Ad Agencies Feel the Crunch as WPP Readies Layoffs

The advertising industry, which went into the holidays suffering less from the struggling economy than many other industries, got bad news this week when the British newspaper The Guardian reported that WPP, the advertising and communications mega-company, would eliminate thousands of jobs (out of about 100,000 worldwide) as a result of the recession.

While WPP denied the rumors, a flurry of stories began circulating through legitimate press organizations including AdAge and BNET, which reported that WPP subsidiary Ogilvy & Mather will shed up to 100 employees. Omnicom, like WPP a member of the “big six” advertising holding companies, announced that it will lay off between two and five percent of its global workforce.

So what does this mean for pharma and it agencies of record?

According to most of the ad professionals Pharm Exec asked, the outlook is better than it may sound. Companies with major accounts in consumer products—particularly automobiles—are in for a rough 2009, said one creative director. But smaller firms that deal primarily in drug ads should be safe—at least until patents start expiring.

“The worst layoffs I ever saw were the ones during the dot-com bust—I have never seen anything like that,” said Mel Sokotch, a veteran of Grey Advertising and Foote Cone & Belding. “But what drove that was the extraordinary money being spent by dot-coms. This time, I have a sense that [layoffs] will line up with the economy and the industries that are hurting.

“If you have an auto account, you are going to be hurting. On the other hand, if your client is Procter & Gamble or Kraft…packaged goods and healthcare hold up in down economies. It’s always been a good thing for an agency to have a lot of healthcare and packaged goods because they are more recession proof.”