Los Angeles The past 12 months have been a mixed bag for Los Angeles County lobbying, advertising and public relations firms that generate revenue by pitching crafted messages to government, consumers and other businesses.
Lobbying firms, ranked in the Business Journal’s list by fee income generated in the county, notched nearly 13 percent collective growth in 2017 compared with the period prior, totaling $68 million in fee income.
Driving the gains were a brisk real estate market, new legislation that gave the cannabis business a boost, and continued growth of the Silicon Beach startup community.
Public relations companies, ranked by local staff numbers in the Business Journal’s list, saw headcount increase sector wide by more than 4 percent to 1,900 employees over the past 12 months, as clients called for more content creation and marketing.
Advertising firms, also ranked by employee numbers in the county, had a more challenging run. The ad shops faced lower profit margins and uncertainty with clients over the past year, some companies said, leading to an overall drop in employee numbers of 4-plus percent from the prior period.
The sector at large was about even on jobs for the period, with the exception of longtime leader TBWAChiatDay, which dropped from its perennial No.1 spot to 11th on the list after losing three major accounts and trimming 455 employees.
The cuts at ChiatDay account for slightly more than the sector’s entire decline.
Government agencies are taking in more tax revenue amid the strong economy, and a number of big-ticket products are in the works locally. The trend includes major projects at Los Angeles International Airport, transportation authorities, and the region’s twin sea ports (see related story, page 1).
The public works projects, coupled with an increase in private spending, especially for development, helped the top 25 Los Angeles County-based lobbying firms collectively see their income fees jump 12.8 percent to more than $68 million last year from $60.4 million in 2016.
“The economy in L.A. is healthy,” said Harvey Englander, founding partner at No. 1 ranked Englander Knabe & Allen.
Fee income at Englander’s firm last year rose $1.2 million, bringing the total to $8.3 million and enabling it to edge out No. 2 ranked Ek, Sunkin & Bai, which generated $8.2 million in fees.
Englander attributed significant growth to development, cannabis and technology clients.
“Everyone who has a development practice is going to have an increase in growth,” he said. “We have a number of clients in the tech world, and government is getting more involved in buying and updating tech products. Cannabis is growing.”
Englander’s firm represents the United Cannabis Business Association, and worked with it on regulatory issues, as well as several dispensaries on licensing and entitlements for their facilities.
“We’re the only firm in L.A. involved on the local level and on the state level in Sacramento,” Englander said.
Perhaps the biggest news last year in the local advertising world was TBWAChiatDay’s loss of three major accounts: Infinity, Nissan and Airbnb Inc., news which was confirmed by Erica Samadini, executive director of public relations for the agency.
The losses drove cutbacks that totaled 455 employees, dropping the agency from the No. 1 spot on the list to 11th.
Rubin Postaer and Associates, which jumped into the No.1 position from No. 2, credited its success to a trend in which clients are consolidating, and hiring one, full-service firm to handle their advertising as opposed to several boutique firms.
“We have a lot of flexibility to do what’s right for each client,” Pete Imwalle, chief operating officer of RPA, said. “Full service was out of vogue, but now it’s back.”
Imwalle said being a full service advertising agency allows it to have a more holistic approach to ad campaigns, and not just focus on programmatic and digital work.
“Digital is something a lot of clients and agencies have been slow to adopt,” Imwalle said. “There’s this fear from clients and agencies that they’re missing out and behind. There’s also a huge overreaction of people throwing money at digital. Most Americans are still watching television live over broadcast.”
Imwalle noted that when clients shift more of their advertising budget to digital media from broadcast media, a lot more labor is needed to handle the digital work.
“We tend to think of digital as automation, but the data allows us to micro-target,” he said. “It means we’re buying tons of smaller pieces of media to reach people. The micro-targeting allows us to have a much bigger labor pool. It may be more expensive to target people that way because you’re reaching the exact person.”
As a result, the shift towards digital has translated so far into lower margins for the industry as a whole, industry executives said.
“The ad industry in general is less profitable even though our revenue is up,” Imwalle said.
The top five public relations firms, led by No. 1 ranked PMK•BNC and No. 2 ranked Edelman, held their individual positions on the Business Journal list.
Just last week, however, PMK•BNC’s co-chief executive and co-chairman, Michael Nyman, announced he was leaving the firm to start his own venture, called Acceleration. Co-Chief Executive and Co-Chairman Cindi Berger will become the sole chief executive and chairwoman effective immediately.
Berger and Nyman said public relations firms are evolving as clients have put a greater value on content creators.
“The business of PR is still a solid business, whereas advertising and traditional marketing services are down and evolving,” Nyman said.
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