Ad agencies weather slowdown

In-your-face ads are all the rage as the economy cools

By BBC News Online's North America Business Reporter, David Schepp

Advertising in the US these days is as aggressive as it gets. Amid an economic slowdown, companies are pulling out all the stops to grab customer attention.

From pop-up windows on web pages to dazzling billboards to obnoxious - and sometimes clever - television advertising, Madison Avenue, the heart and soul of the American ad world, is constantly on the lookout for new and possibly invasive ways to get the word out.

The slowing economy is making times difficult for the advertising business

John Challenger, CEO, Challenger, Gray & Christmas

Times are difficult and American business wants to get its message out to a public that has become increasingly weary of familiar types of advertising and annoyed with the latest in-your-face techniques.

Ad agencies and related consulting businesses are in a slump.

Job cuts abound, including those at such notable firms as TBWA ChiatDay, Burson-Marsteller and Saatchi & Saatchi.

In a squeeze

"The advertising agencies are in a squeeze," says C Samuel Craig, professor of marketing at the Stern School of Business at New York University, "because advertising is an easy expense to dial back quickly."

Ad agencies either lose business outright or renegotiated contracts leave them performing the same amount of work for less money.

"There's a sea change in companies' willingness to spend money on advertising right now," says John Challenger of Challenger, Gray & Christmas, an outplacement firm that tracks layoffs in many industries.

"The slowing economy is making times difficult for the advertising business," Mr Challenger told BBC News Online.

Madison Avenue is home to many New York's ad agencies

Consulting firms, too, are suffering amid the slowdown.

With cash in short supply companies are less inclined to opt for high-end market research from firms such as Greenerevolution, a New York-based focus-group facility that has seen a significant drop in its business this year.

Out of pocket expenses

From an average of $5m to $6m a year, Greenerevolution has seen its year-to-date profits slump to $150,000, according to the firm's president Owen Pahl Greene, who told BBC News Online he now pays his five employees' salaries out of his own pocket as he awaits a turn-around in the economy.

"We've been making a lot of sales calls," says Mr Greene.

"Before I never had to advertise my business. We got our business through word of mouth," he says, adding some of his key clients have included such well-known brand names such as Evian water, Claritin, an over-the-counter allergy medication, and Discover, a credit card.

Amid the slowdown, companies of every stripe are looking for ways to trim costs. One of the first to go are consulting-firm expenses paid to firms such as Mr Greene's.

Analysts say the advertising industry will continue in a world of hurt until the US economy rebounds. But that rebound is months away, most say. Few expect a noticeable improvement in the economy before the first quarter of 2002.

Billboards ride high

One portion of the ad industry, however, is weathering the economic slump better than television, print or internet mediums.

Billboards, hallmarks of American highways and New York's Times Square, and other forms of outdoor advertising have edged ahead despite the slowdown.

During the first three months of the year, spending on outdoor advertisements edged ahead 2%, or $1.25bn, over year-ago levels, according to the Outdoor Advertising Association of America (OAAA).

In contrast, the beleaguered dot.com industry saw its profits fall by $7 million over the same period a year ago.

"The industry is holding its own and then some in a very difficult economic environment," says Diane Cimine, vice president of marketing for the OAAA, who adds that outdoor advertising appeals to companies who are looking for the most value for their advertising dollar.

"When you're in a situation like this economically," Ms Cimine says, "every penny counts."