• by Masha Geller , June 14, 2002

A few weeks ago, I received an email from a recently laid-off ad agency employee, who rather heartily blamed all of his recent misfortunes and those of his peers on, and I quote, “those *&^%$#@ dot-coms.” Although I sincerely sympathize with anyone who’s ever been hit with a pink slip, it’s time for a reality check. Dot-com job cuts are indeed making the headlines, and hundreds of layoffs have hit media departments at ad agencies over the past few months, but is the disappearing dot-com ad revenue entirely the root of all evil? And who’s to blame if it is?

Of course, layoffs are more prevalent in agencies where dot-coms made up a large portion of business. But an equally large portion of the blame goes to the agencies themselves. We’ve all read the sob stories of dot-coms spending huge proportions of their funding on relatively short-term advertising campaigns (Super Bowl 2000, for example) and quickly running out of money. But who put those ill-fated ad programs together? Agencies made a killing spending as much money as possible, oftentimes neglecting the interests of their clients.

So, perhaps we’ve grown too sensitive to cutbacks and tend to automatically blame everything on the dot-coms. There are more-significant (in the grand scheme of things) reasons for the downturn—those age-old agency phenomena called client shifts, internal reorganization, and client cutbacks in spending.

Let’s not forget that long before there was an Internet, let alone dot-coms, agencies went through drastic layoffs and staff expansions and restructurings. Remember that big layoff at JWT Chicago in 1987 following a 50% reduction in ad spending at the agency by Kraft Foods.

More recently, to name a few, the much talked about Y&R layoffs were related to a corporate downsizing effort following the agency’s acquisition by WPP. Lowe dropped staffers following their loss of the Burger King account. BBDO laid off at least 40 people in its flagship New York office in a cost-cutting move after BBDO won the business of DaimlerChrysler AG’s Chrysler Group. And Fallon New York reportedly laid off 10 people simply due to their poor performance on certain accounts.

Another fact to remember as we muse this question is that behind these layoffs is the consolidation going on among ad agencies, which is leading to overlapping job responsibilities as departments are merged, especially in the senior posts.

And above all, keep in mind that all these job cuts are taking place amidst what recruiters say is a relatively healthy advertising environment. In spite of the nay-sayers on Wall Street, online advertising impressions reached an all-time high of 65.6 billion in December, a 21 percent increase over the month of November, according to advertising measurement firm AdRelevance. All things considered, the year 2000 wasn’t disappointing for online advertising: Ad impressions increased 120 percent from January to December. The layoffs are less about an economic downturn than they are about companies returning to a focus on turning a profit after the exorbitant ad-spending in 2000. Recruiters say everything will come back to normal in the second quarter of the year. The hope is, agencies will soon be back to old levels, an equilibrium of sorts.

Masha Geller is Editor-in-Chief of MediaPost. She may be reached at masha@mediapost.com.