Digital agencies not immune to layoffs

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As the American economy continues its malaise, layoffs have occurred in many sectors — and the residual effects are now being felt by marketing and advertising agencies in both digital and more traditional spaces.

Agencies serving banks, the automotive industry and retailers are laying off employees due to lower demand from their clients. Several marketing agencies with close ties to the troubled auto industry also have implemented cutbacks recently. Omnicom agency BBDO Detroit, which handles Chrysler, recently cut 145 jobs to account for loss of client activity; Mullen Agency, which has an office in Detroit, laid off 5% of its work force; and Campbell-Ewald, in Warren, MI, also let some people go.

“When we surveyed agencies in June, everybody thought that only 7% of agencies expected a decrease in spending, and now our forecast does predict that billing will slow,” said Emily Riley, analyst at Forrester Research. “But the industry won't necessarily experience major losses, only if their main clients are in certain sectors that have been hit hard, such as financial services and automotive.”

In the marketing services sphere, Omnicom is planning to cut up to 5%, or about 3,500, of its 70,000 employees.

Experian laid off approximately 130 staffers company-wide.

“Experian is always trying to improve its business practices and operations to make sure the needs of our clients are being met and, as client needs change, we have to make sure we are best positioned to serve them and remain competitive in the market,” explained company spokesman Christopher Fielder. “We're just trying to be as efficient as possible.”

While Experian and others like them in the digital space have argued that cost efficiency and measurability have helped make digital advertising more attractive in this tough economic landscape, the digital agencies have not been free from cutbacks.

Two weeks ago, Publicis Groupe's digital unit, Digitas, announced that it is laying off 2% of its 2,100 US employees in a restructuring effort, attributing the layoffs to changing client needs.

“We have taken the difficult step of restructuring staffing levels at some of our US offices,” said a company statement. “We have redeployed talent wherever possible, but the realities of the current economy did require that we let some talented people go in order to best position the agency for continued growth and success.”

Online spend growth will slow
Display will decline or flatten in some sectors, but video may surge: Forrester

According to a new Forrester Research report, US Online Category Advertising Forecast, 2008 to 2013, 2009 and 2010 will show only single-digit growth for display advertising — 8% and 9% respectively. The report also predicts that display spending will decline in the financial services market in the near term, while remaining flat in the automotive and lead generation categories.

However, online video spending is expected to increase over the next five years — at a rate of about 13% a year in search and 14% a year in display advertising — due to its accountability and growth.

“There are a couple of things working for and against marketers in the weak economy,” said Emily Riley, analyst at Forrester Research. “Working for marketers is that they will see an increase in search, because consumers will use the Internet to make sure that they are getting the best deals. However, consumers are going to be spending less overall, so that is working against marketers.”

Yet, as big companies continue to announce layoffs, marketers and ad agencies should proceed with caution.

For example, Office Depot's recent announcement that it will close 9% of its North American stores and cut 2,200 jobs over the next three months may not be the best news for Young & Rubicam, which recently landed that account.


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