Dot-com plunge leaves agencies with questions

It was a moment many had predicted - but it came as a bitter dose of reality all the same....

It was a moment many had predicted – but it came as a bitter dose of reality all the same.

On April 14, high-tech stocks on the Nasdaq dropped a stunning 11% at one point. Pundits called it the beginning of the end of Wall Street’s dot-com boom.

This wasn’t the first sign of trouble, either. Days earlier, Cambridge, Mass.-based Forrester Research had issued a study warning that "weak financials, intense competition and investor flight" would drive many online retailers out of business by 2001. That echoed other industry reports offering similar predictions about the financial fate of many well-known dot-coms.

For those advertising agencies that have aggressively pursued dot-com accounts, these events have raised questions about the time, resources and effort being devoted to clients in this new category. Indeed, reports from the U.S. suggest that some agencies south of the border have been badly hurt by the Nasdaq plunge.

Here in Canada, agencies say they will continue to court dot-com business – albeit a little more cautiously than before.

It’s probably wise to tread carefully, rather than getting caught up in the hype, says Andrea Southcott, managing director of Vancouver-based Bryant, Fulton & Shee. But agencies that choose to steer clear of the category altogether run the risk of missing out on desirable opportunities.

"There are a lot of dot-coms with solid business plans," she says. "You just have to look at the numbers and find confidence in a solid business proposition."

"E-commerce is here to stay," says Frank Palmer, president and CEO of Vancouver-based Palmer Jarvis DDB, which currently gets about 15% of its business from dot-com clients, including Savingumoney.com and Click.com. "Some of the companies may fall by the wayside, but I’d like to think that when we take on any client, our business decisions are sound ones."

Analysts and industry players are quick to point out that online business-to-business ventures generally have solid foundations, and should continue to flourish. It’s the dot-coms operating in the consumer space that are expected to experience a major shake-out in the months ahead.

This country has generally lagged behind the U.S. in the e-commerce race – a fact that may work in favour of Canadian dot-coms, suggests Chris Staples, one of the partners of Vancouver-based Rethink, which has done high-profile work for Stockhouse.ca.

Canadian e-tailers currently on the launch pad, he says, may be able to learn from the dumb mistakes that some American dot-coms have made (such as blowing a sizeable chunk of their ad budget on a single spot during the Super Bowl).

Canadian agencies, too, can look to the examples set by their U.S. counterparts and avoid similar missteps. Many, says Bob Stamnes, president of Vancouver-based Glennie Stamnes Strategy, simply got caught up in the dot-com euphoria, and were burned by clients who failed to spend what they’d promised – or who simply couldn’t pay for the completed work.

Some agencies have also opened themselves up to potential liability by agreeing to accept options or stocks from dot-com clients in lieu of cash payment, Stamnes adds.

Glennie Stamnes, like many Canadian shops, has done a few stock deals, he says – but nothing that would precipitate a financial crisis for the agency should the stock’s valuation drop.

Agencies that take shares in lieu of fees invariably argue that it brings them closer to the client by creating an opportunity to share in their future, notes Jean-François Bouchard, president of Montreal-based Diesel Marketing.

But in fact, the decision is often "motivated a lot more by greed than by sound business practices," he says.

Money, however, isn’t the only factor that has attracted agencies to the dot-com category.

According to Philippe Garneau, one of the partners with Toronto-based Garneau Würstlin Philp Brand Engineering, many agencies believe that adventurous dot-com clients will offer them the freedom to create the sort of edgy creative that can be difficult to sell to traditional clients. And, for that freedom, they’re willing to accept the possibility that they won’t make any money from the account.

"A lot of [agencies] are giving away free time and creativity to dot-com companies so they can create ‘cool’ ads," Garneau says. "And they’re morons for doing it."

There’s no question agencies are drawn by the opportunity to do memorable work that will win awards, affirms Domenic Caruso, president and CEO of Toronto-based MacLaren McCann.

Still, there are also sound reasons for shops to be pursuing dot-com accounts, even if these ventures aren’t necessarily going to be as profitable in the short-term as many first imagined. Agencies are businesses, he says, and they must pursue any viable new opportunities for growth – especially given the decline in ad spending in many traditional categories.

"Is it opportunistic? Absolutely. If you don’t think opportunistically, you’re foolish. It’s not greed – it’s business."

In Brief: The Garden picks CDs to take on daily creative leadership

Plus, Naked names two new leaders of its own and Digital Ethos comes to Canada.
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The Garden promotes two creative directors

ACDs Lindsay Eady and Francheska Galloway-Davis have taken over responsibility for day-to-day creative leadership at The Garden after being promoted to creative director roles.

The pair will also help develop the agency’s creative talent, formalizing mentorship and leadership activities they have been doing since joining the agency four and three years ago, respectively. In addition to creating the agency’s internship program, the pair have worked on campaigns for Coinsquare, FitTrack and “The Coke Challenge” campaign for DanceSafe.

Eady and Galloway-Davis will continue to report to The Garden’s co-founder and chief creative officer Shane Ogilvie, who is stepping back from daily creative duties to a more high-level strategic role, allowing him to focus on client relationships and business growth.

Naked Creative Consultancy names new creative and strategy leadership

Toronto’s Naked Creative Consultancy has hired Yasmin Sahni as its new creative director. She is taking over creative leadership from David Kenyon, who has been in the role for 10 years and is moving into a new role as director of strategy, leading the discipline at the agency.

Sahni is coming off of three years as VP and ECD at GTB’s Toronto office, where she managed all the retail, social and service creative for Ford Canada. She previously managed both Vice Media and Vice’s in-house ad agency Virtue.

Peter Shier, president of Naked, says Sahni’s hiring adds to its creative bench and capabilities, as well as a track record of mentorship, a priority for the company. Meanwhile, Kenyon’s move to the strategy side, he says, makes sense because of his deep knowledge of its clients, which have included Ancestry and The Globe and Mail.

Digital Ethos opens a Toronto office

U.K. digital agency Digital Ethos is pursuing new growth opportunities in North America by opening a new office in Toronto.

Though it didn’t disclose them, the agency has begun serving a number of North American clients, and CEO/founder Luke Tobin says the “time was right to invest in a more formal and actual presence in the area.” whose services include design, SEO, pay-per-click, social media, influencer and PR,

This year, the agency’s growth has also allowed it to open an office in Hamburg, Germany, though it also has remote staff working in countries around the world.

Moray Hickes was the company’s first North American hire as VP of sales, tasked with business development in the region.