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Thursday, Apr 18, 2024

Ad Agencies’ OC Revenue Falls 1.6%

OC’s largest advertising agencies topped $1 billion in revenue last year, despite facing challenges from clients expecting a recession in 2023 that never occurred.

The 19 companies included in the Business Journal’s list of advertising agencies reported combined revenue fell 1.6% to $1.04 billion in 2023.

Several firms told the Business Journal that they had good retention of clients throughout last year, despite a few clients cutting budgets in areas like ad placements.

Larger national advertisers traditionally cut back on expenditures in expectation of a recession; despite the consensus for a recession at the onset of 2023, a resilient economy ultimately made those fears unfounded.

Costa Mesa-based SCS saw annual revenue fall 32% to $55 million, largely due to a sportswear retailer pulling back on their media spend last year as well as clients concerned about a possible recession in 2023.

“We will continue to keep the throttle down on driving the best possible results for our clients,” Chief Executive James Schiefer told the Business Journal of approaching 2024 “with optimism.”

“Acquiring new clients continues to be a challenge as competition continues to grow and diversify,” Gigasavvy’s Kyle Johnston said.

The Laguna Beach-based agency reported 2023 revenue of $14.9 million, up 7.2% from the year prior, and ranked No. 11.

The largest agency by revenue, Innocean USA in Huntington Beach, made several new hires in the creative department with Jason Sperling coming on as chief creative officer and Steven Nishimura as its new chief digital officer last year.

“Everyone has come in with a fresh perspective on advertising,” Innocean’s Managing Director Mark Weinfeld told the Business Journal.

Client Activity

A variety of new clients were added to local portfolios last year.

Innocean welcomed four new companies—Korean Air, Seaworld, Nexon and Jinro—while losing UMass Global. The Surf City agency remains in the top spot on the list with an estimated 2023 revenue approaching $400 million.

The company has been expanding beyond its initial automotive focus for the past several years. Existing clients include Wienerschnitzel and Hyundai.

Gigasavvy signed Brea hat maker Flexfit and homebuilder D.R. Horton.

The list’s fastest grower was Irvine-based No. 12 Rhythm with an 18% increase in revenue to $13 million.

“Rhythm experienced accelerated growth in two primary services lines respectively focused on Media Services and Customer Lifecycle Communications Programs through CRM,” CEO Peter Bohenek told the Business Journal.

“Greater demand in email and media buying accounted for revenue increases. On a post-pandemic level, Rhythm continues to hire OC based as well as remote candidates to bolster deeper specialization across our six core services of: Web, Search, CRM, Content, Media and Analytics.”

AI Curators

Employee headcount in OC for those on the list fell 5.1% to 1,369 people; however, companywide employees grew 6.1% across the board.

Eight of the 19 agencies reported a decline in employees at their Orange County offices.
A large innovation that may be affecting employee growth is the ramp of artificial intelligence.

“This past year, we’ve witnessed significant interest and changes in AI, data, technology,” SCS’s Schiefer said.

He added that the agency had already been leveraging AI in behind-the-scenes operations and will continue leaning into the programming along with other technology designed to study and translate consumer insights and behavior. SCS was acquired by Toronto-based PopReach Corp. last year and recently integrated a firm called Contobox to improve collecting first-party data.

“With the prospect of AI changing this landscape even more, we will continue to position ourselves around offerings that humans do best and ones that drive big, bottom-line results for our clients,” Gigasavvy’s Johnston said.

Innocean is focused on making AI more user-friendly for ad agencies. The firm is working with Getty and Adobe on building a library of rights-free images, which could help with the issue of AI-generated images based off licensed art.

“In order to embrace it, agencies have to become curators,” Weinfeld said. “The curators are the ones choosing the images to tell the story and make it the most effective and efficient.”

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