Midway through 2014, it may be too early yet to say for sure whether Puerto Rico’s advertising industry will grow, stay flat or lose ground this year,
but one thing is sure: even in these difficult economic times for the island, some agencies are growing and clients continue to advertise.
“In moments of trouble, advertising is critical,” said Young & Rubicam General Manager Iván Santos. “Stop investing (in advertising) and it will take three times as long to pick up later.”
Manuel Sajo-Ruiz, President of Sajo, García & Alcázar, still an independent company among the industry’s big players owned by U.S. and international corporations, concurred.
“All clients are active in the face of Puerto Rico’s economic challenges … This is a time for reinvention, not for cutting budgets,” he said in an interview at the agency’s homey Santurce headquarters where walls are inscribed with inspirational quotes.
Lizzette Quiñones, president of the Advertising Agencies Association of Puerto Rico, said ad revenue reached $700 million in 2013, down nearly $200 million from the previous year, but then again, 2012 was an election year when advertising typically spikes.
The association is forecasting ad revenue will remain stable this year, with the industry staying more or less on par with 2013 results, said Quiñones, a vice president at PopuliCom.
Meanwhile, the growth experienced by some ad companies reflects new accounts as in the case of Lopito Ileana & Howie which this year gained three new clients, including Merck, Sharp & Dohme, said General Manager José Luis Álvarez.
LIH also added Cabrera Auto and Rooms-to-Go to its lineup of clients, said Álvarez, who declined to identify the accounts’ former holder.
To be sure, ad agencies are having to make adjustments, snipping away at any fat they can lay their hands on and seeking efficiencies like Y&R did by cutting operational costs, including phone expenditures, by five to eight percent, according to Santos.Lizzette Quiñones, president of the Association of Advertising Agencies of Puerto Rico.
Digital growth prompts hiring
Meanwhile, growth in the digital area is prompting increased hiring. The expanded penetration of mobile phones on the island (there are currently 3 million such devices in use in Puerto Rico) with the consequent need for more digital advertising and the growing role of social media in company operations are dictating that ad agencies pay increased attention to the digital area and they are doing so by hiring and expanding their digital departments as in the case of SGA which added three people and plans to hire three more.
Ditto for LIH, which also recruited three new employees for this area.
“Our concept of digital applies to everything, we don’t see it as something separate,” said Álvarez. “Since all media are digital we must work in an integrated way. Even TV is digital.”
Said Sajo-Ruiz: “We are seeing that we need to provide greater content for (digital) media and in that sense we need more people to help us develop that content.
“We call ourselves brand matchmakers, we are responsible for maintaining a relationship between consumers and brands. For that you need a conversation, a sense of trust, a willingness to listen and take decisions and make changes. That is the trend,” he said.
A great part of that dialogue between brands and consumers now takes place on social media and company web pages, Sajo-Ruiz said. Hence the need for more personnel to help keep that communication going strong.
This year began with one less big name advertiser, namely FCB (Foote, Cone & Belding), which closed up shop in December 2013, a decision that one ad executive attributed to corporate global strategy rather than to the agency’s performance.
“It wasn’t doing that bad,” he said.Manuel Sajo-Ruiz
FCB’s departure benefited Y&R, which added the Coors account to its lineup of clients that includes T-Mobile, MMM, Direct TV, Banco Santander, Bacardí and Nissan, among others.
Whether the exit heralds other closings and consolidations is another unknown this year.
“The market is difficult and competitive but we’re not at the point where agencies will close down,” said Y&R’s Santos.
Álvarez noted that in a recessionary economy it is common for companies to merge or buy out a competitor while Sajo-Ruiz opined “there should be more consolidations because this market has too many agencies, almost 200 of them, and only 25 are members of the Puerto Rico Advertising Agencies Association.
“Most are either a one-man show, a couple show, or a family show,” he said glibly.
As for the industry’s outlook over the next six months, one executive said a lot will depend on the last quarter of 2014 and the Christmas season. According to LIH’s Álvarez, for the past three years this period has taken on extra importance for advertisers in terms of ad revenue.