dan Nance
Chief executive, president
Casanova Pendrill Inc.
Irvine
What’s your outlook for 2004?
2004 will mark a stronger year than 2003 for our segment given the heightened awareness of the overall business community and advertisers to the U.S. Hispanic market.
The release of the 2000 census further propelled what was already a “hot” consumer segment, and the importance of the Hispanic market is generating significant interest in not only consumer marketing, but also entertainment and politics in 2004. Agencies as well as our media partners are experiencing robust growth as a result of marketers’ accelerated growth in this consumer segment.
Casanova Pendrill is projecting 20% to 30% growth on top of what was already a robust year (2003 revenue rose 25%). Clients are all expanding advertising support as well as expanding integrated marketing programs,promotions, public relations, online and so on.
Is competition heating up?
Competition always is increasing in our segment. General market agencies are waking up to the business opportunity and many are trying to staff internally to retain Hispanic marketing responsibilities for their current clients. On the other end of the spectrum, small entrepeneurial agencies continue to pop up on the landscape. The depth and breadth of Hispanic marketing needs in California,and across the country,have created opportunities for companies of all sizes.
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Paul Otis
Cofounder, chief executive,
MOB Media Inc.
Foothill Ranch
What’s your outlook for 2004?
While there are some indicators that local advertising isn’t performing as expected, 2004 still will be stronger than 2003 due to the Olympics and upcoming election. But beyond that there’s hope with the economy, with Americans spending more freely. And, love him or hate him, there’s certainly a business-friendly governor in Sacramento. Media is undergoing tremendous change right now due to a variety of factors including the proliferation of options, fragmentation, emerging technologies and the Internet.
We’ve been fortunate to have several clients that have grown. Examples include Corinthian Colleges, PADI and Showbiz Productions.
We expect our seasoned sales staff and a better economy to produce the best year ever for MOB Media in billings. Newly minted accounts include: American Isuzu Motor Corp., Advent Product Development, Orange County Transportation Authority and online development projects.
Is competition heating up?
Competition always is fierce in this industry.
What’s hot in the advertising industry?
Search engine marketing is white hot. Contextual online marketing is strong, too. Overall online ad revenue hit a whopping $2.2 billion last quarter. Online, in fact, has surpassed cable TV in penetration of U.S. homes. Outdoor has had a resurgence.
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Don Reddin
President,
tkmw
Rancho Santa Margarita
What’s your outlook for 2004?
In a word (or actually two): client confidence.
For the past few years, nobody got in trouble for doing nothing. As the economy soured and tensions of war and terrorism grew, not doing anything new in marketing gave an aura of stability and reassurance, and saved money.
As 2004 begins, we’re seeing clients feeling more confident that they can (and should) be making changes and thinking proactively once again. In some cases, this is driven by clients with a very strong vision for the future. In some cases it is driven by needing to react to a competitor who has begun to get more aggressive. In almost every case, doing nothing is no longer the best solution.
Caution still has a seat in every strategy and budget meeting, but it’s only a consideration and not the ultimate decision maker.
We have seen the decision-making cycle get shorter, as clients move forward with projects more quickly.
Budgets remain tight, but are approved with fewer revisions, and innovative ideas can get funding instead of polite smiles and a sincere “thanks, maybe later.” This has been consistent in the past few months, and is reflected in the ultimate measurement for an agency … billings, with our year-to-date billings well ahead of last year. However it’s far from a stampede and we’re well aware that small changes in the economy or world politics could damage confidence and slow spending.
In the past few months we’ve launched several completely updated Web sites for clients in the beverage, restaurant and beauty products categories. Their old sites were dated, but functional, so this was purely a proactive step into the future. We recently began working with Makita, a maker of power tools, to develop and launch several major brand strategy initiatives. These are large-scale, long-term programs to bring renewed energy to the brand, which will include promotions, sponsorships and advertising. Internally, we’ve added a few new people and moved to new offices.
Is competition heating up?
We certainly have been busier and continue to run lean, but don’t yet see competition heating up. Most of our growth has come from existing client relationships, or from clients we’ve been courting who now are ready to move forward. I believe this is because clients also have been running lean and are finding it too time-consuming to run a full review. This is being echoed on the national level with account shifts like the recent one at Burger King.
However this may be changing. Recently, we received one official request-for-proposal from a client, and met another client the other day that plans to launch a request-for-proposal. As client confidence continues to increase, they may be more willing to invest the time and energy to meet and review more potential agency partners, increasing the competitive landscape.
What’s hot in the advertising industry?
We’re currently seeing huge activity in two areas: brand image and customer interaction.
Brand image has been our busiest area, with work in updating Web sites, new packaging, collateral, trade show materials and other projects. Many clients have been using the same materials for the past few years and are ready for something new and different.
Customer interaction also is red hot. We’ve done a number of projects that gather direct customer feedback on recent retail experiences, and use that information to develop segmentation studies and marketing materials, which address increasingly focused market niches.
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Erika Price Schulte
Public relations director,
RiechesBaird Advertising
Irvine
What’s your outlook for 2004?
Two months into the New Year, there are no guarantees that 2004 will be stronger, and the recovery is definitely still slow.
At this time last year, war with Iraq was looming, which I think caused some hesitation in the already-shaky business market. A year later, the war largely is behind us and the stock market has shown stability and modest growth,good signs. After two years of focusing on cost containment and operational efficiency, many businesses now are shifting to growth strategies and investing in research and branding.
The year has started out stronger for us than the past two have. Clients large and small are investing in long-term strategic planning, and looking beyond just first-quarter sales,another very good sign. Our research department is very busy as companies are assessing trends, reevaluating their brand positions and monitoring and forecasting consumer behavior in order to make sound decisions.
Several markets that our clients are involved with have trended very well in the past six to 12 months, especially homebuilding and home improvement, which naturally follow the hot real estate market.
Is competition heating up?
Definitely. We are being invited to participate in more reviews and request-for-proposals, and receiving more unsolicited calls from potential clients. As a result of the changes in our industry in the past few years, there are more boutique shops out there making claims of “full service.” Clients have to be more educated and savvy than ever about evaluating potential marketing partners and making decisions that affect their business and their brand.
What’s hot in the advertising industry?
In terms of business sectors, real estate and related industries such as homebuilding and home improvement continue to grow at a rapid rate. We have three clients in this space and business is very good. In addition, tech continues its comeback and our manufacturing clients are doing very well.
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Andy Skiver
President,
The Skiver Group
Irvine
What’s your outlook for 2004?
We think 2004 will be stronger for several key reasons.
It’s an election year that will see heavy media spending and President Bush needs to show economic growth to get re-elected. Key indicators show growth in stock market gains, higher production due to depleted inventories and low interest rates. I also sense pent-up consumer demand as they’ve held back on purchases and are beginning to spend again.
The Skiver Group didn’t see its business tank in the aftermath of the Sept. 11 terrorist attacks because we opened just a week before them. We have been able to grow our business every year and this year is looking like it will be the best yet.
We have extensive real estate experience but have expanded in new categories like the wireless industry and have several new hires that are OC industry veterans.
Is competition heating up?
The competition is very tough as large shops pushed by the weak economy are now interested in smaller accounts that they used to pass on.
What’s hot in the advertising industry?
Real estate, fueled by the lowest interest rates in 40 years, continues to be hot. And low interest rates are fueling the mortgage and refinancing sectors, which in turn makes the home improvement sector grow.
Lowe’s and Home Depot set earnings records last month and you can’t go anywhere without hearing or seeing a mortgage message. Aging boomers’ healthcare and prescription medicines are another fast-growing sector, with drug companies doing direct consumer advertising.
This may be an oxymoron but healthy fast food seems to be another growing sector as witnessed by the lunch crowds at places like Baja Fresh.
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Debbie Zimmerman
Executive vice president,
group account director,
Foote Cone & Belding Southern California
Irvine
What’s your outlook for 2004?
After several tough years, I think marketers are feeling more hopeful and optimistic in 2004. But this optimism is tempered by the uncertainty of our times,war, terrorism, a jobless recovery and corporate scandal. We’re in an election year and economic indicators tell us things are getting better.
Marketers are looking for ways to deliver. We live in a short-term, “What have you done for me lately?” mindset. That’s not going to change anytime soon. Look how dramatically the Internet has impacted our lives, both professionally and personally.
And who would have thought that Americans would so totally be enamored with reality TV programming? We have to market differently, as the dynamics of reaching and impacting our target audiences have changed.
Marketing officers want agency partners who will help them uncover the next big thing,but profitably. I think 2004 will be stronger than 2003 because marketers are more ready to latch on to a growing optimism.
They don’t want to be left on the sidelines. There’s been a lot of stagnation these past few years; it’s simply time to seize the momentum.
The outlook is cautiously optimistic. We’re in a fragile state, so market conditions could temper spending if things slow down. We’re certainly seeing clients that are stepping up to the plate in terms of spending. But our programs need to be accountable or they don’t get funded, and I expect the plug will be pulled if those programs don’t deliver a reasonable return on investment.
The encouraging sign is that clients are recognizing that branding and tactical initiatives are not an either-or proposition.
Is competition heating up?
Competition is intense. Our media landscape is more fragmented than ever and marketers are having to work harder to find and connect with their target audiences. Consumers are deluged with messages and too many options in every category. Technology disrupts and enables us at the same time. Marketers are looking for resources to help them build rational and emotional connections with their customers. As a result of these combined factors, only the nimble will truly be in the game.
What are hot areas in advertising?
Biotechnology and direct-to-consumer drug advertising. Both are hot for the same reason: They give consumers more control and more options for longer life and better quality life.
