In early 2015, Adam Kleinberg, co-founder and CEO of San Francisco-based agency Traction, was looking to hire an in-house developer. His search brought him to an HTML developer who was two years out of school. Things were going smoothly until the candidate demanded a hefty $125,000 paycheck — perhaps reasonable in the tech industry but outlandish by advertising industry standards.
Kleinberg’s experience is emblematic of the struggle ad agencies faced during the tech boom in general. Silicon Valley juggernauts and tech startups were courting the same creative technologists, product designers and developers with better salaries, perks and benefits than agencies could offer. Agencies began losing their sheen, and some even opted out of San Francisco’s skyrocketing real estate prices — finding a home in places like Oakland instead.
“Twenty years ago, agency jobs were dream jobs for people just out of school — but suddenly, everyone wanted to work for Google or Facebook or a startup,” said John Matejczyk, executive creative director at Muhtayzik Hoffer. “Advertising had definitely lost its luster in the marketplace of available jobs.”
But with the tech boom subsiding toward the end of 2015 with a pullback in VC money, advertising agencies are hoping that sanity — and normalcy — returns. The signs are already there.
The talent drain
Ad agencies across the globe have increasingly been battling with tech companies for talent in recent years. Last year, Talent Zoo, a recruiting firm that specializes in advertising, marketing and media, estimated that almost 50 percent of creative jobs available today aren’t at agencies — compared with 30 percent in 2010. But nowhere was the battle for talent more pronounced than in San Francisco. Attracting senior talent was the hardest, said Matejczyk.
Salary pressure was the biggest issue for agencies, which lost talent because they couldn’t match the perks of tech companies, he said. “We had this developer, whom we loved, who also had an offer from Square,” he said. “It was the same salary, but they offered him stock, too.”
“There were also a lot of people in the job market who were caught up in the gold rush fever and had an inflated sense of self-worth,” agreed Kleinberg.
Minneapolis shop Mono, which set up shop in San Francisco in July 2015, tried to avoid the cut-throat hiring competition altogether, instead looking for hires by tapping into Minneapolis natives in the Bay Area. The agency dubbed its hiring tactic the “Minneapolis Mafia.”
In recent months, however, talent has started to flow back to agencies. Teak, Venables Bell & Partners and Traction have all hired employees from Citrix and even Google. Agencies have always touted the creativity and versatility of their work, and they say this could be the reason people are coming back.
“The tech darlings south of us are infamous for paying fantastically while you watch your portfolio languish,” said Paul Venables, founder and chairman at Venables Bell & Partners. “But on more than one occasion, we’ve had employees come back to us, because we have a weapon they don’t seem to have in their arsenal: We produce great work.”
For millennials in particular, lifestyle could be a factor. High pay notwithstanding, working for a startup can be grueling: Long commutes to Mountain View or Menlo Park everyday — even in luxury tech buses — aren’t always fun.
“I think there’s a shift in people trying to improve their overall quality of life, and a big part of that is 20-somethings wanting to work closer to where they live,” said Kevin Gammon, partner and creative director at Teak. “So offices in San Francisco are attractive to them, and that’s the shift that’s driving a return to both agency and smaller-company jobs.”
Nearly all agreed that while Silicon Valley’s tech prevalence has made the competition for talent more intense, it has also brought people with varied skill sets to the area, which in turn has benefited agencies that have ended up hiring them. Plus, many of the agencies rely on tech companies and startups for business.
“We’re in the midst of the most vibrant and innovative talent pool the world has ever seen,” Kleinberg said.
Upping the perks
One way agencies are bouncing back is by upping their game when it comes to perks. Ping-pong tables, happy hours and unlimited vacation have long been standard at agencies. But Silicon Valley and its tech companies have raised the bar, with their free transportation, laundry service and meals. San Francisco agencies deny feeling the pressure to out-perk their tech competitors. Yet many of them have instituted newer benefits in recent years.
Traction set up a “no questions asked” policy for those who want to attend Burning Man. Teak refurbished its office space. Venables Bell & Partners has a staff concierge and a dry-cleaning service for employees.
Others, like Goodby Silverstein & Partners, have introduced elements of the innovation and startup-like life that appeals to employees today, with in-house “labs.”
GS&P has a so-called “BETA group” that applies cutting-edge technologies into creative projects. The group recently created a VR experience for the Dali Museum and is working on an interactive multiscreen project with Shazam and Instagram. The agency also created “Brand Camp,” which lets staffers work with startups and has hosted a weekend-long hackathon.
“As nice as perks are, creative talent wants to be in a place where they have the resources to produce innovative work,” said Zach Canfield, director of talent at GS&P, who has also worked at Google in the past. “We give our talent an array of challenges to solve across a variety of categories — something not all tech companies can offer.”
Finding a way around the real estate
San Francisco has historically been plagued by affordability issues – both commercial and residential. That was only exacerbated with the tech boom. The city has a huge inventory shortage, and it’s been getting harder to convince people to move. A Muhtayzik Hoffer intern was once even assigned to find a place to stay for a creative director who had recently moved to the city.
“In San Francisco, everyone’s first reaction to anything is to complain. But the real estate problem and growing homelessness is a legitimate concern,” said Matejczyk. “The housing horror stories frequently come up during the hiring process.”
Commercial rates, too, have gone through the roof. Startups are gobbling up huge office spaces, and the city is in a construction overdrive, with new skyscrapers appearing everywhere. The rent for Muhtayzik Hoffer’s space in the city’s Financial District is $52 per square foot, and, according to Matejczyk, “it’s not even a high-end building.” Teak, whose rent was below the current market rate until recently – also renegotiated its lease last year. And EVB made the move to Oakland a few years ago.
But with VC seed investors slowing down investments toward the end of 2015, the prices in the housing market are expected to stabilize.
“The upside is that things do balance out — in terms of a drop in rent, for example — and it actually favors places like us when the market turns like that,” said Kevin Gammon, creative director and partner at Teak.
For Kleinberg, the pullback from investors is definitely a respite. “I wouldn’t say this place is anywhere close to sane yet, but I’m optimistic.”
Homepage image via Shutterstock.