Election Section

East Bay advertising agencies are beginning to feel the belt-tightening as clients cut their budgets to save a little money for what is becoming more of an uncertain economic future every day. 

“This is going to be a super tough one,” said K.C. Jones, executive director of AdMark, the East Bay Advertising Club. He said the recession has been forming since the start of this year and was exacerbated by the aftermath of the Sept. 11 attacks. 

Gary Albright, owner of Design for Advertising, Inc. in Lafayette, said his firm felt the economic downturn as early as last fall.  

“That’s really when I started to notice fewer and fewer calls,” he said. 

Albright said his clients are mostly small- and medium-sized businesses, where the advertising budget is the first thing to go during spending cuts. 

“We seem to get pretty direct feedback from the ups and downs in the economy,” said Albright.  

According to AdAge magazine’s Coen Report spending totals for 2000, advertising is a $243 billion business in the United States. An estimated $12.2 billion of that is located in the Bay Area.  

Magnus Nagase, of Montclair-based Nagase Advertising Inc., said he noticed business thinning out about four months ago. Many of his clients, including high-tech firms and government agencies, already warned him that project spending is going to drop next year. 

“I think everyone’s watching their dollars more than before,” said Nagase. 

Some companies were doomed long before September. Clear Ink, a Walnut Creek-based agency, was at the top of its game last year with 150 employees and a large, mostly high-tech clientele. However, following the dot-com implosion, the agency found itself with a lot of unpaid bills. 

A phone call to Clear Ink on Friday yielded this response from the secretary: “Actually, we’re going out of business today, so you’ll have to call someone else.”  

Laurie Beasley, owner of Beasley Direct Marketing, Inc. in Morgan Hill, also deals with high-tech clients, but she said that the dot-com bust did not affect her as strongly.  

“I did have a lot of dot-com clients, but I never counted on them for 100 percent of our revenue,” she said.  

However, her major clients are software and hardware firms, and revenues for her 10-employee agency have decreased from 30 percent to 50 percent since June. 

Jones warned it could take until sometime next year for the economy to recover. He added that Sept. 11 and its aftermath are “really going to slow the comeback.”  

The recession comes on the tail of extreme surplus.  

“Year 2000 was probably one of the biggest years in the history of advertising,” said Jones.  

But just one decade ago, the advertising industry was suffering intensely as a result of the economic slowdown that hit the country at the beginning of the ’90s. 

“Oh my God, yes,” said Dennis Green, of Lazzari & Green in Alameda, when asked if his firm was affected by that recession. At the time he was working primarily with real estate firms.  

“Some clients cut back pretty severely,” he said, noting that it took four to five years for things to return to normal. 

Albright said it also took his firm several years to recover from the early ’90s recession, forcing him to cut his small staff of seven in half. During the following years, he has gradually dismissed his entire staff, now running the firm by himself. He has no plans to begin hiring anytime soon.  

“I’m just going to continue working in low-overhead mode,” he said. 

How severely some advertising agencies are affected by a recession depends much on which industries they are representing at the time. J. Stokes and Associates in Walnut Creek works mostly with food and automotive services.  

“Those tend to be things that people still need,” said owner Jim Stokes. “We’ve had a record -year in income.” 

Stokes said most businesses are still unable to make long-term decisions based on the market, but the ones who choose to be proactive may end up making a tidy profit. 

“Traditional thinkers will probably cut their advertising, which means there’s an opportunity for a competitor to increase their activity to gain market share,” said Stokes. “Buying a market share can be a very expensive thing, but during a recession the price of media tends to drop.”  

When the economy finally turns around, said Stokes, these businesses will end up “ahead of the game.” 

However, making the decision to spend a lot on advertising in a recession is risky, and most companies are too nervous to take the chance.  

Pete Halberstadt, part-owner of Alameda-based West Advertising, said none of his clients have cut their budgets yet, but he wouldn’t be surprised to see it happen.  

“We’ve sensed it, everybody’s nerves are a little jangled,” said Halberstadt. “I think the mood is such that we’re all bracing ourselves.” 

Murky as the economic future may be, Jones said he expects consumer confidence to return soon, and companies should be prepared for this. He cited an advertisement from the media magazine AdAge Global, which read, “Why advertise in 2001? 2002.” 

“That hits the nail on the head,” said Jones.