Dot-Coms Fuel a Terrific Year For Los Angeles Ad Agencies.

As 1999 dawned, Kalis & Savage Advertising was a small boutique agency overlooking the beach in Pacific Palisades, content with a handful of traditional clients like Hormel Chili and a reputation for clever if not major-award-winning campaigns.

A year later, it is an Internet advertising powerhouse.

Kalis & Savage illustrates how the dot-com phenomenon revolutionized L.A.'s advertising industry in 1999.

No figures have yet been tallied on the overall growth of Southern California's ad business last year, but anecdotal evidence suggests it was hefty. Forecasters have estimated national ad-billings growth at 6 percent in 1999 over 1998; Jerry Gibbons, executive vice president of the Western region of the American Association of Advertising Agencies, believes the percentage in California was higher than that.

"Overall, the industry has done really very, very well," Gibbons said.

It isn't just Internet companies that have fueled the growth, Gibbons points out. The economy was very strong last year, leading to an increase in marketing budgets for many non-Internet businesses.

But in L.A. in particular, the vast majority of the growth came from the dot-coms.

"You take (dot-coms) out, and it's 1989 again. There certainly isn't big spending coming from traditional marketers," said Murray Kalis, co-owner and creative chief at Kalis & Savage. 'This is new money."

From billings of around $30 million at the start of 1999, Kalis & Savage now has what Kalis conservatively estimates at $80 million to $85 million in billings. It might be a good deal more.

"It's hard to say how much you're billing with these dot-coms, because it just goes from day to day," Kalis said. "If something is really working, they can get the money for it."

Kalis & Savage won new accounts last year from hot Internet startups CarsDirect.com, GreatDomains.com and JFax.com. It is one of the more dramatic success stories from last year, but it's not the only one. West L.A.-based Kovel/Fuller & Partners, which came into existence early last year after account chief John Fuller merged his Fuller Group with creative head Lee Kovel's Kovel, Kresser & Partners, has upped its billings from around $30 million when it was formed to between $70 million and $80 million today, according to Fuller.

The real extent of the dot-com growth is hard to determine, not only because spending plans are nearly nonexistent, but because many new accounts have not been disclosed. Fuller says his agency has three new dot-com clients, but he can't reveal their names because he signed non-disclosure agreements; Kalis has two phantom dot-coms.

"You can't even reveal their URLs, because that gives too much information to their competitors," Fuller said.

These fledgling companies are entering a highly competitive business, and they don't want other startups with similar business plans to know they exist until they're ready to launch, Fuller explained.

The majority of the new dot-com business appears to be going to smaller boutiques, rather than the local outlets of multinational ad giants. Last year saw little reported new-account activity at local titan TBWA Chiat/Day, for example, nor was there much reported action at agencies like Saatchi & Saatchi, McCann-Erickson Los Angeles, Grey Advertising or Team One Advertising.

Fuller theorizes that entrepreneurial startups prefer to deal with smaller, entrepreneurial boutiques, rather than giant bureaucratic agencies.

"If I'm starting up a dot-com, it's me and six other guys busting our butts seven days a week. You tend to identify with the guys who are also busting their butts. You think, 'I could probably call this guy on a Sunday and get an answer,'" Fuller said. "They're looking for a more entrepreneurial mindset in their agencies."

For all the dot-com mania, the biggest advertising-industry story of 1999 in Los Angeles had nothing to do with the Internet. It was the long-fought victory by Santa Monica-based Rubin Postaer & Associates, which wrested the $150 million Acura account from Westside rival Suissa Miller Advertising.

Rubin Postaer President Gerry Rubin says his agency has nearly added all of the 100 people it planned to bring on to staff the new account. The agency has taken up additional space in its existing building on Second Street.

Rubin Postaer will release its first work for Acura in February, with the launch of the automaker's new CL coupe. The agency will also handle the launch of a new SUV this summer.

"Regrettably, Acura has lost some of its edge. Our job is to bring that edge back," Rubin said.

Assistant Managing Editor Dan Turner writes a weekly column on marketing for the Los Angeles Business Journal.