Battling to Bounce Back: After a Tough Year in the Advertising Game, Could a Shake-Up Be Ahead among African American Agencies?

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"BLACK AGENCIES NEED TO EXPLORE new and different business models to better compete," says Donald Coleman, chairman and CEO of GlobalHue (No. 1 on the BE ADVERTISING AGENCIES list with $550 million in billings), "Consolidation and acquisition, among other things, should be considered."

This statement from an executive at the largest black-owned advertising agency underscores the state of the industry--and particularly the ever-diminishing role of African American entrepreneurs within it. While billings for the agencies increased 7%, these firms were forced to continue draconian cost-control measures while trying to grow business with existing clients and in some cases taking on less profitable assignments. Emphasizing the grimness of the situation, BLACK ENTERPRISE has for the second consecutive year elected to not name an advertising agency of the year.

While The Nielsen Co. reported that advertising spending for 2006 rose 4.6%, several factors, including competitive pressure from larger white-owned agencies, a certain degree of racism, and a shift of spending toward the Hispanic market, have left many black agencies in critical condition. The loss of African American executives in the ranks of mainstream marketing organizations who would normally champion the case for valuing the black segment, such as Jerri DeVard, the former senior vice president of brand management and marketing for Verizon Communications, compounded the problem.

Among the firms that have grown is IMAGES USA (No. 9 on the BE ADVERTISING AGENCIES list with $62.5 million in billings). The firm grew business with five of its existing customers--Amtrak, Wachovia Corp., the Georgia Lottery, National Black Arts Festival, and, while creating African American and Hispanic marketing campaigns for six new clients--Papa John's International Inc., Cardinal Health Inc., FedEx, Sara Lee Corp., International Speedway Corp., and Aflac. All told, the firm grew its billings by a little more than 22% and hired 10 new staff members.

The key for IMAGES was expanding its offerings for existing clients. "For example, we started with Amtrak two years ago doing advertising for the Southeast long-distance train service and, based on the success we've had, they gave us the multicultural business nationally," Robert L. McNeil Jr. says. Today, IMAGES is the multicultural agency of record for Amtrak's nationwide long-distance service and its premium Acela Express service, which caters to business travelers. Amtrak Acela Express ridership increased to 2,668,174 in 2006, an 8.8% increase, while revenues rose 18.8% to more than $328 million. According to spokeswoman Karina Bomero, ridership on the entire Amtrak system has increased for three straight years and the company is confident that the multicultural campaign has contributed to the growth.

Among the agency's 2006 campaigns was a television spot designed to demonstrate Wachovia's commitment to the African American community that featured a testimonial in which a customer told of how her financial health was improved as a result of the bank's efforts. The subject of the commercial spoke of her financial goals and how the bank was able to help her with a retirement plan and ultimately with the house of her dreams. The advertisement became the bank's first national African American TV commercial.

Coleman's GlobalHue continues its reign at the top of the list, having gained 17% after landing the African American portion of Wal-Mart's $580 million marketing campaign. The agency also exercised organic growth with its clients Chrysler and Verizon Wireless. Other agencies followed suit. For example, Equals Three Communications (No. 15 on the BE ADVERTISING AGENCIES list with $43 million in billings) expanded its healthcare portfolio with current client the National Institute of Mental Health by adding two new accounts: the American Association of Geriatric Psychiatry and the Geriatric Mental Health Foundation. …