Local advertising firms are on a hiring binge.
Twenty-four of the 40 companies on the Business Journal’s annual list of ad agencies reported growing payrolls in the last year, with five agencies flat. Only two reported fewer workers. (Nine didn’t provide sufficient data about past head counts for comparison.)
The agency with the largest payroll increase was TBWA Media Arts Lab in Playa del Mar, which hired 109 people in the last year. The shop has only one client, which happens to be the most valuable company in the nation based on market capitalization.
“TBWA Media Arts Lab was built from the ground up to look after a single brand: Apple,” said Duncan Milner, chief executive. “This is a unique premise in our industry and one that’s allowed for us to create the most powerful marketing communications for the world’s most important brand.”
The lab is a spinoff from TBWAChiatDay, the No. 1 agency on the list with 550 employees, the same number as last year. Carisa Bianchi, president of the agency, said the media lab was separated from her company for security reasons because Apple didn’t want to risk leaks about product launches. The Media Arts Lab is in a high-security building with admittance by fingerprint scan.
Agency heads and industry analysts said advertisers started to spend again in 2011 after several years of hunkering down.
Bill Hagelstein, chief executive at Rubin Postaer and Associates in Santa Monica, the No. 2 agency on the list with 525 employees, said most of his growth has come from longtime clients, especially L.A.-based Farmers Insurance and Mountain View-based Intuit.
“Los Angeles has large corporations that are coming back and willing to invest more in marketing,” Hagelstein said. “Also, with the entertainment and tech firms here, there are lots of startups that have the potential for new growth.”
Chief Executive Mike Sheldon of Deutsch, the No. 3 agency on the list, said new business comes as companies see his agency’s work for current clients Volkswagen, PlayStation and Dr Pepper.
“In 2011 our business was up about 30 percent,” Sheldon said. “Our hybrid traditional and digital offering is absolutely right for what clients need.”
Russel Wohlwerth, chief executive of External View Consulting Group in Culver City, a company that evaluates ad agencies for corporate advertisers, said the ad business is cyclical, and right now it’s on an upswing.
“In the depths of 2008 to 2009, marketers were operating out of fear,” Wohlwerth said. “Now the storyline is ‘Help me grow my brand.’ Across the board, the consensus is that 2011 was a great year for growth.”
Casey Burnett, director of West Coast operations for Roth Associates, a marketing consultancy for large corporate advertisers, attributed the ad sector’s growth to two factors: a turnaround in the automotive sector and a creative renaissance at local agencies.
“Southern California is still the place where automakers predominately come for advertising,” Burnett said. “The last couple of years have been tough for the car brands, but now they are spending more and so their agencies are hiring back those people they let go a few years ago.”
The list confirms the importance of auto advertising at local agencies. No. 1 TBWAChiatDay lists Nissan among its clients; No. 2 Rubin Postaer and Associates handles Honda and Acura; Saatchi & Saatchi LA, No. 4 on the list, has the Toyota account; Team One in seventh place works for Lexus; and No. 11 David & Goliath is the agency for Kia. Honda, Toyota and Lexus appear as clients for agencies farther down the list.
Burnett also said Los Angeles has a mix of new boutiques and established agencies that together have earned a reputation for creativity.
Wohlwerth agreed, pointing to examples such as TBWAChiatDay, Deutsch, 72andSunny and Goodness Mfg.
“We have a lot of innovative advertising agencies and a lot of good smaller digital agencies,” he said. “Compared to other cities we are doing very well.”
New methodology
One of the largest companies on the last year’s list dropped off and plans to shut down.
Mendelsohn Zien Advertising, the No. 7 company last year with 165 employees, will close. President Richard Zien plans to retire by midyear. Co-founder Jordin Mendelsohn left in 2009 after the agency was acquired by Tokyo-based Hakuhodo. Last year, Mendelsohn Zien lost the Carl’s Jr.-Hardee’s account, valued at about $100 million.
On this year’s list, TBWAChiatDay regained the top spot because the Business Journal changed its methodology to rank agencies by number of employees rather than revenue. The change was made to better represent the scope of the ad industry in the local economy.
TBWAChiatDay, started by copywriter Jay Chiat and business manager Guy Day in 1968, was ranked as the largest agency by revenue on the Business Journal’s list until 2003, when the Sarbanes-Oxley Law limited how public companies disclosed their financial information. As a result of the law, the local offices of large publicly traded ad agencies – including TBWA, a unit of New York-based Omnicom Group – stopped providing revenue figures.
Soon the list was dominated by those private companies willing to disclose financials, with Rubin Postaer as the biggest agency.
Wohlwerth said the growth of local agencies, both in revenue and payroll, should continue to gather steam in 2012.
Sheldon at Deutsch, for example, has 40 open positions mostly for digital ad production talent and traditional creative types.
“Everybody talks about being cautiously optimistic in 2012,” he said. “I’m wildly optimistic.”
