“The dollars are clearly shifting this way,” says Eric Johnson,… (Mel Melcon, Los Angeles…)
Old notions of advertising are being scrambled on the Westside, inside boutique agencies with names like Blitz, Ignited and Omelet.
The hot shops are pushing big-brand clients beyond the familiar confines of radio, television, magazines and newspapers and onto the Internet, smartphones, game consoles and tablets.
With more than 42% of the country's TV homes equipped with digital video recorders, which allow users to fast-forward through commercials, and some younger viewers leaving TV altogether, advertisers are rushing to build Internet infrastructures, create Web videos and funnel content to social media sites such as Facebook, Twitter and Pinterest.
It's a boom-time business. Ten years ago, companies spent an estimated $6 billion advertising their products and services online, according to eMarketer, which tracks advertising dollars. This year, that number is expected to reach $39.5 billion. Within five years, it could top $60 billion.
It's not that advertisers are abandoning TV. Last year they spent $68 billion on television commercials, and in two weeks last month they placed orders for $9.1 billion worth of prime-time network spots. But marketers recognize that affluent and younger consumers are as likely to be found glued to their cellphones or the Internet as the TV screen.
L.A. agencies have been in the vanguard of the ad evolution. The region already boasts such prominent creative shops as TBWAChiatDay, RPA and Deutsch LA. Upstarts have taken root in the same narrow band west of the San Diego Freeway, drawn by the proximity to the beach and the nearness of major entertainment hubs, music labels, video game makers and an increasing number of Internet firms, includingGoogle Inc.andYahoo Inc., which have opened outposts in the newly minted Silicon Beach.
At the end of a crowded cul-de-sac in Culver City, more than a dozen young workers cluster around common tables in a warehouse. A makeshift sign on the door reads: Omelet.
"We were at this diner in the Marina, eating omelets, and thought why not?" company co-founder Ryan Fey said. "We didn't want to take ourselves too seriously."
"And you've got to break some eggs to make an omelet," co-founder Steven Amato added.
Omelet's founders met a decade ago while working at Los Angeles' leading ad agency TBWAChiatDay, just as the Internet was becoming a viable vehicle for advertising. Amato, 39, was a former playwright turned ad copywriter from Connecticut. Fey, 36, was an Ohio native who started his career as a page for "Late Night With David Letterman," then worked as a music writer for Spin magazine before joining a large ad agency in New York.
Over months of breakfasts at Nichols diner in Marina del Rey, they plotted how to create their own "storytelling" firm built for the Internet age. The pair and a third co-founder, Shervin Samari, each chipped in $200, which covered one month of office rent.
The agency opened in 2004 and quickly made a splash with silly spoofs created for Coffee Bean and Tea Leaf. "Mascot Roommate," featuring a man in an oversized iced-coffee costume, notched more than 1 million views and spawned sequels, including one so effective that CNN's Headline News aired it as the real thing and wondered on the air whether the coffee chain would fire the out-of-control mascot.
This year Omelet is on track to triple its 2011 revenue of $23 million. The firm, which has about 45 full-time employees — only two over the age of 40 — has created ads for AT&T Inc., Harley-Davidson Inc., HBO, Microsoft Corp.and NBCUniversal. It designed Internet advertising campaigns and television spots for the Academy of Motion Picture Arts and Sciences. Earlier this year it won a large account withWal-Mart Stores Inc.'s corporate headquarters.
Omelet has company. El Segundo-based Ignited exploded onto the scene 13 years ago.
The digital agency now boasts 120 employees and has annual billings of nearly $140 million. The firm, which specializes in Internet display ads, occupies a 55,000-square-foot warehouse that previously hosted a short-lived Internet incubator set up by former basketball star Shaquille O'Neal. Its clients include NBCUniversal,Sony Corp.and Zico coconut water.
"The dollars are clearly shifting this way," said Eric Johnson, Ignited's founder and president.
A former top executive at the video game company Activision, Johnson recognized more than a decade ago that young people — particularly young male gamers — were consuming much of their media through nontraditional channels. He figured that eventually mainstream audiences would become heavy Internet users and that established ad agencies would be slow to respond. He was right.
"There has been a fundamental shift in behavior that is shaking the underpinnings of the whole media and marketing industry," Johnson said. "Everything needs to be digitally connected."