As I watched President Obama give a short speech to receive a Nobel Peace Prize he did not earn in Oslo, Norway, I wondered why he didn't show much concern over the loss of jobs in the ad industry. Maybe he does care, but he just doesn't have time to address it. That's just like a politician.
It' so easy to forget our advertising friends once we've been elected. After all, didn't advertising and message management help put him into office? Weren't there a few stories in the news touting how well the Obama team used social media and kept a tight hold on communications? This was, after all, one of the reasons that the president kept his Blackberry.
Although the media seems to be trumpeting the economy is slowly recovering, the advertising industry is still cutting jobs in huge chunks. In the last week, Interpublic Group (IPG) announced another 400 job cuts. IPG owns agencies like McCann Erickson, Deutsch, Campbell-Ewald, DraftFCB, and Campbell Mithun and has already committed nearly 6,000 people to the unemployment lines. Additionally, another 90 cuts were announced at WPP Group's Ogilvy & Mather. That makes 500 in a week's time, and although the unemployment rate dropped by a whopping .2% (from 10.2% down to 10%), Barack Obama predicted last year that once the TARP (Troubled Asset Relief Program) and economic stimulus monies were released, unemployment wouldn't hit more than 8%.
According to BNET, ad agency job losses are most likely worse than reported due to an under-report by some of the larger agencies.
- IPG claimed 3,000 in losses but actually lost about 6,000.
- WPP admitted 11,232 jobs but previously stated 7,800.
- Omnicom supposedly cut 3,500, which has been now disclosed as 5,000.
- Publicis disclosed 1,800 losses in July but has been secretive since.
- JWT nearly closed their Chicago office, leaving a staff of no more than 10 people.
- Cliff Freeman & Partners shut down.
Those are just the big boys. Smaller agencies have shut down or made comparatively large cuts with regard to size. If the economy is getting better, why are advertising agencies still cutting people? The simple answer is also the obvious answer: Ad agencies do not bill enough to support their rosters.
Somewhere along the line, every ad agency has stated that their most important asset is their people. This may be. However, it's also the most expensive asset. According to BNET, the rule of thumb for advertising agencies is: One employee for every $1 million in billings. The agency may claim roughly 10 percent of those billings in fees or commissions.
This means for an agency that has annual billing of $70 million, they can support roughly 70 people. Once $10 million or more dollars go away, there's just no way to keep operating in the black.
I did not want to be a harbinger of doom, but deep in your heart, you knew this was the truth, didn't you?