The current federal government scandal involving several Montreal-based ad agencies will likely result in a reduction in the government ad spend, particularly in the province where much of the controversy is centred.
While insisting that it is a ‘very important communication tool for the government of Canada,’ André Lanteigne, director of public affairs for Communication Canada, the department which assigns ad contracts, admits that in the short term there will probably be a slowdown in government advertising.
This is bad news for the industry, since the federal government is the largest single advertiser in the country. According to Nielsen Media Research, the feds spent $130 million in 2002, about $5 million more than runner-up Procter & Gamble. In total, the Chrétien government coughed up $800 million for ad programs in the last five years, not to mention $250 million for the sponsorship program recently scrapped by Prime Minister Paul Martin.
‘There may be some reduction in expenditure for advertising in the sense that it’s more difficult for the Canadian government to advertise in the current situation, but it’s not by design,’ says Lanteigne, adding that the government can’t buy ad space with its media AOR in flux. The government recently put its media buying activity on hold after coming under fire for continuing to do business with Montreal-based media AOR Media/I.D.A. Vision, a subsidiary of Groupe Everest, which is implicated in the scandal. Furthermore, only one unqualified bidder responded to a retooled request for media AOR proposals forcing the feds to develop a revised RFP with a Jan. 26 deadline. (The government has so far refused to reveal how may bids were received for the contract, estimated at $100 million.)
Explains Lanteigne: ‘This will in effect reduce advertising activity. It was not the plan to [do this] – it just happened by accident almost.’
Unless you live under a rock, you’ve probably heard by now that Sheila Fraser, Canada’s auditor general, blasted the federal government last month for abusing taxpayers’ dollars by funneling them through Liberal-friendly ad agencies such as Groupaction and Groupe Everest of Montreal. According to the auditor general’s report, these agencies and others reaped $100 million in questionable commissions and fees between 1997 and 2003. Five Crown corporations were also drawn into the scandal.
Lanteigne says he has no idea how long the clamp on advertising will remain. However, most industry observers believe there will be at the most a short-term impact. Says Lindsay Meredith, marketing professor at Simon Fraser University in British Columbia: ‘It’s not like all the ad contracts are going to be cancelled, it’s that they will be scaling them back for a little bit until this thing blows over.’
Meredith sees the deceleration affecting two parties. Likely, advertising for the three Crown corporations that have come under the heaviest fire will grind to a halt, he says. (Late last month, the heads of Canada Post and Business Development Bank of Canada were suspended, while VIA chairman Jean Pelletier was fired in early March.) ‘You can bet your boots there will be a serious slowdown there for now, because they are basically on ice until this gets sorted out.’
But Meredith also thinks the Quebec industry could potentially lose out, since most agencies mixed up in the scandal hail from that province. ‘I wouldn’t want to be an ad agency in Quebec right now,’ he says. ‘You’re going to be looking at some lean times, because even your honest guys are being tainted with the same brush as these other suckers. As usual, the good get punished with the bad.’
However, Quebec agency presidents beg to differ. While Carl Grenier, president of both Montreal shop Amen and the Publicité Club de Montreal, admits the reputation of the ad business has been marred, he thinks a solid PR effort could alleviate that. ‘Right now the industry is in the spotlight, but it’s only a small group [involved], so we need to react,’ he says. ‘There are 54,000 people working in the Quebec industry, and we generate $4 billion a year economy-wise. We have a huge impact.’ He points to the recent creation of the Conseil de l’industrie des communications du Québec (CICQ), an organization comprised of eight industry associations that aims to publicize the importance of the communications industry.
For his part, Jacques Duval, president of Montreal-based agency Marketel and chairman of the Institute of Communications and Advertising (ICA), isn’t worried about any fallout in Quebec. And, he points out, if the government had truly opened the pitching field to include agencies that aren’t 100% Canadian owned, as it said it would when it revamped its agency selection process last year, likely Quebec would have lost some contracts anyway.
‘If you look at the ownership of agencies, Toronto tends to be multinational oriented, and Montreal is still local ownership,’ he explains. ‘If the government of Canada opened it to all agencies, [the work] would be skewed a bit more in the middle.
‘Even though the rules [technically] came into effect last summer, if you look closely, you’ll see that Canada Post went to BCP-Publicis and VIA went to Publicis [BCP-Publicis is 100% Canadian-owned]. That’s why the government is in deep shit right now. Even though the ownership rules have changed, we haven’t seen the results of that yet.’
In fact, Duval thinks there is more opportunity for a Quebec-based agency like Marketel, a member of the McCann-Erickson World Group, to pick up government work down the road – particularly as many affected agencies are imploding in that province – as it is a national, fully bilingual agency. This would alleviate the need for translation and keep costs down, he says.
Duval is more anxious about the new RFP process put forth by the feds. He says there is more paperwork for agencies to deal with now, which is both expensive and tedious. ‘That’s the trouble, because people have abused the system, I think the honest guys are going to pay the price in red tape.’
At press time, Duval was heading to Ottawa to discuss the industry’s concerns on behalf of the ICA. One of the issues he hoped to address is the fact that the process doesn’t enable agencies to meet face to face with their potential clients.
There also seems to be an apprehension that the feds will become more cost-conscious, although most observers say they aren’t likely to judge bids solely on price. Says SFU’s Meredith: ‘That’s singularly one of the stupidest things you can do for your buck…. You’d be better off to just hope the customer walks by and looks in your window and sees your product.’
However, Alan Middleton, professor of marketing at York University’s Schulich School of Business in Toronto, suggests the government won’t be too concerned with advertising effectiveness for the next little while. ‘It’s not so much that governments want to know about effectiveness of their communications, it’s that they don’t want to get caught on this again. So it will slow the process down, it will make the appointment of marketing communications suppliers more ponderous.’
Middleton points out that ad expenditure isn’t likely to decline in an election year, but he does think that if the Martin Liberals truly looked at cutting back waste, advertising could indeed be vulnerable – or at least it should be. ‘Too often governments have run ad campaigns to change attitudes, but they’ve only been able to run them for four weeks a year. That’s a total waste of money. If you really want to change an attitude about health or smoking for instance, you have to embark on substantial campaigns. I would hope [the government] would look there.’
Having said that, some industry players are looking on the bright side. Mark Sarner, president of Toronto-based Manifest Communications, which has worked on the Health Canada account in the past, believes the situation could lead to a ‘better, fairer and more transparent approach to selecting communications agencies.’
‘I think it’s a positive,’ he says, pointing to the fact that the new agency selection process will see the government choose from a pool of agencies as needs arise, as opposed to dealing with one shop for a two- or three-year stint. ‘This allows departments more flexibility. I think in the previous model, they were locked into agencies, and that may or may not have been appropriate to their needs as they evolved.’
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