Bracing for the ad pullback

gottabetheshoesIt comes as no surprise that local marketing firms and sole practitioners are bracing for a slowdown, and the outlook will probably get worse as state and local nonprofits slash 2009 budgets amid declining revenue.

Ask any marketing or advertising executive how business is going, and you’ll likely hear this refrain: “Marketing is the first to go when the economy slows, and the first to start hiring when it picks up.”

Or something pretty darn close.

It comes as no surprise, then, that local marketing firms and sole practitioners are bracing for a slowdown, and the outlook will probably get worse as state and local nonprofits slash 2009 budgets amid declining revenue. Several builders and developers have told BizSense that they plan to spend less in advertising in 2009 than this year. Car manufacturers and dealers also are pulling back.

So far, big Richmond-based companies are retaining their marketing employees but cutting back on the ads they buy. Connie Dye, president-elect of the American Marketing Association’s Richmond chapter said some companies might let go marketing employees and hire them back as consultants, a cost-saving measure.

Chris Thurston, chief executive at the Richmond advertising firm RightMinds and a 20-year veteran of the industry, said he’s seeing some retraction in retail clients.

“I’ve been through downturns and recessions,” Thurston said. “This is by far the worst.”

RightMinds has cut eight positions since the summer, including two layoffs in the past two weeks. That’s about 20 percent fewer workers, Thurston said. RightMinds also subleased one of the three floors it rents in the chic Main Street Station to Otair, a mobile marketing firm. RightMinds is using two floors in the old train station and has no plans to sublease more space.

Thurston said RightMinds has seen most of its clients cut their ad budgets. Without strategies to plan or ads to produce, the company wasn’t bringing in the fees needed to cover payroll.

Those sorts of cutbacks might force some marketing professionals into other industries, Dye said, because there won’t be enough demand to absorb those jobs, at least locally. And the worst is likely not over. Advertising spending across media, including TV (not counting the election bump) and newspapers, is down double digits compared with last year. Publishing revenue at Media General, which owns weekly and daily newspapers in Virginia and relies heavily on classified and display advertising, has fallen 20 percent in the third quarter compared with the previous year.

Even Internet advertising is slowing, although still growing by most recent estimates. Thurston said advertising online remains more popular than other outlets as the economy tightens because companies can measure their return via clicks.

There are some bright spots in an otherwise gloomy outlook. The Martin Agency recently picked up the American Cancer Society as a new client (the dollar figure has not been disclosed). The Shockoe-Bottom advertising firm is on track to hire about 100 employees this year, company spokesman Dean Jarrett said. The company has about 510 employees, 55 of whom work in New York.

“If I look over our entire book of business, some people are cutting spending a little,” Jarrett said. “Others have been up. Overall, for us, it’s been a net increase.” The Martin Agency is buoyed by Wal-Mart, which is thriving as consumers cut back on discretionary purchases to pay for staples such as food and, well, food.

And as other companies pull back on advertising, Jarrett said it makes those who continue to advertise that much more effective at reaching their target audience. “If people are cutting back and you decide to spend, you get a bigger share of the voice [than you would] otherwise.”

Aaron Kremer is the BizSense editor. Please email story ideas to [email protected]

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