Ad industry rides it out

WHILE 2003 may not have had quite the bleak beginning of 2002, talk of cutbacks and consolidations within the advertising industry is rife.

A fall in consumer confidence and the Western Australian Government’s decision last year to cut its advertising spend by 30 per cent is largely being blamed for the malaise.

Talk of war with Iraq and a potential conflict with North Korea are also putting a damper on things.

Brand Agency managing director Ken James said he believed 2003 would be a difficult year, coming off a tough year last year.

“It will be tough and that’s bad coming from me because we had a record year last year,” he said.

“At the end of last year there was a tightening of consumer confidence and I expect that will continue for the first quarter of this year.

“Everyone will have to be a bit leaner and not everyone will keep their jobs.

“Government spending was cut quite extensively and that hurts.”

Marketforce group managing director John Driscoll said 2002 finished well for his firm and expected 2003 to start slowly and finish well.

His company ended 2002 by securing new clients Jesters, Cap-Aus, Argyle Diamonds, Scitech and the Mirvac Fini Burswood Development.

“The icing on the cake for us was being named the B&T Weekly agency of the year for the western region that incorporates WA, Northern Territory and South Australia,” Mr Driscoll said.

“There were some very positive signs towards the end of last year. Our outlook for this year is that it will be very similar to last year.

“The general feeling among clients is that 2003 will be a better year but there is a bit of reservation about what is going on in the rest of the world.”

However, Mr Driscoll said it could be a tough year for some agencies and did not discount the possibility of job cuts.

“I’m surprised that some agencies did not cut back last year,” he said.

Mr Driscoll agreed that the Government’s reduction of spending would hurt but did not expect it to fall the full 30 per cent.

“The Government is a big player in the local market, especially given the number of local accounts held out of WA,” he said.

It is understood the Government has already secured its 30 per cent cutback through Treasury holding that money back from the departments.

However, there is a belief within the Government that departments will still maintain high advertising spends if they need them by reallocating funding from other areas.

303 Advertising managing director Jim Davies said his agency increased its government billings last year.

“We had a number of campaigns from health, such as the nurses recruitment campaign and the physical activity campaign,” he said.

However, Mr Davies said a big issue hanging over agencies this year would be a review by the Government of its media buying.

“There is a suggestion that there may be a downgrading of remuneration for advertising agencies,” he said.

One of the things reducing optimism in the agency field last year was the number of contract reviews pending.

“There was a lot of change and reviewing from the Government and the big clients. A lot of that has happened now and those contracts are set for the next three years,” Mr Davies said.

He said there was also a trend back towards full service advertising agencies, which could hurt players that had decided to concentrate on niches.

“Those agencies that don’t have direct marketing or Internet services as part of their offer could struggle,” Mr Davies said.

“A lot of agencies will be looking to cut back. I have no plans to recruit this year.”

Ad Impact managing director Luciano D’Ambrogio said he felt 2003 would be a good year.

“I believe the year will be challenging but there will be some opportunities. The challenges will come if something happens in the Middle East,” he said.

“Our start to this year was very strong and that’s always a good sign. But our growth is coming from existing clients. As they grow, so do we.”

However, Mr D’Ambrogio also expects there to be a further thinning of advertising industry ranks.

“The industry has gone through an upheaval. Advertising spending is down worldwide,” he said.

“The other issue is that the industry is starting to spread. That means mid-sized agencies have to grow or get swallowed up.  But their problem is that they don’t have anywhere to grow.”