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Hispanic Ad Shops:  Survival of the Fittest

Published in Marketing y Medios

June 01, 2006

By Tony Stanol

 

SPANISH-LANGUAGE media in this country dates back centuries, with periodicals and signage catering to an audience that has come to be called U.S. Hispanics. Paradoxically, the Hispanic advertising industry itself is in its infancy. While the first professional U.S. advertising agency, NW Ayer, opened its doors in 1869, the Hispanic advertising industry is only approximately 20 years old.

So how are Hispanic shops evolving? What challenges do they face? Are there any lessons to be learned from the older Anglo industry? Having worked in general-market agencies and Hispanic, here is an insider's perspective.

The U.S. advertising industry has experienced unprecedented expansion during the past 20 years. It is an era marked by a series of earthshaking events, such as voracious holding companies gobbling up the strongest agencies, account planning coming ashore and new media vehicles suddenly populating the world.

But what about Hispanic agencies during this era? Here's a snapshot:

Total Hispanic agency revenue amounted to nearly a half-billion dollars last year, compared to approximately $20 billion for all agencies. Some Hispanic shops are old-timers still around from the 1980s. They include Siboney and Orcí as offspring from agency networks FCB and McCann, respectively. More recently, we have seen a number of self-starters, including Grupo Gallegos and Vidal, who broke off from their previous partners.

For the most part, Hispanic shops tend to be full service. Primarily, they address the language need since general-market shops no longer even pretend to do Spanish well. They also provide an important cultural counterbalance: self-advocating the importance of the Latino consumer. If they don't do this, no one will.

The fact is, Hispanic shops have not evolved much during the past 20 years! In some respects, they are less sophisticated than many of the leading general-market agencies. This may be because of their short histories, their miniscule budgets and resources they have to work with, and the depth of experience among many of their people.

Hispanic agencies are at an evolutionary crossroads: More advertisers need to be convinced about the market potential. Latinos represent 14 percent of the U.S. population but receive only 3 percent of total advertising spending. Even Web-based ad spending is now higher than Hispanic. This sector of the ad industry must either evolve or die.

In my opinion, there are five evolutionary challenges facing Hispanic agencies. Not surprisingly, they come right out of the trends that are shaping the general market:

Wrestling with agency independence

Media unbundling

Who owns the consumer?

The language debate

Upping creative quality

And of these, the most divisive challenge is media unbundling.

One recent headline captured the tension of this issue perfectly: "Media Chiefs to Ad Folks: We've Split, Get Over It."

There's a lot of hand-wringing about general-market media departments leaving the building - and for good reason. These departures were not necessarily engineered at the altar of what's good for the client. Creative and media do not get to play together. Integration denied.

Will this happen to Hispanic agencies? Some contend that it's already happening. Tapestry, part of Starcom Mediavest (Publicis), controls approximately $300 million in U.S. multicultural media. And Carat has recently swept away Hyundai, Kia, Radio Shack and Rent-A-Center from their full-service Hispanic agencies.

Hispanic agencies should beware of losing this huge competitive advantage. In contrast to my general-market experience, I found it invaluable to have a media department nestled in Hispanic agency Orcí when I worked there. It helps integrate creative ideas with media if both parties are brought to the table together early and often. You have an edge in knowing the market better than the other guy.

Yes, the strong will survive. But this is a perfect time in history for Hispanic agencies to learn from their Anglo brethren and smartly deliver integration.