Advertising's Black Thursday: Layoffs, Spend Cuts, Hiring Freezes and Client Collapses Bedevil the Biz

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It will be a cold Xmas and a dark New Year for ad agency folks, as network chiefs, clients and analysts spent most of this week either firming up plans for job cuts or revising downward their already grim predictions for adspend in 2009. Even freelancers felt the chill, as WPP circulated a memo demanding their use be curbed. Among the developments:

3,500 jobs are to go across Omnicom’s agencies, as key client Chrysler wobbled. BNET readers learned the jobs would be cut back on Oct. 27. UPDATE — BBDO announced late Thursday that it would cut 189 positions across its agencies, due to the Pepsi loss, among others.

WPP denied that 30 percent of its jobs would be cut across the board. Instead, an internal memo shows that there’s an immediate hiring freeze at the network, with job offers being withdrawn. According to the memo:

Preliminary results for September show another month in which even our recently prepared forecasts for revenues have not been achieved … even some of these markets [in Asia] now are feeling a dramatic change in fortunes … We have noted that even in companies where there has been overall reduction in staffing, we have incurred a very significant cost in terms of recruitment agencies and/or freelancers … freelance and temporary staff continue to be a poorly controlled cost in many of our companies …

CFOs have been ordered to crack down on their use.

Magna Entertainment, one of the pioneers of the branded entertainment business, has folded.

Jack Myers predicted three years of adspend declines. Myers believes spend will be down 2.4% this year, down 6.7% next year and down 2.3% in 2010. Other agencies broadly agree with his take, according to Dow Jones:

Publicis Groupe media agency ZenithOptimedia said recently it expects U.S. ad spending down 3.8% in 2008 followed by a 6.2% drop in 2009. WPP’s agency GroupM expects a 0.3% increase in spending this year followed by a 3% decline next year.

Barclays Capital was the most negative, however. Analysts there said they believed spend would shrink 10% in 2009

This year, spend declined between 1 - 4 percent, according to dualling estimates from TNS and Nielsen.
See more at BNET’s ad agency layoff counter, here.

Image by Flickr user Snofla, CC.

Tags: Hiring, Job, Layoff, Advertisement, Agency, WPP, Myers, Recruitment & Selection, Advertising & Promotion, Human Resources, Workforce Management, Marketing, Jim Edwards

Jim Edwards, a former managing editor of Adweek, has covered drug marketing at Brandweek for four years, and is a former Knight-Bagehot fellow at Columbia University's business and journalism schools. Follow him on Twitter or send him an email.

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1

myson1

12/19/08 | Report as spam

RE: Advertising's Black Thursday: Layoffs, Spend Cuts, Hiring Freezes and Client Collapses Bedevil the Biz

Living either too fat or too lean...pretty much the story of the ad business...for some reason I get the sense that sometime in Q1 everyone's going to wake up with a cut "hangover" but for now let the doom and gloomers play their ledger sheet game...
2

salgo

12/21/08 | Report as spam

RE: Advertising's Black Thursday: Layoffs, Spend Cuts, Hiring Freezes and Client Collapses Bedevil the Biz

I detect the distinct odor of sulphur in the air, so Sir Martin must have recently commented about the cost of labor at WPP Group. Oddly enough, I just watched a youtube video in which I could swear I saw rats, bats, snakes, and slimy things streaming out of Sir Martin's mouth and getting an unintentional boost as they fled his wretched body by pivoting from his forked tongue. But back to the issue. Technically, he is probably right that there will not be a 30 percent cut in jobs at WPP Group. However, I would bet the repossessed ranch house that he gets at least a 30% reduction in labor costs, if that's the number he wants. They clearly explain that their subcontractors and temps constitute a healthy portion of the labor costs incurred, so all the agencies have to do is stop using them, or make drastic cutbacks which will accomplish the same thing.

How can they do this, and still serve their clients? It's actually pretty easy, in Asia anyway, if it's a wholly-owned subsidiary of WPP group. I feel qualified to speak about the matter since my wife was a rising star at an Asian office of the WPP network in '97 when the Asian economic crisis had just begun. Revenue started to slip, and clients were cutting costs. The full-time labor force wasn't so large at her office. They had a fairly high rate of attrition among employees anyway, and with no new hires, a virtual moratorium on using any subcontractors or temps, and a significant incresase in the workloads of the full-time employees, earnings increased. What had been 14 or 15 hour workdays soon turned into 18 hour days. After a little over 2 years, the spouse had been promoted to associate director before the age of 35, had been instrumental in gaining new clients, and had instigated the termination of some of the less productive units of labor from the full-time work force. For her effort she was rewarded with the opportunity to work 20 hour workdays whenever possible and to manage up to eighteen different accounts at the same time. Although her pay was ridiculously low on an hourly basis, she used her stunning performance as a means to find a very lucrative position with another foreign firm that was a 'buyer' rather than a 'vendor' of ad and marketing services.

It took a while for her to become human again, but she made the transition successfully after all. Needless to say, WPP Group was sad to see her go, and Sir Martin actually made a personal request for her to stay that was only mildly insulting, but she had regained her senses due to my undisguised threats if she continued working for those savages. So, my guess is WPP will reduce their labor costs by 30% yoy by intensifying the extraction of blood from their full-time workers worldwide, but in particular Asia where some people consider it a privilege to be abused, underpaid, and unappreciated by arrogant and dirty European bosses.
3

doug.eaves

12/21/08 | Report as spam

RE: Advertising's Black Thursday: Layoffs, Spend Cuts, Hiring Freezes and Client Collapses Bedevil the Biz

The images accompanying the articles are certainly a nice touch. I've always been attracted to realism in photographic and cinematic arts, so it would've been a genuine delight to see moist crimson blood stains on the blue carpet inside the white outlines. Plus, think of the patriotic fervor this message could stimulate. Citizens would be eager to die not just for the country, but for their ailing corporations as well.