Advertising Age reported on how federal agency cuts are
impacting Adland. While White advertising agencies may be adversely affected by
reduced and retracted governmental contracts, non-White shops will likely experience far greater losses.
The Trump administration’s anti-DEIBA+ stance poses direct threats to crumby assignments historically delegated to minority agencies.
To compound
matters, minority agencies have been routinely relegated to second-class
status—or worse—in multi-agency coalitions servicing ginormous governmental
accounts such as the U.S. Army and U.S. Census.
In the
emerging environment, typical Prime Redlining could be entirely erased. The erasure,
however, won’t be rooted in progressing toward fairness, equity, and justice;
rather, it will ignited by an increased exertion of control, dominance, and
power from the ruling majority.
How federal
agency cuts are affecting the ad industry
Contracts are
being scrapped and campaigns put on pause as Elon Musk’s DOGE slashes the
federal bureaucracy
By Ewan Larkin
The Trump
administration’s mission to pare down the government is taking a toll on
marketing shops responsible for supporting federal agencies.
The Department
of Government Efficiency (DOGE) led by Elon Musk has moved swiftly to cancel
government contracts and reshape the federal workforce by slashing jobs. Musk,
the owner of X and adviser to President Donald Trump, aims to hit $1 trillion
in savings and has said the DOGE team is already working inside nearly every
federal agency.
Some
departments are feeling the heat more than others, including the Department of
Veterans Affairs and the U.S. Agency for International Development, which has
led to scrapped contracts with ad agencies, paused marketing campaigns and
more. Agencies, in turn, have been forced into making job cuts and pivoting to
focus on new areas. And with cuts—and reversals—coming abruptly, all the
involved parties are keeping a low profile.
“It is an
environment of deep anxiety,” said one communications agency executive who
works with an impacted federal agency and who, like almost everyone interviewed
for this story, requested anonymity to speak freely. People are “wondering
every day whether funding is going to be cut.”
Feeling the
impact
Several federal
agencies, including some within the Department of Homeland Security and the
Department of Health and Human Services, have paused some marketing campaigns,
according to multiple people familiar with the matter. (HHS and DHS did not
provide comment.) Many departments are doing their best not to
attract unwanted attention, said a second marketing agency executive.
“We’ve had a
lot of clients keep their heads down,” this person said. Without canceling
contracts, they “have scaled back or put things on pause.”
A third ad
agency executive noted that some contracts are being put on hold for 90 days,
which presents numerous challenges. “We’re supposed to keep our staff on hold
for 90 days while the government gets their shit together? Yeah, that’s nearly
impossible to do,” this executive said, noting that agencies with government
contracts cannot fire or rehire staff easily due to lengthy clearance
processes.
Some contracts
are being entirely scrapped, too. The U.S. Agency for International
Development—which manages foreign assistance—has been hit particularly hard,
with Secretary of State Marco Rubio boasting that 83% of USAID programs have
been canceled. The fallout has reached Ogilvy PR, a longtime USAID partner,
which recently saw its communications contract with the federal agency
terminated, according to a person close to the situation.
Ogilvy PR
declined to comment. USAID did not provide comment.
Marketing
agencies have also had to cull their staff due to contract cuts. Due
to canceled contracts with the Department of Veterans Affairs (VA),
Virginia-based consultancy Aptive Resources recently laid off hundreds of
employees, according to multiple people familiar with the matter. The cuts
are incredibly fluid and unfolding gradually, making staffing decisions
difficult for marketing shops.
Aptive Resources
did not return multiple requests for comment. VA did not provide comment on
which contracts it had canceled.
Many federal
agencies are experiencing other sudden changes, including the HHS, which in
January was told to pause all external communications.
That
communications freeze appears to have impacted the marketing efforts of the
Centers for Medicare and Medicaid Services, the federal agency that provides
health coverage to more than 160 million people through Medicare, Medicaid, the
Children’s Health Insurance Program and the Health Insurance Marketplace. In
July, CMS launched a review to find multiple shops to help develop, implement
and evaluate national integrated communications campaigns. The federal agency
had been providing public updates about the review, but has not posted anything
since December.
In early
February, federal agencies were allowed to resume some communications. Asked
about the status of the review last week, a CMS spokesperson said the
“communication hold for this solicitation has been lifted,” while adding that a
decision has not been made.
Military
contracts appear relatively unscathed, for now
DOGE has so far
largely avoided many of the biggest sources of contract spending in the federal
budget, including the Department of Defense (DOD), which includes military
branches.
Multiple agency
executives who work with military units told Ad Age their scopes have not been
reduced and there have not been any changes to contracts. Given Trump’s focus
on having a strong military and an ongoing recruitment crisis, contracts with
the DOD generally seem “safe,” said Mike Kapetanovic, a business development
consultant at GrowthLab, which is focused on supporting advertising and
marketing agencies that work in the public sector.
“I think DOD,
writ large, is fine,” said Kapetanovic, who works with roughly 50 agencies. “I
don’t see that getting cut. I’d be shocked, but I would have said the same
thing about the VA two months ago.”
To be sure, any
cuts to military contracts would have a substantial impact on the agencies
involved. VML’s deals with the Marines and Navy are valued at $1.9
billion and $455 million, respectively, while DDB’s agreement with the Army
stands at $4 billion. And GSD&M’s contract with the Air Force is worth
roughly $741 million.
The DOD, Navy,
Marines and Air Force did not provide comment.
The Army has
not made any changes to its contract with DDB nor shifted its marketing
strategy, said Laura Francisco, public affairs officer at the Army Enterprise
Marketing Office. In fact, the branch debuted a recruitment campaign on Monday,
she said.
DDB’s new
campaign highlights the dual lives—as both civilians and critical response
personnel—of the Army National Guard’s members.
With all the
uncertainty at the moment, Francisco didn’t rule out eventually having to tweak
the Army’s marketing strategy, but said, “Unless they decide to shrink the size
of our army … we’re still going to be marketing.”
DEI
crackdown causes anxiety
The Trump
administration has moved to implement an executive order to stop DEI programs
across the government and its agencies, and repercussions have already started
for some federal contractors, according to Dismas Locaria, a partner
at Venable in Washington.
“I am aware of
several contractors that have lost contracts, apparently based upon their DEI
posture,” said Locaria. “The threat is real.”
Agencies
working with the federal government that are still touting DEI need to figure
out if they want to “resist and put a foot down” or “risk looking misaligned
with the administration’s priorities” and lose out on opportunities, Locaria
said.
The crackdown
on DEI has also hurt morale at some shops.
The second
agency executive told Ad Age their employees were required to scrub their
pronouns from their email signatures, an order a few staffers took issue with
and pushed back on. “We had to say … ‘We understand this is very personal for
you, but this is a potential matter of our livelihoods, so we’ve got to play
ball,’” this person said. “Some people understand that, and some people really
don’t.”
What’s next
Agencies that
rely heavily on contracts with the federal government are rethinking their
growth strategies, according to Kapetanovic. Many shops, for example, are
looking to “parlay their federal experience into appropriate commercial
markets,” including high-regulated industries such as health care, financial
services and utilities, he said.
“That’s one
thing that a lot of these agencies are doing,” he added.
The third
agency executive said they are exploring more state-level contracting, citing
increased opportunities in states including Florida and California. “It’s
something we’ve been looking at for a while,” this person said. “As I've been
talking to a lot of my peers in this space, I am hearing a lot of, ‘We need to
be looking to state contracts.’”
This person
also noted interest in doing more commercial work but added that such a
transition won’t come without challenges. It “doesn't happen overnight,” this
executive said. “But the agile, smart companies that have the resources to
endure a painful three to six to 12 months are going to be able to figure out
how to do that.”
