Opinion: UPDATE: HBS marketing a new business model?

Rumours of firm’s demise greatly exaggerated, says chief, but others disagree

It’s always somewhat of an annoyance for a company when “bankruptcy” is the second-most searched term related to it on Google.

But that’s the unfortunate truth for local agency HBS Marketing, a creative shop headed by Don Hewson. Indeed, the company’s rumoured demise has been a hot topic within Ottawa’s business community for the past couple of months.

But Mr. Hewson’s competitors in the ad world can stop salivating, it seems. The heart of HBS Marketing, which at its peak employed a couple dozen talented agents and was known as one of the coolest, hippest marketing firms in Ottawa, is apparently still beating – and even stronger than ever, according to the proprietor.

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“We went through a restructuring,” he conceded, adding that the company has essentially been transformed into a consultancy; the company’s 15 or so staffers on hand last year were let go, with five senior members returning as consultants, he explained. That allows him to hand-pick which consultants he wants working with each client, for one thing, he said. 

Documents obtained by OBJ in the wake of this column’s publication indicate that Hewson Bridge and Smith Ltd. declared bankruptcy on Jan. 13, 2010. The documents, which list total assets of $163,292 and deficiencies of $234,706, are signed by KPMG trustee John Haralovich.

The first meeting of creditors is to be held Feb. 1 at 3 p.m. at the KPMG offices on Elgin Street.

In an e-mail, Mr. Haralovich said “It is anticipated creditors will receive some amount of restitution, however at this time the amounts are not known.”

In a discussion with OBJ on Tuesday, Mr. Hewson said Hewson Bridge and Smith filed for bankruptcy “because it wasn’t functioning.

“HBS Marketing did not (declare bankruptcy),” he said. “The old company, Hewson Bridge and Smith, I’ve put to KPMG as trustees. (But) HBS Marketing was only a trade name, and as far as that name goes, it can continue to live.

“(But) employees were all paid out – everyone got paid their last week’s pay, and their vacation pay,” he said.

The documents list as local creditors Ottawa web development shop Real Decoy, Precision Transfer Technologies, Proulx Brothers Inc., former HBS employees Eric Schallenberg, Lynn Bereza, Kelly Johnson, Corein Kershey, Pam Ellison, Rick Denomme and Ian Driscoll, Affinity Productions Ltd., CHUM Radio Ottawa, the Ottawa Citizen, Performance Printing, Dollco Printing and the law firm of Shields & Hunt, among several others. Transcontinental Media, the owner of this newspaper, was also listed as an unsecured creditor.

Preferred creditors are an Etobicoke-based numbered company and 601 Bank St. Inc., which is owned by Mr. Hewson.

One former employee – who said he had worked at HBS since 2007 until apparently being let go last November – said he hadn’t heard of many former staffers being retained as consultants.

“I know it’s definitely not the case with me,” he said. “(But) I think that there were some people, senior stategists, at the company who have continued doing work for some of the clients.”

He also said most creditors have resigned themselves to the fact that they “are not going to get anything.

“HBS was seen as this institution that was going to be around forever. But (recently) the reputation has suffered. There were several bad business decisions.

“We we were told time and time again that becoming a consultancy was not an option, and that they would not get rid of the creative department,” the former employee added.

One has to feel empathy for former employees of the company who have lost their jobs, as well as unsecured creditors who may never see what they are rightfully owed. Regardless, Mr. Hewson was adamant that he did what he needed to do to keep HBS going in a dramatically changing industry.

He also swapped the company’s main focus from marketing communications to branding strategy, probably the hottest aspect in the business these days.

It’s a shrewd move, to be sure, and one Mr. Hewson said has worked thus far – the company has signed five rebranding contracts in the past month, he added.

But then again, when your entire industry is undergoing a sea change as in the advertising space, Mr. Hewson said those in the industry can either change with the market or eventually wither and die.

“The whole industry is restructuring,” he said. “The web is changing, and organizations are moving to digital communication … and a lot of it is going in-house, particularly with social media.

“The clients are now going out for special services, and I’d rather be in the special services area,” he added. “Because all the ad agencies are chasing the same (requests for proposals), which has driven the margins down because it’s become commoditized.”

Mr. Hewson said he’s noticed this trend pick up over the past five years or so, explaining that the double-hit of advanced technology and a deep recession have only sped up the process. “And maybe there are too many companies in the business,” he added.

“I think you’re going to see a lot of restructuring in our industry, and Ottawa is late getting in on that.”

Advertising revenues across North America have plummeted with the advent of the economic slowdown, though signs of life are slowly beginning to pop up. In Europe, things are just as bad – the Financial Times recently reported U.K. advertising revenues in 2009 slumped below three billion pounds for the first time since 2000 – a drop of 12 per cent from 2008 levels.

“The marketing world is the canary in the mine shaft – it’s the first to go, and the last to come back,” he continued. “Because when markeing dollars dry up, companies downsize … and once the money comes back they have to rehire, and the budgets have to arrive.

“Then, you start to get some activity.”

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