Firms Battle for Jackpot: $100 Million Lottery Account
By CLAUDIA PESCHIUTTA
Staff Reporter
Two of the area’s largest advertising agencies are gambling that the lottery can help pull them though an industry-wide slump that has forced others to lay off workers or close up shop.
The high-stakes game for the $100 million California Lottery advertising account could come to a head late this week if the California Lottery Commission rules on a complaint filed by the Los Angeles office of Grey Worldwide that contests the January award of the contract to DDB Worldwide’s local office.
The four-year contract would be worth fighting for even in good times, but shrinking ad spending and a lack of new business have made it all the more valuable.
Grey, which held the lottery account for five years, lost to DDB by less than two points out of a possible 100 in the lottery’s evaluation process. Scores are based on written proposals, presentation and cost. Lottery Director Joan Wilson was set to decide the matter by March 4, although there were indications the process could drag on longer.
“It’s a large solicitation. It’s $100 million. That may be one of the factors (that lead Grey to file a complaint) but, I mean, you have to have grounds to protest,” said Rose Marie Laplante-Olvera, a state contract administrator. She would not disclose any details about the confidential complaint.
“Anything in the $100 million market is important,” said John Barnes, executive vice president and managing director of media buyer Carat USA in Santa Monica. “The industry over the last few years has been in a bit of a slump so everyone is fighting (for accounts). It becomes a zero-sum game, which means that you grow business by taking business from somebody else.”
Carat bid for the lottery’s creative and media work with Sausalito, Calif. ad agency Butler, Shine & Stern.
John Crosson, Grey’s president and chief operating officer, told the Business Journal last fall he expected the lottery business and a $45 million state energy conservation contract to boost the agency’s 2001 revenues by 25 percent over the previous year, an impressive claim given the industry’s downturn. He also noted that state accounts have “high-profile marquee value as well.” Crosson declined to comment for this story.
“I’m sure it’s an important financial and emotional issue (for Grey),” said Scott Gilbert, chief executive of Saatchi & Saatchi. “Accounts that size usually have a pretty big staff on it. There could be some layoffs.”
The loss must have come as a surprise to Grey executives, given the increase in lottery ticket sales during the agency’s tenure. During those five years, sales rose by more than $800 million and reached record-breaking heights, according to Jim Hasegawa, the lottery’s director of marketing.
“These milestones could not have been achieved without the outstanding efforts of Grey Advertising,” he said in a statement announcing DDB’s win. DDB President Rick Carpenter referred calls about the decision to lottery officials.
Local advertising executives questioned the state’s decision-making process on advertising contracts, saying that choices are made by people without advertising experience and are influenced by politics.
“Even if everything is great, a third-term for an incumbent agency raises eyebrows,” said one ad executive. “If they want a specific agency to win, that’s the way it’s going to be. You can protest to your heart’s content. It’s not going to change anything.”
Hasegawa contested such claims, saying he and others at the California Lottery come from advertising and marketing backgrounds. He also pointed out that incumbents often win contracts.
Compared to his experience in the private sector, Hasegawa said the state’s selection procedure is “definitely a much more open and a much more rigorous process.”
Grey’s chances of getting the commission to overturn its decision may be little better than those of winning the lottery. Such instances are rare and the appeals process can be long. For example, Carat was still waiting last week for state officials to rule on a complaint filed in November contesting the award of a $125 million media-buying account for the state Department of Health Services’ anti-smoking campaign to L.A. ad agency Ground Zero.
“No one’s going to want to reverse a decision because it could be embarrassing,” said another advertising executive. “The government doesn’t like embarrassing situations in an election year. It’s particularly embarrassing if you make a public scene about it.”
