BLS.GOV : Unemployment is 17%
October 21, 2009
The BLS.GOV site is reporting that the Unemployment rate has reached 17% in the US via the U-6 Standard. This standard is what was roughly used during the 1930′s, squarely placing us at 1931 in terms of the unemployment rate. By 1934 that rate jumped to a full 25%, meaning that 1 out of every 4 people was without a job, so at current job loss rates, within 900 days we will be at that 25% unemployment level. How do you market and advertise in such a recessionary environment?
We argued earlier this year that the U-6 needs to be the measure rather than the U-3, We were criticized as being off the wall, until a Federal Reserve head stated the same thing, hence validating our position that we have argued for months for.
Yes we were even called Peter Schiff (like it was an insult)
If you want to know who Peter is, here is a video dated 2006…. notice he was right then… in the middle of the housing boom and made Arthur Laffer look like an idiot within 18 months of it’s filming.
The point is that 17% is ugly, really ugly… and the chances are it will go to 20% or higher unless something stops it…. last time it was WWII … who knows what it will be this time….
Checklist to see if your advertising agency is in trouble
October 20, 2009
We figured we would spill it out for people, because based on recent comments we have a sinking feeling that many creative types need things spelled out for them. So we have created a simple checklist to see if your ad agency is in trouble.
1 - Is your ad agency part of a holding company?
Why is this question relevant? Well most holding company owned ad agencies have some serious accounting problems, mainly the way YOU are accounted for. It’s not your talent, it’s your personal ROI for the agency as a whole. See the guy that fires you won’t actually be located in your city, or in many cases even your country. He’s looking at a spreadsheet and is working hard to see who he can fire that won’t cost him money.
2 - Do you have many Universities or Hospitals as clients?
Huh? WTF kind of question is that? Accounts like that don’t pay well, there’s no massive growth there, like most Universities and Hospitals have been there for 100 years.. if they haven’t grown by now they how can they grow in the future? I mean literally sitting there for a century is not growth. Those places have seen the great depression, World War I, World War II… uhh wait…
Like if I have a bunch of stable clients on the roster that means I have a better chance of keeping my job? uhh… I want those clients in this economy. May take some time for many people to realize it, but growth isn’t the same as stability. I don’t care if we hit the mother of all great depressions, The hospitals will most likely still be there. Unlike Government Motors or Lehman Brothers. Now this shouldn’t be the entire mix of clients that you have, but a stabilizing force like that with your client roster will help get though ugly times like now.
3 - The ad agency I work for, what percentage of digital does the total revenue come from, and how does my agency define digital?
This is a hot topic, sometimes agencies push out “30% of our revenue is from digital” but ask them to define it and then ugly starts to show it’s face. If what they are saying is that 30% of their clients spend is for Google Adwords that isn’t digital, that’s a media purchase. Because there is a digital divide in terms of what is called digital because until someone can answer that question, you can’t provide an answer.
4 - Recent layoffs have crippled our agency, or did they help it make it though this mess?
This is a painful discussion, recently in an unrelated industry (an automaker) they needed parts on the assembly line. Until about 6 months ago there was an individual in charge of the computer system to specially order those parts. This individual (let’s call him John Doe) that earned roughly $60,000 a year was laid off with the assumption that the software was running the show and no more human intervention was needed. Well about a week ago they had to break an order into 2 parts for the same assembly run. Since the software wasn’t able to audit it, the order was hosed. Normally John would intervene and fix the problem and this problem would be fixed. But since John wasn’t there, they had to stop the assembly line until the issue was resolved, costing the company roughly 3 million.
Sounds like that 60k saved cost them $2,940,000 . So the question is, did your agency fire a John? The lack of foresight in that instance shows a lack of understanding of the process overall. Hence If your firm fired too many individuals like John, you’re looking at not a cost savings but rather a disaster that will accelerate though this recession as the agency will continue to lose needed revenue to fix problems rather than with a master plan to grow the company.
5 - Has your agency had many recent wins? Or are you defending and holding your existing client base?
This is actually highly important, if your ad agency is holding it’s own against others that is good, but it’s not the same as landing new business. Talking to the same guy in and out every day at the client puts things into a rut, it means that both you and your client are happy about the relationship. People tend to trust people that they have worked with for years. That being stated, landing new business is harder, and it must mean that your services that your firm is rendering must be so superior as the be able to overthrow the existing relationship. New business is superior to existing, it proves your firm is still relevant to the changing market place.
Thoughts?
Man sends out Farewell E-mail from Starcom
October 17, 2009
Our sources have stated that this e-mail was sent out as a final farewell after resigning from “Advertising Agency” Starcom. Roll on the floor funny (though the circumstances are not funny) was the approach this e-mail took. Congrats on making the best of a crumby situation.
Enjoy the mess.
Edit : we were told it was Leo Burnett initially, but after about 20 minutes on The Gimp, we were able to make out that it was in fact Starcom
October Effect — this is going to be ugly
October 1, 2009
On September 4th, we noted that the markets will crash first thing in October. With our post “What is an ad agency to do?”
Well low and behold, On the very first day of October, the markets crashed, The Dow was down 203.00 (2.09%) and all major indexes took a serious dump between 2-3% of total capitalization within a matter of 8 hours.
We hate to say “we told you so” but the fact is that we told you so. Documented is a trend called the October Effect. What that simply means is that the economy.. and for the most part the economy as a whole tends to crash in October.
Sometimes these crashes are utterly nasty, such as October 1929 when the market completely collapsed, allowing the full effect of the Great Depression to come rolling in. It’s not like this isn’t a common occurrence, In October 1987 the market completely folded and in more recent memory, last year in October of 2008, when the full effect of the Great Recession came to bear…
Today the market started it’s ugliness again, if I were to bet, I would say that the market will continue it’s historic trend.. and that trend is a triple black diamond ski slope for the rest of the month.
Put your money in your mattress.
Ad Agency M&C Saatchi profits down 28.4%
September 24, 2009
M&C Saatchi reports 7.5% revenue drop in first half of 2009 — it’s ugly — really ugly. The UK Guardian reported the story roughly 20 minutes ago. Evidently the recession is putting major pressure on their clients, which in turn is slashing and burning advertising dollars in huge ways.
“Revenues in the six months to 30 June fell to £49.8m, down 7.5% on a like-for-like basis, eliminating the positive impact of exchange rate movements on overseas revenue. Operating profits were down by 28.4% to £5.5m.”
Profits down 28.4% …. that is normally grounds for layoffs…. though we hope not. Someone tell me when this depression is going to end?
Minyanville : Advertising Agencies will “never come back”
September 14, 2009
“The good old days before the Internet atomized the advertising market, slashed billings, and, in the view of some, gutted creativity. In the Golden Age, advertising was simple: Ballerinas danced in kitchens to sell appliances, cars were built in America, and cigarettes were pitched by babies” is how the article starts off at Minyanville, a leading news source for financial news.
In essence what they are saying is that Advertising isn’t what it used to be. Not even close. Traditional is out, digital, SEO , SMO , blogging is in and the billables for that type of advertising are a fraction of what these holding companies are accustomed to and what their payrolls are geared for.
“The Internet allows ads to be targeted to specific audiences and response can be measured by site views and click-through rates. Micro ads typically come with micro budgets, ending the scale and sweep of ads from the Golden Age.”
Hence our argument from nearly half a decade ago.
This doesn’t matter for now as we can still make these expensive print media ads and still design sites in unspiderable ways for now. We figure we have at least 5 years left to rake in the cash.
Looks like we are right on schedule.
Ad agency to get shafted by Anheuser-Busch
September 11, 2009
Several local firms relied for years on business flowing freely out of One Busch Place. Then in March, Anheuser-Busch altered its approach. It dropped retainers, whittled down its roster of agencies and crimped all suppliers’ cash flow by giving itself 120 days instead of its traditional 30 days to pay bills. The changes jolted local ad shops and left some scrambling to survive.
The Local Business Journal is reporting mass layoffs, like to the point where 50% of the local advertising agencies have laid off staff.
It’s ugly people, really ugly. The 120 day payout is pure madness, and it’s when big companies can force their will on smaller firms. Like the Ad Agencies in question can’t put a 120 day payout on their vendors.
This is becoming a serious problem, really serious problem.
Let’s take a hard look at the 120 day payout. If a small ad agency has a $30,000 a month payroll (typical for a smaller agency of about 7-8 people). They have to float, borrow, whatever payroll for 4 months or better said $120,000 just for payroll alone until they get paid.
Nevermind the $3,000 a month in rent (times 4 that’s $12,000) and the $3,000 a month in health insurance bills (another $12,000) and the other costs (phones, internet bills, etc) that comes out to most likely another $3,000 a month when added up (yet another $12,000 bill).
All in all the advertising agency is now forced to float about $156,000 instead of $39,000. This is devastating for smaller firms, especially in this economic environment where small businesses can’t get loans.
The temptation to layoff as many workers as possible is high in order to survive payment terms such as these.
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Omnicom : We save $116,000 for each person we fire
September 8, 2009
Jim Edwards at B|Net outlined a report that showed that Omnicom saves $116,000 a year for each person the ad agency fires.
And even after firing thousands of people, the revenue is falling faster than staff and operating costs. Meaning that the chances are layoffs will continue and even expand as the business continues to collapse in the current environment.
This is exactly how management views their creative department and the employees of the advertising agency. You cost them $116,000 a year, are you making more than $116,000 a year for them? Could they get someone in the door at $50,000 and do your job? Could they get someone in the door at $100,000 and do the job? Could they fire you and just offload parts of your job to a few people and just save the $116,000?
That is what it’s coming down to, and if you think otherwise you are seriously mistaken. You cost them money, and they are looking to cut costs meaning you are directly in the line of fire.
Amazing stuff, it’s never been this bad, and it’s expected to get somewhat worse before it becomes better. The current projections have unemployment reaching 10% to 12% according to the U-3 and nearly 25% according to the U-6. That’s the great depression level people. Even now a debate rages over the standard the government uses to measure unemployment.
Well at least most of us don’t live in Detroit, where the unemployment rate is now exceeding 30%
So what’s an Ad Agency to do in October?
September 4, 2009
Well there you have it people, summer is over. Leaves are starting to fall in the way northern areas of the United States and what’s left of the retailers are throwing up “70% off” ads in the paper for summer clothing.
But what’s terrifying everyone is next month, October. Historically most massive market crashes show up in October.
Last year in October 2008, the market cut it’s value in half in October starting the full effect of the Great Recession. In October 28, 1929 the market crashed (then crashed the next day again) leading into the Great Depression. In October 19, 1987 (Black Monday) the Market took a massive crash and it goes back even further, in October of 1907 (over 100 years ago) the market completely melted down and mass panic ensued. The below photograph was taken in October of 1907.
As you can tell, there is a serious trend in October. There is even a name for it, it’s called the October Effect.
So what’s the point of this? Well take a look at your advertising agency client base, because you will need to do a study to see if your clients could survive another meltdown like what happened in October of 2008.
If your gut feeling is that some of your agency clients might not be able to handle it, then the chances are your ad agency will be forced into another round of layoffs. In other words, the next 8 weeks might make or break your job.
Detroit Unemployment reaches 30%
August 27, 2009
The Detroit Unemployment rate has now exceeded the Great Depression. It is currently at 30%… and that is measuring it by the U-3 (which undercounts unemployment dramatically).
People were wondering if the Advertising Agencies of Detroit will ever recover? Well this settles it, that city is never coming back in any reasonable time frame.
With an unemployment rate exceeding that of the great depression of 25%, this tells you that the city is in deep trouble barring any miracle.
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