AdWorld Features

The Right Chemistry

Ray Sheerin

The next six months will be critical for the Irish advertising industry according to Chemistry's Ray Sheerin who says that we could see a number of mergers and corporate failures. He talks to John McGee.

Ten years ago Ray Sheerin and Mike Garner took a brave step into the unknown by setting up their own full service advertising agency. The Celitc cub was growing up into the Celtic tiger and Having fled the comfort and security of the WPP-owned Ogilvy, it was a move that paid off the duo.

Now celebrating its 10^th birthday, Chemistry has managed to bag quite a few blue-chip clients in the intervening period and has produced top quality creative work for which it has been showered with a wide range of awards and accolades. The agency's current clients include, Danone, Kerry Foods, Eircom, Largo Foods, Edward Dillon, the Sunday Business Post, William Fry, Irish Life, Coors Light, ICTU and Deloitte.

Apart from a cabinet full of ICADS and IAPI AdFX awards, Chemistry is still the only Irish agency to have ever snared a gold at Cannes. That achievement came in 2006 when it won the top prize for its Power of the Press campaign on behalf of the National Newspapers of Ireland (NNI).

While awards are nice to win and they garner respect and admiration amongst clients and peers, Sheerin has much more pressing issues on his mind these days. Top of the list is the devastation that has been wreaked on the industry by the savage economic downturn. While some agencies may still be in a state of denial, Sheerin is forthright in his view that the industry is staring into a period of profound uncertainty.

"If you look at the industry at the moment, it is probably about half the size it was this time last year in terms of revenue yet it is only slightly smaller in terms of the number of people servicing it. That to me is not sustainable and I think the industry is facing into a very serious period of realignment over the next three to six months," he says.

"It's like the comet has hit earth and the smoke-clouds and dust are only beginning to settle and people are now beginning to see the devastation that has been caused as a result. The fall-out or realignment may come from mergers or it may come from casualties but I do think that this time next year, there will be fewer agencies in Ireland than there are now," he says.

"I think a lot of agencies had a reasonably ok first quarter in 2009 but as the year progressed, it got a lot worse. I think some agencies were probably holding off making critical decisions in the hope of some sort of an upturn in the last quarter of the year. At the moment, I don't see this happening and it's certainly not going to happen in the first quarter of 2010. So I think reality for some agencies will really only bite early next year and I don't think it's going to be pleasant."

Sheerin's forthright and honest views may not go down too well in adland but the prospect of some indigenous advertising agencies going to the wall over the next year is indeed a very real threat for the industry. "There are plenty of agencies out there that are struggling at the moment. Some have high levels of debt, many of them will have lost money this year and, if they have them, they will have already dipped into reserves. While they may have cut their costs over the last nine months, there is a point you reach where you can't downsize anymore because you can't provide the level of service that is required and expected by the client," he says.

Apart from the obvious fallout in terms of job losses and the contraction in the indigenous advertising industry that would ensue, Sheerin warns that there is a real danger that a situation could arise where the big multinational agency groups that already dominate the industry here could start looking at servicing the Irish market out of London or Paris.

"Entire marketing departments have already been pulled out of Ireland and are now servicing the market from the UK. It could happen in our industry too. They may hang a brass plate on the door somewhere in Dublin but it would be possible to service a small market like Ireland from London or wherever. I hope it doesn't happen but it's a very real possiblilty."

The fact that Ogilvy & Mather, which in turn is owned by WPP, has a non-controlling 29% stake in Chemistry, makes Sheerin's claims all the more interesting, if not controversial. While WPP's Martin Sorrell may not necessarily agree with him, his views are probably shared by the MDs of every other indigenous agency and indeed every media supplier.

The savage reduction in marketing budgets across the board has also threatened to undermine all that is good in advertising and the partnership that used to exist between agency and client is now a thing of the past. "With budgets being cut all the time, clients hold all the cards at the moment and there is definitely a master-servant relationship back in place. That's not a good thing because it's to the detriment of creative standards in the business. It's now very difficult for agencies to stand up to clients and be honest and upfront about the creative standards that need to be in place for an effective campaign. It's not good for the industry and it's not good for the client and their brand."

Decreased budgets aside, it is probably fair to say that some of the blame for the sorry mess the industry now finds itself in can be attributed to some of the mind-boggling and nonsensical practices that have been allowed develop over the last ten years. The industry's near obsession with de-coupling and ongoing fragmentation allied to the dubious practice of handing clients back commissions and taking on new business for wafer-thin margins is hardly a way of running a business, never mind an industry. Because of this, one could strongly argue that the industry, as a whole, has devalued itself to such a point that it is difficult to see how it can reclaim lost ground.

"I would be very critical of the big holding companies. They are the ones who have driven the fragmentation in the industry and they have been incredibly stupid and short-sighted by allowing certain important functions to be outsourced to specialist units within the group. I don' think it has been good for the industry. It's even coming to the stage where important things like strategy and production are being de-coupled in some agency groups and to me that's a load of nonsense. And because of this creative is being corralled more and more. It hasn't happened in Ireland yet but I am sure it will."