Triangle advertising agencies that gutted it out through the recession are enjoying a resurgence in business.
Many agencies that were forced to cut their staffs last year, either through layoffs or attrition, are hiring today to handle the extra work.
Though ad agencies aren't huge job generators, they typically pay well and attract the type of creative employees that economic developers covet. The agencies' fortunes, tied to clients in a wide range of industries, also are a gauge of the broader economy's health.
The current rebound came too late for some local agencies. Last year, Raleigh ad agencies RBW and The King Partnership closed, as did The Catevo Group, an advertising/public relations hybrid. S&R Communications Group, a Durham agency that focused on the pharmaceutical industry, folded in April after 19 years in business.
The CEO of an agency that's still standing, Raleigh communications firm Capstrat, calls 2009 "a disaster." Ad-related revenue at Capstrat fell 17 percent last year, said CEO Ken Eudy.
"We didn't lose clients," he added. "We didn't have clients that went away [because of mergers and acquisitions]. Almost all of our clients reduced spending."
This year, ad revenue has risen as clients spend more, Eudy said. Ad accounts such as Quintiles, Lenovo and the N.C. Health and Wellness Trust Fund account for about 40 percent of the agency's revenue. Public relations and other services account for the rest.
The rebound has prompted Capstrat to hire 25 employees this year, swelling the staff to 88. Still, the Raleigh agency is slightly below its pre-recession peak of 92.
The uptick reported by local agencies fits the national picture.
Down 2 years straight
National advertising spending fell 4.1 percent in 2008 and 12.3 percent last year - the first time in 75 years that spending declined two years in a row. This year the trend has reversed course, with spending up 5.7 percent in the first six months, Kantar Media reports.
Chris Larsen, an ad consultant based in Rocky Mount, expects the resurgence to continue. "There will be more hiring [by the ad agencies] in 2011 as the economy continues to grow," he said.
Advertisers are starting to spend more money, said Reji Puthenveetil of Group Newhouse, a Raleigh marketing and management consulting firm. "They can sit and wait only so long," he added. "They're not going to grow by cutting costs."
At Raleigh communications agency French/West/Vaughan, an 87-employee firm that gets more than a third of its revenue from advertising, the ad business was flat last year. This year, it's up more than 50 percent as clients spend more and new clients come on board, CEO Rick French said.
French expects to hire five more ad employees by the end of this year, which would increase its staff devoted to advertising to 20.
"There's a turnaround across the ad sector as a whole," he said.
Although the ad market is rebounding, it's a work in progress. The $63.57 billion spent on ads during the first half of this year is 12.4 percent lower than the amount spent in the same period of 2007.
Some still recovering
Some agencies that were rocked hard by the recession are still in recovery mode.
Creative Associates, a small Raleigh agency, did project work for Nortel Networks that accounted for more than half its revenue before the telecommunications equipment maker filed for bankruptcy last year.
"For us it was, how are we going to survive 2009?" CEO Ed Collevecchio said.
Creative gradually reduced its staff from 14 to eight. This year, however, the agency snared project work from a trio of new clients: IBM, Verizon Wireless and Avaya, which purchased a piece of Nortel's operation.
Collevecchio expects revenue will be "down slightly" this year. But the agency is now "a more stable company" because it isn't overly dependent on a single client.
Not every agency suffered during the recession.
Raleigh's Howard, Merrell & Partners enjoyed revenue growth of 16 percent last year and is on track to rise another 18 percent this year, said CEO Jim Cobb. The agency has hired more than a half-dozen employees this year - giving it a total of 60 - and plans to add a few more.
"This year has been a banner year for doing market research," Cobb said. "I think [clients are] working smarter with how they spend their money, and we've benefited from that."
Keeping big accounts
In addition to riding the ups and downs of the economy, agencies' fortunes hinge on the accounts they win or lose.
McKinney, by far the Triangle's largest ad agency, took its lumps before the recession. In 2006, it lost two major accounts, Sony Electronics and Audi of America. That triggered a downsizing that ultimately reduced its staff from a peak of 250 employees to 160.
Last year, however, Durham-based McKinney added 70 jobs after winning two accounts: Nationwide Insurance, its biggest account ever, and EAS, a sports nutrition brand owned by Abbott Laboratories. Work for those clients, including creation of "The World's Greatest Spokesperson in the World!" campaign for Nationwide, boosted revenue 20 percent.
This year? "We will have a record year, without any question," CEO Brad Brinegar said. He expects revenue to rise "close to 40 percent."
The agency's prospects, however, are clouded by another client loss.
Its work for online travel business Travelocity will end this year after a seven-year partnership. The agency, which created Travelocity's iconic Roaming Gnome mascot, chose not to compete to retain the account after the client solicited proposals from competitors. Brinegar said the shift won't necessitate layoffs.
Now McKinney's ambitions for 2011 include landing a new travel-oriented account.
"We are certainly eager to get back to the travel category," Brinegar said, "because we know what we're doing there."
