IT & Telcos
Ideas are the currency of the advertising world. So it should come as no surprise that good ideas are trading at a premium in these dark times.
On one side, shrinking advertising budgets as businesses rein in spending. On the other, creative companies are winning the battle for increased market share.
"At the end of the day, advertising sells and during a downturn people want to sell their product like never before."
There are few individuals in New Zealand better placed to offer up an industry snapshot than TBWA\Whybin chief executive David Walden.
From office boy to agency boss, and now industry body president, the self-confessed advertising junkie has seen it all during a career spanning nearly 40 years and countless countries.
Advertising is a great barometer for the economy, Walden says. "When sales are down it's reflected in budgets because most budgets are built around sales."
Of course, the same goes for advertising, and there lies the conundrum. People make up as much as 75 per cent of total agency costs. Strip out the manpower and you reduce costs. Strip out the manpower and you reduce creativity.
The fact that agencies are facing challenging times is certainly not lost on Walden; trimmed client budgets and deferred decision-making are hurting all and sundry.
Donning his Communications Agencies Association presidential hat, he says the extent to which individual agencies are being hit is dependent on their level of exposure to underperforming industry sectors.
"You budget on year-on-year growth in our industry, so even if you're standing still you're really going backwards," he said.
"For businesses in the automotive, finance, recruitment and property industries it's pretty tough going and conditions can probably be best described as a 'perfect storm'. For others, it's more a case of holding on tight until conditions improve." The industry has held up pretty well, he says.
New Zealand agencies employ 1600 staff, while another 2500 are in advertising-related service roles. Although some have lost their jobs, there has yet to be a single agency closure.
Advertising Standards Authority figures showed mainstream media advertising topped $2.3 billion in 2008. Although down slightly on 2007, the total haul has jumped nearly $1b since the start of the decade.
While the advertising market is softening - down 10 per cent across the board - Walden says this is in line with the economic environment.
Perhaps more significantly, the recession is driving a shift - albeit off a small base - towards increasing use of alternative advertising platforms. Most notably this has come in the area of digital, which many in the industry put down to the fact it's cheaper, more interactive and reaches a wider audience.
Website and integrated campaigns are on the rise at the expense of more traditional and expensive formats like television and newspapers.
Television continues to play an important role, especially in New Zealand where free-to-air is still such a potent force. A spot during the 6pm news, for example, is still an effective way of reaching three-quarters of the population in one hit, says Walden.
But whereas television drove advertising in the past, today television's role is more about setting an agenda, which is then complemented by other means.
Another victim to the growth of online is print - a trend exacerbated by the recession. In 2001, newspapers boasted 41 per cent advertising market share. By the end of 2008 this had plummeted to 32 per cent, with online coming from nowhere to snatch an 8.3 per cent share.
Advertising revenues too have tumbled. Collectively, newspapers netted $760m last year, nearly $70m down on 2007. Online revenues, meanwhile, were $193m, up $60m.
But while newspapers are struggling, Walden says they will always have a role in New Zealand.
"At the end of the day, newspapers deliver something unique." Newspapers had also created a silver lining for themselves, he says, through their active online presence.
It's not just clients that are being forced to change their mindset as the digital revolution gains momentum, but the agencies too. And because digital advertising is cheaper, agencies are being forced to focus on the value they bring to a client.
Agencies have direct marketing divisions, PR divisions, digital divisions. Once the "court jesters of commerce" advertising agencies are now "the catalyst to create increased sales". It's the creative businesses that are the most successful and the ones that will survive and flourish in the current environment, Walden says. Those that continue to advertise, and across new mediums, will be successful in their push for greater market share.
"Those who haul in the advertising budget will struggle. It's as simple as that. Turn off the tap on advertising and, in many respects, you're doomed."
Walden doesn't do destiny, it doesn't fit his image. He prefers instead to highlight his persistence as the young son of a Taranaki baker that set him on his road to advertising prominence.
"I tried university for a millisecond but it was boring. I had a friend working in advertising who looked like he was having more fun than me so I thought I'd give it a go." The persistent door-knocking paid off with an "office gopher" role at Auckland agency Dormer Beck, where the comings and goings of high-profile clients like Kellogg's and Pan American airlines soon had Walden hooked.
Stints overseas followed, most notably eight years at Melbourne outfit The Campaign Palace, viewed by many at the time as the southern hemisphere's most creative agency. And it was after one typically "liquid" lunch that Walden acquired the nickname "Devo", after the popular kitsch-dressing rock band of the 1970s and 80s.
Donning a terracotta plant pot as head gear he burst into the agency's accounts department to "whip them into shape". The moment struck a chord with colleagues who labelled him "Devo" in recognition of the band's song Whip It.
Later, he returned home to take up the reins at emerging advertising powerhouse Saatchi & Saatchi in Auckland - "a great trip until the planets collided and it was time to try other things". Always aspiring to run his own agency, the 50-something was greeted with a "no-brainer" when approached by expanding international agency TBWA\Whybin.
"The deal was, they put up the cash and I put up myself and a business plan. If it was a success after three years they would withdraw their 51 per cent and leave 49 per cent. If it failed so be it, no money, no agency, no hard feelings. We achieved the three-year plan in two." Since 1997 the agency has grown to attract a star-studded client list which includes among its brands: Apple, Adidas, ASB bank, Mercury Energy, SkyCity, PlayStation and Westfield malls.
Under his stewardship the agency has pumped out a vast mix of successful advertising campaigns such as ASB's "Goldstein" - which after nine years is one of the longest- running uninterrupted campaigns in New Zealand.
More recently, the Auckland agency added value to the adidas brand through a series of All Blacks campaigns including "This is not a jersey", which invited fans to have their name etched on to a thread and stitched into the silver fern logo.
Indeed, TBWA\Whybin has, for the fourth time in five years, won golden gongs at the Cannes Lions International Advertising Festival - the industry's Oscars - for adidas's sponsorship work with the All Blacks.
"It's the variety that keeps you going. One day it's tyres; the next it's banking. Why would anyone want to be an accountant or lawyer? Mind you, in the old days it used to pay pretty well too." With so much brand parity around today it would be easy to grow tired of it, but not for Walden, the creative challenge and "clothing of a brand" is what gets him out of bed every morning.
"You take the badge off a Honda it looks like a Toyota. Take it off the Toyota it looks like a Mazda. Presenting something in a completely different light, now that's the trick.
"The greatest compliment you can give anyone in our profession is 'shit, I wish I'd thought of that'.
* Lives in Herne Bay, Auckland with his wife Annie
* New Zealand chief executive for TBWA\Whybin in Auckland
* President of industry body Communications Agencies Association (CAANZ) THE AD AGENCY LOWDOWN:
* CAANZ represents 85 ad industry and related agencies which account for 90 per cent of all agency billings with combined turnover of $1 billion
* Around 1600 people are employed in New Zealand ad agencies and 2500 in advertising-related services
* Advertising activity contributes to the employment of approximately 10,000 people in the publishing, radio and television industries
* Mainstream media advertising for 2008 totalled $2.3 billion
* CAANZ membership up 14 per cent since March 08 and no agency closures.