Ottawa ad industry ‘diminished’ in wake of McMillan layoffs

Business still healthy for most local firms, but disturbing trends are lingering on the horizon, leading execs say
alphabet
Alphabet Creative president and founder Tony Lyons says traditional ad agencies have often struggled to adjust to new market trends. Photo by Mark Holleron

In Ottawa’s tight-knit advertising industry, where even the biggest players measure their headcount in dozens rather than hundreds, the sudden collapse of the city’s largest agency in late 2019 hit the sector hard.

McMillan had grown into a firm with clients around the world, driven by an ambitious leader who once told OBJ, “From the very beginning, we wanted to go global.” When the 23-year-old company revealed in mid-November it had applied for creditor protection and laid off nearly three-quarters of its employees after a series of key customers jumped ship to other agencies, the news sent shockwaves through boardrooms across the capital. 

“From my point of view, when an agency like McMillan faces this type of situation, we’re all diminished,” says Al Albania, the founder of local ad firm Acart Communications, who’s been a fixture in the local industry for more than four decades.

McMillan founder Gord McMillan said his decision to jettison 38 workers was the result of “a perfect storm of circumstances.” Former staffers told OBJ the firm, which once employed about 60 people, had been reeling from a recent series of high-profile client defections that included U.S. software maker Commvault. McMillan had already shed about 10 employees from its payroll earlier in the year in an effort to stanch the flow of red ink, but to no avail.

While most local insiders who spoke to OBJ say the ad industry in the city is relatively healthy, they also say McMillan’s failures could be a sign of things to come for a sector that’s been turned on its head in the 21st century.

Traditional marketing campaigns ​– think print ads in newspapers and 30-second TV or radio commercials ​– have been replaced with a full-scale multimedia approach that includes everything from Facebook and Twitter posts to videos embedded in website content.

In addition, today’s clients are much more media-savvy, industry veterans note. Customers now have the ability to measure clicks and access detailed reports showing exactly how many eyeballs are checking out their social media promos.

In other words, if a campaign isn’t working, clients know it ​– and they want to know why.

“It is not for the faint of heart,” Albania says of today’s industry. “Technology has totally changed the way that we see, the way that we’re reaching our targets. We are the stewards of our clients’ money, and so we have to be sure that we spend it properly.”

Tony Lyons, founder of Ottawa-based Alphabet Creative, says many traditional agencies have struggled to adjust to a world where customers have access to more information than ever before and expect clear, demonstrable returns on their investments.

“I think our industry is generally in a state of huge disruption right now and has been for probably the last 10 years,” says Lyons, whose firm has 24 employees and works mainly with non-profit agencies and associations.

“Our industry at a macro level really needs to take a long, hard look at itself and really ask the questions as to what real business value that we’re delivering to our clients on a day-to-day basis.”

'It's evolved a lot'

Denis Sabourin, founder of Ottawa-based Xactly Design & Advertising, agrees the business is in a state of flux.

“It’s evolved a lot, and I think the agencies that have struggled have been the ones that have had trouble adapting,” he says, adding he’s not suggesting that’s necessarily what happened to McMillan.

Sabourin says his 18-year-old firm’s business model has changed over the years. He now charges clients a flat monthly rate for a range of services, including video production, graphic design and social media content creation, depending on their needs.

“That really has worked well for us,” he says, noting his company has never had to lay off an employee due to a lack of work in the pipeline.

Albania and Lyons also point to the rise of powerful new players in the ad game – the Big Four accounting firms and professional services companies such as Accenture. These multinationals are snapping up ad agencies and using their market reach and powerful corporate connections to conquer a whole new business vertical.

Deloitte, PwC and the like “are basically eating the lunch of major agencies around the world,” Lyons explains, noting top execs at those firms often have close relationships with CEOs and other high-level decision-makers.

“They’re not saying, ‘We’re going to do a campaign.’ They’re saying, ‘We’re going to help you with your business strategy and figure out how marketing communications fits into that and drives that.’ And they’re delivering real, measurable value. That’s a big disruptor in our industry right now.”

Albania says such a move makes sense for these new competitors to traditional agencies.

“You have the Deloittes, the KPMGs, the Accentures, understanding that they’re connected at the C-(suite) level,” he notes. “Let’s be clear about this: advertising, marketing is a byproduct of trust. If our clients don’t have trust in us, they’re just not going to allow us to be the stewards of their money or to spend their money freely. So when someone is connected at the C-level, they’re connected there because of trust. Why shouldn’t they enter into this business?”

Lyons says he believes McMillan was also more vulnerable than most local firms to shifts in what’s looking like an increasingly fragile world economy because of its global customer base, adding its fall could be a “bellwether” of a coming recession that could drive clients to cut costs and bring their marketing functions in-house.

“Nobody really knows what the tipping point is going to be, but a lot of the indicators are talking about the economy slowing down,” he notes. “Because predominantly their client base was in the U.S. and globally, I think they’re probably a bit of a canary in the coal mine for that.”

In an industry where creative talent is at a premium and margins are thin at the best of times, Lyons says it wouldn’t take much to push a teetering company over the brink. 

“I can see how things can go sideways very quickly if you lose an account or market conditions (change),” he says. 

Still, most local executives say Ottawa remains a relatively safe harbour.

“I think the industry is still healthy,” Sabourin says. “I think between government and the IT sector and lots of associations, we’re somewhat protected. I feel like there’s always work.”