No repeat of 2000 gains seen

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Agencies in the annual Advertising Age survey appear to be traveling on autopilot into a stiff headwind. Expectations continue to be high for growth in gross income, though fewer agencies believe they will see this year's growth levels repeat in 2001. Dislocation in the new economy and a slowdown in the old economy are influencing these reduced expectations.

Agencies cruised through most of 2000, until the fourth quarter, when post-Labor Day blues set in. "You can divide the year into a pre- and post-Labor Day," says Drew Neisser, president of Renegade Marketing Group, a New York-based branding agency. "Pre-Labor Day, there was a feeling among most employees they could get a job anywhere in a heartbeat. Raises of 25% were the assumed norm. But post-Labor Day, it's as if all the water ran out of the bathtub. Headhunters say this is the first time in three years they have more people than they have jobs."


"The TV networks are asking where are all the buyers? The Internet is asking where's all the revenue, clients are slowing down and agencies are feeling it," Mr. Neisser says, predicting a substantial slowdown in 2001.

"In a way, the world has gotten back to normal. The cliff [of irrational dot-com growth] got higher and higher last year," says Steve Addis, CEO of Berkeley, Calif.-based Addis, "and the industry is falling off a much higher precipice. But equilibrium will be found."


Those near-sanguine remarks come from an ad executive who's seen considerable carnage among dot-coms around the Bay area since the first quarter of this year and whose agency lost 10% to 15% of its billings this year when dot-com client Pandesic went out of business.

The dot-com money that flooded the offline ad market in fourth quarter 1999 has slowed. August was the first month this year that ad growth on the Internet slowed down from the preceding month, according to AdZone Interactive, a monitor of Internet advertising.

"We were careful last year by not overhiring and not tossing away traditional work. Some agencies in our market reinvented themselves as e-commerce only. We've kept a balance," Mr. Addis says.

Despite the dislocation in the Bay area and a softening in the employment market in New York and elsewhere, agencies plan to aim for higher gross income levels in 2001 with higher employment rolls. The Advertising Age Salary Survey shows considerable movement upward in employment at agencies with 1-to-50 employees.


The softening market could actually encourage growth in employment as a buyer's market replaces the seller's market nationwide, assuming the economy doesn't deflate.

"People aren't jumping ship as fast [as in the first half], and management isn't throwing money at people as fast. We're returning to a more realistic time where you get the raise for doing a killer job. The past 18 months it's been, `Hey, you're an AE, great, here's a raise,' " Mr. Neisser says.

The Midwest and South will be strong markets for creatives and account management executives, and the East is the place for new hires in media, according to the Ad Age survey. The West will be the tightest market for new employment, though it, too, offers opportunities. "There is a crying need for top-level account executives in San Diego," says Cindy Becker, business manager at VitroRobertson, a traditional agency located there. Virtually all new hires at VitroRobertson come from outside the area because the pool of talent is thin in the city, where agencies are few and small. "We hired a director of client services from outside the area last year after spending a year to find him," she says. "Now he's staffing up."

"There's an agency bloodbath going on in the Bay area. Lots of people are without jobs, a complete turnaround from last year. It's good for us because it gives us more options, although people are still demanding high salaries," Mr. Addis says.


Recruiting and retaining good people remains a problem at most agencies. "Last year the market was so tight we were moving in people from out of town," says Sara Jones, chief financial officer at Sawyer Riley Compton, Atlanta, "but now there's an overabundance, the result of layoffs at dot-coms and major marketers in the region."

She says the dynamics are changing in recruiting and retaining good people. "We're hiring more junior people for a lot more money than we paid five years ago," Ms. Jones says, noting most of the new hires are Generation Xers who seem to be more mature and self-confident than hires several years ago.

Other agencies give Gen Xers similar kudos, though qualified: "The typical interviewee is bold, usually presenting us with a career track and wanting to know when they'll be up for review, when they can expect a raise and a promotion," Andre Fair, assistant controller at E. Morris Communications, Chicago, says with a chuckle.

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