As the economy slips downhill, advertising budgets will tighten. But companies will still want to get the word out to keep their products in the mind of clients, so spending on public relations will rise.
That's how insiders view the outlook for these sectors in the context of total billings for 2007, as compiled by the Business Journal on this week's lists of L.A.'s largest advertising and public relations firms (pages 23-25).
Billings for advertising agencies rose collectively by 3.9 percent in 2007. Some agencies reported stunning growth.
Quigley-Simpson, which ranks fourth among ad agencies, grew 61 percent last year, followed by InterTrend Communications, which grew 42 percent. In dollar terms, Quigley-Simpson grew by $107 million and Rubin Postaer & Associates, the largest ad agency in the county with more than $1.14 billion in billings, grew by $98.7 million.
But those gains already seem like ancient history, given today's housing slump and grim news about jobs, inflation and currency fluctuations.
"We're in a downturn now," said Gerald Bagg, chief executive at Quigley-Simpson. "There's a ripple effect that will touch everyone financially. We're helping clients trim budgets prudently, reallocate resources, use alternative media, re-purpose and change creative approaches all with a view to maintaining share of voice at lower expenditures."
Bill Hagelstein, chief operating officer at Rubin Postaer, hasn't seen the cuts happening yet, but he expects a rough year for his big-ticket clients, which include Honda, Acura and a number of regional dealership associations.
"Certainly in the auto category, the market is predicted to go down and supply will exceed demand," Hagelstein explained. "Some clients are putting money into incentives rather than advertising. For quite some time there has been a heavy dose of price-related advertising, from cash-backs to aggressive lease arrangements."
On the public relations side, agency leaders see the economic slowdown as an opportunity, based on the idea that PR is more cost-effective than advertising so companies use it more when budgets are limited.
"If I used to spend $10 million on TV, and now I only have $1 million, I can't get much exposure on TV, but that money will buy a big PR campaign," said Lynn Doll, president at the Rogers Group in Century City.
"PR has captured more of marketers' interest in reaching consumers because it can be so targeted," said Gail Becker, regional president for Edelman. "The pending recession exacerbates it, but the trend started long before softening of the economy."
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