Monday 22 October 2012

How the Recession Transformed Chicago's Ad Market

While Storied Heritage and Skill Set Remain, the Landscape of Chicago Has Changed

There was Madison Avenue, and then there was West Wacker Drive. For decades, Chicago was the biggest powerhouse in the ad industry, after New York. The city's location -- smack in the middle of the country -- has suggested an understanding that companies there understood what it means to know the typical American consumer.

Former upstart Digitas has grown into a huge presence in Chicago.
The market has boasted some legendary agencies run by legendary people (such as Leo Burnett). But while much of that heritage and skill set remains, the landscape of the Chicago ad market has been transformed, particularly since the recession.

Agencies that were once city stalwarts, such as WPP's JWT office, have shuttered, and shops such as DraftFCB have struggled through the loss of significant accounts. Meanwhile, agencies that were upstarts a decade ago, such as Digitas and McGarryBowen, have grown to be huge presences.

Top holding companies all have a strong presence here. Publicis Groupe's Leo Burnett is believed to be the largest employer, with nearly 1,600 people. Other Publicis agencies include digital agency Digitas and the Starcom MediaVest Group network. WPP's Ogilvy & Mather has grown significantly -- to nearly 600 people -- in recent years, helped by its acquisition of a chunk of SC Johnson's business.

Gertrude was founded by Burnett alum Otis Gibson.
Omnicom's EnergyBBDO also picked up some SC Johnson work, as well as the Quaker portfolio, helping the agency grow to more than 260. Sibling DDB has about 375 employees. Interpublic's agencies include DraftFCB, whose presence has shrunk in recent times, and digital agency R/GA. Havas agencies include Havas Worldwide Chicago, formerly EuroRSCG Chicago, and media agency MPG. Dentsu's presence in Chicago is largely through McGarryBowen and, to a smaller extent, digital shop 360i.

Indie shops are few and far between. The largest consumer-focused independent agency in town is Cramer-Krasselt, with about 270 employees and a client list that includes Corona and Panera Bread.

A few boutiques have cropped up of late, but agency execs seem more prone to hanging their own shingle in San Francisco or New York. Among those in Chicago are Commonground, founded in 2004 by agency veterans Sherman Wright and Ahmad Islam, now with 78 employees; Sponge Chicago, an 11-person shop founded in 2007 by DDB alum Paul Brourman; and Gertrude, founded in 2005 by former Leo Burnett creative Otis Gibson.

"In a way the rise of the small-agency crop here was right at the cusp of the economy shift," noted Sponge CEO-Chief Creative Officer Paul Brourman. "After the economic [downturn], would you start a small agency?"

One challenge will be employing senior data and marketing people in Chicago after the election, since the Obama campaign has been headquartered in the city. There's also the need to ensure that large agencies like DraftFCB rebound, keeping external talent and clients here. The market is also in need of an influx in venture capital, startups and digital companies. Companies such as Google and Groupon and incubators like 1871 provide a solid foundation, but Chicago has a long way to go before it can match San Francisco or New York in terms of venture capital and tech innovation.

Boutique agency Commonground now has 78 staffers.
Sears Holdings is the biggest ad spender in the area, ranked as No. 18 in Ad Age's Leading National Advertisers report with $1.6 billion in U.S. measured media. But Illinois boasts 31 Fortune 500 companies, the vast majority of which are in the Chicago metro area. Most of them are major ad spenders, including Kraft (which recently split into Mondelez and Kraft Foods Group), McDonald's, Boeing, MillerCoors and United Continental.

Most of those marketers turn to Chicago agencies for work. "Agencies here have a great fix on mainstream America, and I think clients are looking to us to help them make that connection," said Tonise Paul, president-CEO at EnergyBBDO.

Chicago is also home to Tribune Co., parent of the city's largest paper, the Chicago Tribune, and the Los Angeles Times. Tribune Co. owns local broadcast TV and radio stations WGN. Tribune Co. and the parent company of the Chicago Sun-Times have both had difficult years.

In the past two years Chicago has seen a slew of senior agency execs from outside the city and even outside the U.S. come to town. Peter McGuinness, who ran Gotham in New York, now runs DDB, Chicago, along with Chief Creative Officer Ewan Paterson, who hails from CHI in London. Susan Credle leads Leo Burnett's creative after a 24-year tenure at BBDO New York. Jason Peterson, also from New York, came to Havas Worldwide as chief creative officer in 2010 after a stint at Translation.

"It's very easy to point out the negatives, but I actually think this is a very vibrant time for Chicago," said Rich Stoddart, president-North America at Leo Burnett. "If you asked me five years ago whether we could get talent outside the market, the answer would have been no. [But now] you're seeing very senior people across the agency landscape choosing to come to this market."

Now that the Groupon bubble has burst, many are looking for Chicago's next tech startup. The next big thing could come from 1871 -- the name is a reference to the year of the Great Chicago Fire -- a startup incubator in the Merchandise Mart that opened this year. Entrepreneurs can rent office space at 1871, but the group also plays host to university-affiliated programs and investors with the goal of connecting ideas with funding.
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