The Ad Downturn: Why Isn't Digital Immune?

  |  December 22, 2008   |  Comments

As clients slash their online ad spend, the initial shock at agencies turns to disbelief.

The digital agency layoffs keep coming. What began in October as a smattering of job losses at well-known firms such as Razorfish in New York and IMC2 in Dallas has since accelerated to include dozens of digital specialists, including Harris Interactive, Agency.com, Solid Cactus, and ePrize, among many others.

Also cutting staff are many digital ad vendors and media sellers, including Exponential, Eyeblaster, and Spot Runner.

One agency communications guy, who asked to remain nameless, went so far as to call the wide-ranging cuts in the digital media ecosystem a "bloodbath."

Coming as they do amid large-scale headcount reductions at traditional agencies, it's easy to view the interactive job losses as just another manifestation of the general economic chaos. However as it settles in just how drastically clients are cutting their Web spending along with the rest of the pie, the first shock is giving way to disbelief for some.

"The under-covered story is, why isn't digital immune?" said Amy Auerbach, SVP and director of digital at Initiative. "Why aren't clients using this bad economy to experiment with the most measurable technology, which is digital?"

A partial answer, Auerbach and others say, is that senior marketing executives are panicking, and that's leading them to rapidly draw down their spending where it's easiest to do so.

"Digital is the most easily cancelable," said Auerbach. "That's our cross to bear."

Jeff Lanctot, chief strategy officer at Razorfish, sounded a similar note back in October when he said, "The blessing of digital media, [the ability to] respond quickly, will become its curse...I think there's going to be widespread pain in digital media" Moritz Loew, senior director of national sales at MSNBC, believes much of the disappearing money can be traced to advertisers with mid-sized budgets.

"The middle class is gone from marketers right now," he said. "You see the bottom feeders getting stronger. In the top tier, we're getting more big deals than ever before -- the big custom branding stuff. It's the middle, your bread and butter $50,000 to $250,000 RFPs, that are going away."

Less than a year ago, one of the biggest factors limiting the growth of digital marketing was the talent shortage. There simply weren't enough seasoned interactive buyers, creatives, analytics pros, or search experts to fill the open positions.

At the risk of posing a too-obvious question, is it safe to say that desperate demand for talent is a thing of the past?

Not quite.

"While it's tough knowing people out of work right now, I'm getting lots of updates from people with new gigs in interactive -- very uplifting," David Berkowitz, emerging media director at 360i, wrote in a Twitter update Friday.

Auerbach sounded a similar note: "Demand will change based on account movement, when clients change agencies." She called demand for interactive talent "flat" and said a normalization of inflated digital salaries would actually be positive development.

"Digital folks will have to be happy with what they have," she said. "And that will be a good thing for the ethos of the media buying community in digital. Go back to the basics, work hard, innovate, and learn, versus this 'It's all about me' kind of attitude."

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ABOUT THE AUTHOR

Zachary Rodgers

Until March 2012, Zach Rodgers was managing editor of ClickZ's award-winning coverage of news and trends in digital marketing. He reported on the rise of web companies, data markets, ad technologies, and government Internet policy, among other subjects. 

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