When MGH Advertising Inc. pitched a Papa John's pizza account in Atlanta recently, executives competed against a large, publicly held advertising firm for a $2 million piece of business - a David-and-Goliath match-up MGH's chief said would never occur in a stronger economy.
At Baltimore's GKV Advertising, executives acknowledge that accounts they once dismissed as too small to go after are now being considered.
Annapolis-based Ledo Pizza officials made a few informal phone calls recently seeking advertising help and soon had the pick of 12 agencies - for business worth less than a half-million dollars in billings, according to one of the firms involved.
"I think in the last year or so agencies are a lot hungrier," said Andrew Malis, president of MGH, which lost out on the Atlanta Papa John's account to a unit of giant Interpublic Group of Companies. "Larger agencies that we wouldn't usually compete with are getting into the pitches."
The economic downturn has sharpened the already fierce competition in advertising to a razor edge. Large firms are chasing smaller pieces of business, smaller shops are slashing prices, and everyone is after the same turf. Agencies that never before crossed paths are suddenly finding themselves in the same arena.
"Every single agency that hears about something is pitching it," said Paul M. Walczyk, executive vice president and general manager of the Baltimore office of Brann Worldwide, "whether they would have before or not and whether they have any experience in the category. Everyone is pitching everything. The competition is unbelievable."
GKV, for instance, now looks at accounts one-third the size it had set as a threshold.
"The new-business prospecting has been abysmal in our industry for two years," said Roger L. Gray, president and chief executive officer. "We have been talking to people with half-million [dollar] budgets. Two years ago, we pretty much set a limit of $1.5 million plus. The economy has forced agencies to get their overhead more in line so they can service well the smaller budget accounts."
"There's a lot of cost competition in the marketplace," said Gray. "The smaller agencies are trying to combat that by discounting."
For GKV, lowering the bar for business seems to have paid off. The firm has won about 40 percent of the new business it has pursued - well above the 15 percent to 20 percent that is more typical, Gray said. He said he expects to close this year with a 17.5 percent increase in revenue.
The strategy has helped spare his firm layoffs this year - a problem that has afflicted agencies here and across the country.
Employees at Baltimore's office of Brann Worldwide, for instance, popped champagne last month to celebrate winning the Saab direct-marketing business, worth up to $15 million a year. A week later, eight people were laid off.
Eventually, the Saab business will require at least three additional hires, but they will be people experienced in the automotive category, Walczyk said.
"It's so bad that a lot of agencies are laying off, not hiring, going after smaller accounts, doing anything they can to stay in business," said Lynda M. Maddox, professor of marketing and advertising at George Washington University in Washington.
The slump has hit particularly hard in New York City, where roughly one-sixth of the industry's U.S. jobs are found.
The number of advertising jobs there dropped from an average of 45,436 in 2000 to an average of 40,146 last year, according to Vincent F. DeSantis, a state labor market analyst for the New York State Department of Labor. The downsizing has continued in New York and elsewhere, according to industry experts.
About 1,700 people worked in advertising in the Baltimore area as of the first quarter of this year, according to the Maryland Department of Labor, Licensing and Regulation.
MGH, which has 55 employees, has avoided layoffs this year and throughout its 7 1/2 years of operation.
"The thing that I'm proudest of is that we've never had a layoff here," Malis said.
He attributes his agency's track record to a policy that keeps its three largest clients from collectively representing more than 30 percent of total billings. But he also recognizes that his shop, where billings hover around $50 million to $55 million, has been lucky.
"None of our clients has cut back," he said. "In general, our clients who are the largest spenders are either leaders in their category or they're in a competitive market and have to keep advertising."
That hasn't been the case at several Baltimore agencies, including Brann, Eisner Communications Inc., Carton Donofrio Partners Inc. and others that laid off staff this year.
"We had clients scale back," Brann's Walczyk said. "Our layoffs were completely due to the economy. We were actually carrying people for a significant time hoping to gain new business."