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Top Independents See Growth in Shifting Ad Marketplace

Top Independents See Growth in Shifting Ad Marketplace

By NICOLE TAYLOR

Staff Reporter

Who’s number one in the local advertising world?

Good question.

The large, publicly held agencies are declining to release 2002 billings data for their subsidiary companies, presumably because of the recently enacted Sarbanes-Oxley Act, in which chief executives and chief financial officers are required to certify the accuracy of corporate financial data. This has fueled long-held industry suspicions that billing information for many operating subsidiaries has been inflated for years.

Because data for the major firms is unavailable, the Business Journal will not be publishing its usual list of the area’s largest advertising agencies (nor of the top public relations agencies, which had been scheduled for next week).

As for the 15 independent advertising agencies surveyed, Rubin Postaer and Associates ranked first, with 2002 billings of $858.3 million, a gain of less than 1 percent from the previous year.

The greatest growth came at Encino-based Inter/Media Advertising, which reported a 92 percent gain, billing $202 million in 2002.

Most of the 15 agencies surveyed reported billings growth in 2002 compared to 2001. Six firms held steady or reported declines.

While all agencies, large and small, have struggled in the face of an advertising recession and tougher competition, the independents appear to be adjusting to the newer ways of doing business.

Perhaps the biggest shift has come in the embrace of direct response advertising, which clients have come to see as a means of tracking the effectiveness of marketing dollars.

“We’ve found our best years are in times of economic downturns because of the accountability dynamic,” said Lucas Donat, chief executive of Donat/Wald, whose independent firm specializes in direct response.

Bart Young, chief executive and president of Young Co., which focuses on business-to-business activity, said that billings fell in 2002 by 2.5 percent, to $27.3 million. But he said that the company is now less dependent on technology and sees good expansion opportunities in business development tools for it business-to-business clients.

Young, like other independents, has begun offering more non-advertising services, like public relations and market research.

Sagon/Phior, which had been an Interpublic unit until last year, has also repositioned itself, shifting from a full-service agency to a marketing and creative services firm, according to Glenn Sagon, its chief executive.

Although the company still handles a significant amount of advertising work, its primary focus is shaping a company’s identity with tools like packaging design and Web site content and design.

Fraser Communications in Santa Monica is a good example of the struggle facing independents. The company saw a modest growth of 4.6 percent in billings, to $27.2 million, in 2002 and expects to maintain that level in 2003. In order to stay lean, the company has been using more freelancers to keep overhead low.

“Consolidation is strong in Los Angeles,” said Renee Fraser, chief executive of the agency. “Internally it means a lot fewer jobs, so there is a great pool of (freelance) talent available.”

Rochelle Newman-Carrasco, chief executive at Hispanic agency Enlace Communications Inc., expects to see “conservative growth” this year to come from interactive and direct response advertising.

“Tools that are interactive connect consumer with products and services so you can track the advertising,” said Newman-Carrasco. “It’s not just about print and phones. Directing people online and clicking on Web sites gives another response mechanism.”

The tight ad market is even causing the local units of major firms to compete for contracts they wouldn’t have only a couple years ago.

“We were surprised to see a global firm in a pitch for $450,000 worth of business,” said Sagon. “The biggest agencies are going after the tiniest account.”

Some see the shifts in practice becoming a permanent feature of the industry landscape. Jack Feuer, national news editor for AdWeek magazine, cited the growth of interactive technology and increasing “fragmentation” of the audience, causing a shift away from traditional 30-second advertising.

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