Adland health check: Agencies grow despite silent redundancies and jittery clients

Ashley Regan
By Ashley Regan | 25 October 2023
Credit: Hello I'm Nik via Unsplash

Adland is doing "surprisingly well" in Australia despite some restructuring and silent redundancies, according to agencies CEOs AdNews spoke to.

However, the market is short with clients more budget conservative, in the face of economic uncertainty, and expecting the same amount of service from their agencies for less.

Brands are leaning to cheaper, non-traditional advertising - with digital seeming to be the only channel increasing - and 2023’s pitch palooza continues with clients shopping around to find the better service or deal.

Peter Horgan, Omnicom Media Group ANZ CEO, told AdNews the industry is holding up “surprisingly well”.

Horgan, despite a slower growth year, doesn’t have a hiring freeze and is still signing off recruitment at “high frequency”. 

Although recruitment is mainly to replace exiting staff and OMG is encouraging staff to reduce leave balances.

Mark Coad, chief executive officer at IPG Mediabrands, told AdNews he is actively hiring at the moment and has mandated no in-office days across the agencies.

Initiative restructured its Perth office two weeks ago, with the exiting of managing director David Burger and client services director Steve Hare. Paige English was then promoted to the newly created role of head of Perth.

Michael Rebelo, CEO of Publicis Groupe ANZ, told AdNews given the broad-church of capabilities and businesses across the groupe, there has been varied levels of growth with some seeing increases close to double digits.

“The country model that Publicis Groupe moved to in 2019 works under a single P&L, which gives our business a lot of resilience when it comes to combating market forces. It proved invaluable during Covid and has once again shown its strength in 2023,” Rebelo said.

“It allows us to align our businesses to pull levers at a Groupe level when necessary, giving us economies of scale when it comes to managing economic headwinds. 

“This could be around the use of annual leave, managing travel costs or sharing talent across our businesses, versus going outside.”

Chris Howatson, CEO of Howatson+Co, told AdNews growth is harder to find despite his agency doubling its headcount in the past 12 months with a staff churn rate of 12%.

“The last 12 months was a period of massive growth for the agency where we doubled - 67 new people – which worked about to be a new person about every 4 days,” Howatson says.

“We’ll never grow at that pace again, but we’re still moving forward – last quarter we were up 25% year on year.  

“Growth is definitely harder to find at present. Clients are being appropriately cautious but a scientific approach to investment and return means there’s still plenty to do.”

As a result Howatson+Co is applying caution to pitching. 

“There’s a lot of pitches currently in market that require a very high effort for relatively modest scope, and the number of participants in each pitch is getting larger,” Howatson says.

“Consequently, the economics of salary cost and emotional cost simply don’t work. So, we’re being very choiceful on what pitches we participate in to protect our people and therefore our clients.”

Andrew Drougas, Renee Hyde, Chris Howatson

Howatson+Co leadership team - Andrew Drougas, Renee Hyde and Chris Howatson.

These jittery clients have caused most holding groups to report dragging revenues

Globally, WPP cut its full year revenue guidanceDentsu reported a 4.7% drop in organic revenue and IPG pulled back its outlook after reporting a 1.7% drop in organic revenue.

As growth decreases so does headcount, but this is being done silently at the moment. "My clients don't tell me when they're firing people anymore," an industry consultant told AdNews.

Dentsu has cut 40 jobs locally, AdNews understands, which dentsu ANZ CEO Patricio de Matteis told AdNews was the result of the macroeconomic situation.

“Like many other businesses, we’re not immune to the macro-economic situation that we all currently live in and we do need to address this so we're coming out the other side stronger,” de Matteis said.

“This has unfortunately meant that we've seen some people impacts, which any leader will know is never an easy decision to make.”

However this local holdco’s piece of restructuring was a “long time coming,” according to insiders and on the upside Dentsu has made some high level appointments.

Of course, the ad market is cyclical, and history shows that what goes down will return stronger. 

But don’t hold your breath. Media owners predict the earliest signs of recovery won’t happen until the second half of calendar 2024.

Claire Fenner (pictured below with Rory Heffernan), national chief executive officer at Atomic 212°, told AdNews the agency is tracking at the same rate of growth as last year, with its lowest turnover rate, but is holding back on recruitment at the moment as they await outcomes on a couple of pitches. 

“Coming off the back of so many strong years of growth and the talent crisis that everyone was subject to as a side effect of COVID, it's the first time I can remember in a number of years that we've been in a position of having so few open roles,” Fenner said.

“It's not due to a lack of growth, but rather our very strong retention rate at the moment. Having said that, we are always open to talking to people as we know situations change.”

Rory Heffernan and Claire Fenner

Aden Hepburn, CEO Akcelo, said the agency is experiencing steady growth, both organically and from a new business perspective, across most of its capabilities. 

“There were absolutely some slow-moments in 2023, but that’s definitely passed from what we can see, and we’re seeing a return to spend,” Hepburn said.

“We’re fortunate to have excellent staff retention, but we have noticed that hiring challenges have come in waves against different capabilities at different times of the year. It was easier early on, got a little tough mid-year and has become more fluid again now in the back quarter.”

Clint Cooper, GrowthOps CEO, said the group has proactively undertaken some strategic restructuring this year to best meet current and future clients’ needs.

“The restructuring was precipitated by some client wins, and an increasing demand for integrated, digitally led creative services and transformative technology solutions,” Cooper said.

“Historically, we’ve had great collaboration across the Group, so the restructuring has resulted in an even more seamless experience for our clients.”

Stephen McArdle, CEO of BMF, owned by Enero Group, said without a doubt the macro-economic environment and rapidly changing market conditions have posed some challenges. 

“Despite those headwinds, early signs in this new financial year are very positive, largely thanks to a really strong new business performance over the past six months,” McArdle said.

“Over the past year we’ve continued to grow our headcount, attracting 31 new BMFers and making some key hires across creative, social, CXM and strategy.

“Our retention rate is over 80% and that’s been consistent over the last five years. This is a result of never resting on our laurels when it comes to our culture and our people.”

BMF team accepts agency of the year award photo Tim Levy feb 2023

Stephen McArdle and BMF team accepting AdNews' Agency of the Year award 2022.

But the job market tells a different story

Job vacancies are increasingly dropping nationally which also coincides with an increase in the unemployment rate over the three months to August.

Particularly in adland, Simon Hadfield, DMCG global executive partner, said the market feels quiet now across the board. 

“In speaking with agencies, clients and talent there is certainly a ‘lull’ at the moment. I really wish I could be more articulate as to why, however I can’t!” Hadfield told AdNews.

“It feels like it is nearly back to pre-Covid and possibly we were simply getting used to the madness which was the pandemic? Maybe it’s time for another one?

“There also seems to be some ‘quiet redundancies’ going on with agencies not replacing natural attrition or involuntary leavers. 

“Again, this could simply be the normal highs and lows of the industry as I’m sure there is growth happening also. Is this how it was?”

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