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Shifting paradigms

Is the ad agency going the way of the blacksmith shop?

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Ever had your paradigm shifted? It's a painful experience. Just ask the 40 employees of the Salt Lake office of Euro RSCG Tatham Partners.

One hundred years ago, it was buggy-whip manufacturers. Now it's people in the printing industry, ad agency and TV production businesses, professionals who just a couple of decades ago were watching the TV show "thirtysomething" and were giddy about the future. It came home to roost late last year when longtime darling of the high-tech ad business Euro RSCG Tatham Partners announced it was closing its Salt Lake office.

To locals, the agency was originally known as Dahlin Smith White, the Utah firm founded in 1986 whose claim to fame was the Intel TV spot with clean-room technicians boogying to "Play That Funky Music." The agency's client list was a who's who of Utah high-tech companies: Novell, WordPerfect, Iomega.

But the dot-com crash wasn't the beginning of the agency's changing fortunes. And it's not the only agency in town to see its name on the door replaced by a for-lease sign.

The good old days

No, the advertising paradigm began shifting a long time ago. Some saw it coming. Others were taken by surprise. In the past couple of decades, longtime names in the local advertising business took down their shingles, closed shop or sold out.

Lon Richardson Jr. watched it all happen. When he finished his tour of duty as an Air Force pilot in 1958, he joined Gillham Advertising, where his father, Lon Sr., was a principal and later took over the reins. Founded in 1911, Gillham was Utah's first advertising agency and for more than 75 years serviced the needs of some of the state's biggest advertisers, like First Security Bank, Browning Arms and Utah Power and Light.

In the mid-1970s — like today — the agency business in Salt Lake City was competitive. Evans Advertising, Harris & Love, Gardiner Advertising, Ross Jurney and Gillham all went head-to-head for local business. According to Richardson, clients and agencies then acted as partners.

"We went to board meetings, were involved in many of their major decisions and provided them with our counsel and insight. But, as our clients grew and became more departmentalized, we were dealing with marketing directors instead of founders and presidents. The relationships became more distant."

In the early '80s, the desktop computer's debut had a big impact on how agencies did business, first in accounting and media. Then, in the mid-'80s, the advent of Macintosh desktop publishing changed how they handled print design and production in house. All aspects of the communications industry had their technological paradigm shifted as well — radio, television, newspapers and the printing business.

"What used to take a room-full of equipment can now be done on a laptop computer," said Jim Yorgason, vice president and general manager of KSL-TV.

Yorgason said that technology can be a trap door — a temptation to overspend and get saddled with too much overhead.

"The caveat is not to get seduced by all the cutting-edge technology out there because it all changes so rapidly," he said.

In recent years, agencies with a lot of fixed overhead saw smaller, lighter firms acquire technology and provide the same services for less money.

"When we started our agency in 1999, we determined that low overhead would be a competitive advantage," said Steve Hawkins, a partner in Salt Lake-based Cohezion Communications. "We use e-mail, PDFs and the telephone to present our ideas to our clients. This helps us stay mean and lean."

Effects of 9/11

As challenging as all the client consolidations and shifts in technology have been, nothing had more of a depressing effect on the advertising industry nationwide than the events of Sept. 11, 2001.

The terror attacks didn't start the decline in ad spending. However, they did mark its low point. And business publications like Advertising Age reported that the advertising recession of 2000-01 was the biggest drop in ad spending that many people had seen in 50 years.

Kipp Chang, vice president for public affairs for the American Association of Advertising Agencies (4As), did soften that description a bit in a telephone interview: "The two-year recession in ad spending needs to be put into perspective," Chang said. "There was an ad bubble that occurred, thanks to the dot-com boom. When it went bust, ad revenues dropped as well. Second, while the bounce-back in 2003 wasn't what the industry had hoped for, there is cautious optimism about 2004.

"We have seen a tremendous amount of consolidation happening in the industry in the recent past. And it has resulted in many smaller agencies being pushed aside. But remember, the business, by nature, is cyclical. When times are tough, ad budgets are the first thing to go. When times get better, they're the last to come back."

Learning to adapt

So the good old days are gone, but will they be replaced by the "good new days"?

At DSW, David Boede cut his teeth on technology and handled the advertising for a local financial institution. He tried to persuade his bosses to focus more on traditional business. Then they landed the Intel business, and he was assigned as the account supervisor.

"We started with a $5 million budget, and before we were finished, it had grown to a $200 million piece of business," Boede said. "Then one day, Intel's advertising manager confided in me. 'We're an international corporation, Dave,' he said. 'And sometime soon, we will need an international agency.'

"I took that sobering news to the partners, and within a year, we had become part of the Euro RSCG Group."

Boede learned a lot from that experience — and from his current challenge. Now he runs Boede & Partners, a Utah-based $70 million-plus agency with clients all over the country.

"Ad agencies have to evolve, build on solid principles, regenerate when required and adapt to changing circumstances," he said. "If you don't adapt and evolve, you'll stagnate and fall by the wayside."

The circle of life

Boede characterized the rise and fall and rise again of new agencies built by former employees of closed agencies as the "circle of life." His former co-worker and one-time DSW staffer, Coleman Barney, used the same language.

Barney left DSW in the late '80s to work at Microsoft, then spent a stint at Novell in Provo before getting into the interactive advertising agency business.

Barney is a co-founder of Utah-based SBI Group. Five years ago, it was an obscure regional services firm that helped companies build and integrate computer applications. Today SBI is one of the top five interactive agencies in the United States, with 14 offices nationwide, an affiliate network in Europe and Asia, and relationships with 25 of the Fortune 100 companies.

In carving a unique niche, SBI is placing another bet — that it can deliver the best of two worlds, creative and technology. "Clients are demanding innovation again," says Barney.

A principal in Salt Lake-based agency Richter7, David Newbold views the focus on technology differently. He sees lessons in what happened to DSW and says it shows the dangers of being too closely focused on a particular niche.

"Any ad agency that has learned from the DSW lesson will ensure that its client base is fairly broad and diversified," he said. "Those agencies that concentrated on high-tech clients and are still around are still struggling."

So how does one of the co-founders of DSW view his run and his agency's legacy?

"We were (able) to see the high-tech marketplace for what it was," Jon White said. "Most ad agencies were not paying attention to technology companies. We were young and saw an emerging market and tried to make ourselves expert in it. We tried to ride the technology wave. But we did it by hiring good people who understood it and would work hard at it."

Then the dot-com crash came and brought with it a new management structure with shots being called from Chicago.

"I wouldn't change any of the decisions we made," White said. "I have no regrets. We had an amazing run. We had experiences none of us ever thought we'd have. We got to work on a stage a lot bigger than I ever dreamed. Career-wise it was energizing, creative, fun and enriching. It also gave us a good financial exit that is hard to accomplish running an ad agency.

"I look back on the legacy that we built, and I'm proud of what we did. We wrote a unique chapter in Salt Lake advertising history."

Greg Jarrard and Ted Phillips were partners in the 1980s ad agency of Hurst Jarrard Phillips. Both have more than 30 years of experience working in and running their own advertising firms.