Puerto Rico: Ad industry gears up for another challenging year.

Puerto Rico’s hard-pressed but feisty advertising industry is in no mood to whine. In fact, optimism is the order of the day as yet another challenging year gets underway for ad agencies big and small.

“Yes, 2008 was a difficult year; 2009 is filled with optimism,” voiced Carlos E. García Anglada of Sajo Garcia & Partners. Erasto Freytes, who heads the island’s largest ad firm-Badillo Nazca Saatchi & Saatchi (BNS&S)-is no less sanguine. “Definitely, the important thing is the attitude,” he said, quoting the old adage that “all problems bring opportunities.”

Overall, the industry expects advertising expenditures to decline vis-à-vis 2008, with estimates ranging from 5% to 7%, and the job market to remain tight. Still, there could be job opportunities in areas such as client services and creative departments; talent with digital and new technology skills also could fare well. Some consolidation is likely as smaller and midsize companies merge for financial strength. Advertisers will be working more closely with their ad agencies as they seek to maximize limited advertising budgets. And, since their thrust will be on adding brand value, their ad messages are expected to hew to the basics. But while advertising will gravitate toward traditional media, alternate tactical media such as the Internet and others could enjoy gains. One executive, though, cautioned that “since alternate media investment is not measured, it is hard to define whether it will grow or not, but overall my sense is that there will be little growth for all alternate media, if any, for 2009.”

Carmen Cedre, president of the Advertising Agencies Association, expects 2009 to be a challenging year that “will very likely reflect a decrease in total investment. As companies tighten their budgets to manage the recession, we can probably expect a shift in investment, seeking to obtain more value from each medium and/or channeling investments to trade marketing efforts.”

Among this year’s trends, these two will be prominent:

Complementing traditional advertising with initiatives targeting consumers. “The days of the shotgun approach are over. One must seek the consumer where he is and wherever he might be more receptive to a brand,” said Edgar Palerm, CEO of Euro RSCG Puerto Rico.

Going back to basics. “As consumers struggle with the economy, creative messages that present the most basic emotions connect much better with consumers,” Cedre noted.

Medianet, one of the largest media-buying and planning agencies in Puerto Rico, estimated last May that total media investment for 2008 would reach $767.4 million, a figure that included $42.4 million in political ad spending in local elections. This estimate was in real dollars, meaning that it took into account the negotiated discounts based on volume that are typical of the advertising industry. These discounts can range from 40% to 60% in the television industry, which accounts for roughly one-third of total ad expenditures.

Instead, the year ended “flat,” according to BNS&S’ Freytes. If anything, he said, that political advertising tied to primaries and the November elections, plus the U.S. stimulus package that pumped $1 billion into the local economy, helped prevent a drop of between 4% and 5% in total media investment for the year, which he estimated at $737 million, more or less on par with 2007.

For her part, Cedre said the island’s advertising industry has been in decline over the last couple of years. “Market estimates for 2008 suggest that the industry suffered a decline of about 8% in total billings versus 2007. As the Puerto Rico recession continues and the global economic crisis deepens, we can forecast that 2009 will be a challenging year that will very likely reflect a decrease in total investment.”

Executives said clients will continue to demand better value for their budgets and, depending on the individual case, may even reduce their budgets, a tactic that advertisers generally consider ill-advised. As Freytes pointed out, the record shows that companies most successful in weathering economic storms are those that continue to push their products. Quoting another adage, he said. “When times are good, you should advertise. In bad times, you must advertise.”

EURO’s Palerm said, “Clients are looking for greater effectiveness and efficiency. The important thing is to be able to offer all communication services under the same roof and offer each client what he really needs, not what is convenient to the agency. Those agencies that can offer this will have greater opportunity of retaining and acquiring clients.” Still, Cedre sees as unlikely any great flux within the industry. “In 2008 there was little account movement, with only a few major accounts changing agencies. Many clients are looking for value in the agency relationship,” she said, also noting that many accounts in Puerto Rico have global commitments “which do not allow clients to make local decisions. As always, a client will seek a new agency when the current agency is not providing the expected level of support and ideas to grow its business.”

Sajo García’s García said advertisers will continue to rely on massive communications media such as television, but executives such as Manuel O. Miranda of Lamar Advertising of P.R. said alternative media, such as billboard products, have the added appeal of reaching the masses at a lower cost. According to Cedre, “Alternate media present a good opportunity to reach specific segments of the population and can be very helpful in enhancing a marketing program. We believe every client’s budget has to be evaluated versus its marketing and sales objectives and its target segments to determine which media makes the most sense. This year we don’t see budgets going up, so a responsible agency will need to determine how to best distribute the budget among mass media and alternate media.”

BY LORRAINE BLASOR

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