“There is a real crisis as it relates to African American advertising agencies, and while most are loath to talk about it, I believe there are serious battles when pitches come about for the few opportunities that are coming along,” says Greg Head, president of Atlanta-based HEADFIRST Insights & Strategy.
Head sums up the challenges faced by many black-owned advertising agencies. Though billings have increased for the 15 firms on the BE ADVERTISING AGENCIES list — 2.3% overall in 2007 — most black-owned agencies continue to scrape for every contract and pursue less-profitable income streams to keep the ship from sinking in turbulent waters. “You know you’re a true leader when you can steer that ship through that cyclone,” asserts Carol H. Williams, president, chief creative officer, and CEO of Carol H. Williams Advertising (No. 2 on the BE ADVERTISING AGENCIES list with $345 million in billings).
For the past few years, CEOs of the largest black-owned advertising agencies have held a firm grip on the helm of their creative shops. In 2007, many CEOs held on tight despite a tough climate marked by increased competition from larger general market firms; severe cuts in ad spending by major corporations; a continual shift of dollars toward the growing Hispanic and Asian markets; and an economy teetering on the brink of recession that cut into many black agencies’ revenues, cash flow, and profits.
When General Motors announced its plan to rework its 2008 advertising roster, it temporarily reassigned four of its accounts once managed by Carol H. Willliams Advertising to other agencies, including Sanders Wingo Advertising Inc. (No. 5 on the BE ADVERTISING AGENCIES list with $89.6 million in billings). GM retained Carol H. Williams Advertising to handle African American, urban, and youth advertising for its luxury brands — Cadillac, Hummer, and Saab — as well as Saturn and the GM corporate brand.
According to the Nielsen Co., despite a 23.2% increase in Internet advertising and an 8.4% boost in national magazine ad spending, total expenditures in the first half of 2007 decreased by 0.5%. Media spending took a hit as well, with advertising in national newspapers declining 5.9%, and network radio sliding by 8.5%. Ad spending targeting African Americans reached $2.3 billion last year, but still recorded a 4.4% decrease from media spending used to reach black consumers in 2006.
With the advertising industry more competitive than ever, African American CEOs need to not only change the way they do business to survive the ad game, they must also rely on solid leadership to win. This year BLACK ENTERPRISE looks at what a few of the agency owners on our list are doing to identify new opportunities, motivate their staffs, and keep steering business in an industry that seems resistant to change.
EVOLUTION IN A NEW ERA
In the midst of these grim business conditions, some black-owned agencies managed to grow. In addition to taking on the Chevrolet account, Sanders Wingo also grew through its existing clients, such as AT&T, State Farm Insurance, the U.S. Postal Service, and others, to boost its bottom line by 23%. “The business that we won with State Farm and Chevrolet came through consultants that represented these brands and that were looking for minority advertising agencies,” says Robert V. Wingo, president and CEO. “We weren’t actively pursuing those businesses, but we were delighted when the opportunities presented themselves.”
In dealing with the search consultants from State Farm and Chevrolet, Wingo provided them with information about his agency’s capabilities. “You have to let potential clients know that you’re in the market and that you have the assets and disciplines in place to do the things that are needed,” he maintains. “These are brands that any agency worth its salt would love to have as part of its roster.”
Creative powerhouse GlobalHue (No. 1 on the BE ADVERTISING AGENCIES list with $720 million in billings) added Wal-Mart, Subway, Chrysler Financial, and Abbott Laboratories to its client portfolio. The top agency knocked out five multicultural and general market firms to consolidate the Verizon business. The firm added $160 million in new and existing accounts. To help handle the growth, Chairman and CEO Donald A, Coleman hired more than 100 new employees and expanded his New York office space from 12,000 to 40,000 square feet.
Even with GlobalHue’s recent resignation of the American Airlines business — an account the agency had handled successfully for seven years — Coleman remains optimistic. “We did well because we have a different business model than just a strictly African American consumer market model. So, I think the leadership of African American agencies has to be looked at to determine why they did good or bad,” he says. “In most cases they are running under the business model that [black agencies] established 30 years ago. You can’t use [that] business model and think it is going to be effective today. You have to evolve with the times.”
IDENTIFYING THE NEXT BIG WIN
At Carol H. Williams Advertising, securing the next big win is on the minds of staff members even when they’re not working. Although Williams’ agency has been doing creative for The Walt Disney Co. since 2005, it was personal trips to Disney World that sparked the idea for the television commercial Signs. That spot is now ranked by IAG Research and listed in Advertising Age as the No. 1 commercial among general market viewers for 2007: It shows the rapture of an African American boy who races home after a trip to a Disney theme park and uses sign language to share the experience with his hearing-impaired grandfather.
“We developed six or seven commercials which we then exposed to Disney, and that’s the one they bought,” Williams says. “And it was great because it really lets you know that African American agency owners can dive into a commercial through African American eyes and still impact the mass market, which this commercial did.”
In addition to expanding work with Disney, Carol H. Williams Advertising also landed Coca-Cola Co. and Full Throttle, and is currently negotiating a contract with GlaxoSmithKline. She identified these opportunities with her new business strategic team. Every day this 10-member group is charged with conducting market analysis and pinpointing growth segments. Leading the charge, Williams then makes her pitch and waits for the score. “It’s like identifying that next hit artist,” Williams says. “Somebody knows how to do it or else it wouldn’t happen. And so we’re that team. We’re going out there and we’re identifying the hits before anybody knows about them.”
MOVING FULL SPEED AHEAD
For African American agency leaders who want to change their standing in the industry, it can’t be business as usual. To keep driving their enterprises, they must be forward thinking in meeting the expectations of an ever-changing marketplace, and they must devise innovative ways to keep pace.
Coleman suggests that black agencies consider acquisition and consolidation to keep their companies moving full speed ahead. He also believes that agency heads should prepare for the next reign of command. For the past five years, Coleman has followed his own advice, grooming his succession team and developing senior management to take over once he is ready to step down.
In valuing the black segment, Head says agency owners must consider the mind-set of the “new-millennium marketing manager,” and speak with a voice they can understand. “These managers see the world differently than,
say, marketing managers of a generation ago. They aren’t born of the civil rights [era], so they don’t get that the African American consumer is different,” Head says. “We have to be smart about how we tap into their psyche and not tire of telling ourstory over and over. Now more than ever we have to remind people that we aren’t dark-skinned white people, and that our differences are subtle, so if you don’t have experts speaking to this African American consumer, you’re not going to be successful.”
Advertising Agency Eligiblity
An advertising agency must be at least 51% black-owned and have been fully operational for the previous calendar year. To qualify as a full-service advertising agency, the company must provide creative services as well as make media placements: purchasing time and/or space for a client’s advertising. Companies that only provide consulting services, create or produce advertising, or do media placements do not qualify as full-service agencies. (We canvassed the Standard Directory of Advertising Agencies, combed industry publications, and made inquiries in the field to identify full-service agencies.)
An agency’s financial status is measured in terms of billings — monies allocated by an advertiser to its agency to buy time on television and/or radio or space in publications. These media outlets then pay a commission to the agency in the form of a discount, typically between 15% and 20%, which the agency counts as revenue. Other sources of revenue include production fees that the agency charges to its clients and fees for adjunct services such as public relations, consulting, and promotional work. Our ranking of the 15 top agencies is based on a combined total of actualized billings, in addition to capitalized billings (commissions that haven’t been paid but the media buys were completed), and other agency fees.
Advertising Summary
| Â | 2007 | 2006 | % Change |
| Number of Employees | 1,145 | 1,076 | 6.41 |
| Billings* | $2,156.853 | $2,109.134 | 2.26 |