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Why Do Big Agencies Struggle In Southern California?


Earlier this month, Ogilvy & Mather Los Angeles cut 33 jobs, all but eliminating its ad agency presence (already drastically down from its 350 level in 2000). In December, DDB L.A. parted with longtime client Wells Fargo and relocated 30 agency employees to San Francisco. 


Some 20 years ago, network agency offices were the dominant players in Southern California. They’d land a local anchor client—usually a car, entertainment or technology account—and try to build from there, despite the dearth of big marketers out West.

But even as technology—driven from the West Coast—transforms the industry, many remaining L.A. network agencies still have more of an outpost mentality than an entrepreneurial reflex born of such change.

One reason is that West Coast network offices often conform to their headquarters’ more traditional operating model, relegating them to service entities. “If the West was a different country, these agencies would be developed within that culture and have a clearer business role within the network,” said Robert LePlae, former North American head of TBWA\Chiat\Day and McCann Erickson.

Not surprisingly, then, L.A.’s industry dynamism comes from hot independent shops like 72andSunny and content creation upstarts.

“To thrive in this market, you have to thrive at the intersection of marketing, technology and entertainment,” said John Boiler, founder, CEO, 72andSunny.

John Seifert, O&M's North American chairman, said Ogilvy L.A. will now focus on technological and social media PR work there. “We believe a strong presence is essential, but we don’t think anyone has nailed the model of how to take advantage of it yet,” Seifert said.

Aside from the vulnerability inherent in being dependent on a couple of clients, big-agency L.A. offices face other challenges. Prospective new clients can conflict with other existing ones in the network. Agencies don’t cultivate talent like they used to and may have fewer high-profile accounts to keep creatives happy. With technological advances and corporate pressure to trim overhead, the need for a network office is less critical.

“With business consolidation and the recession, clients are migrating to larger markets, and it’s harder to sustain smaller offices,” said Mark O’Brien, North American president of DDB. “L.A. boutiques have an advantage in that it is their primary office.”

Jay Chiat’s onetime boutique redefined L.A.’s ad industry in the ’80s. Network agencies with local roots, like TBWA\C\D, have done better by retaining their local identity. Deutsch’s L.A. office, founded before its acquisition by IPG, still has original partner and chief Mike Sheldon. Draftfcb has the advantage of Foote, Cone & Belding’s strong West Coast legacy born of Don Belding’s L.A. base.

“It’s the kiss of death if clients think you are a satellite office,” said Carter Murray, CEO at Draftfcb Worldwide. “The West Coast used to be all about S.F. Now that power base is shifting to L.A.”

Deutsch’s Sheldon says a certain amount of independence is necessary to succeed in that transformational L.A. “It comes down to thinking like an entrepreneur,” he said. “This city has always been a combination of relentlessness and effortlessness. People work really hard, but it’s difficult to be negative on a sunny day—and it’s always sunny.”

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