Y&L is picking a precarious time to expand. North American advertising spending overall is expected to be down 5.7 percent this year, according to New York-based advertising market research firm ZenithOptimedia. And U.S. online ad spending in the first quarter of 2009 will shrink year-over-year for the first time since the dot-com bubble burst in 2001, according to a recent forecast from IDC, a Massachusetts-based market research firm.
Young & Laramore, meanwhile, is rebuilding in the wake of the loss last year of its biggest account, Steak n Shake.
"These are the kinds of times when aggressive companies that push hard will expand and increase market share," said Y&L President Tom Denari.
Denari said the new division is not a reaction to the Steak n Shake loss.
"We've been contemplating this for almost two years," Denari said. "It's a strategic move."
Y&L's capitalized billings for 2007 before the firm lost the Steak n Shake account were $78.1 million, more than double the size of central Indiana's second-biggest firm.
Y&L executives say the firm isn't afraid to take risks in spite of its size and 26 years in business. The name of the new division, Here There Be Monsters, seems to affirm their claim.
"Here There Be Monsters refers to the warnings sea captains and map makers placed on old maps to denote unexplored or uncharted territories," said Y&L Associate Creative Director Bryan Judkins, who, along with Y&L's Trevor Williams, will direct the division.
"We realize the digital realm can be a scary place for some people, but we're going to explore it," Denari added. "That's what the name of the new division is all about."
The new division will be different from the mother ship in two significant ways. First, it will act as an independent boutique shop, focusing solely on things like package and display design, Internet advertising and Web site design.
Here There Be Monsters will focus on specific project work, not agency-of-record accounts like Y&L. Some of the new division's customers will come from Y&L accounts, but Here There Be Monsters will also venture out to work with other ad agencies on their accounts or sign deals on its own.
Like Y&L, the division will focus on large regional and national consumer brands mostly non-durable goods. The division, which was officially launched Feb. 27, already has several strong leads, including one for a private-label food maker, Denari said.
"We see design and digital issues becoming more important, and we wanted to organize ourselves to take advantage of that."
The new division could also be a good calling card.
"Sometimes, the way to get your foot in the door is design work," Denari said. "It gives us another way to approach large, national consumer brands and make ourselves known."
Due to overlapping skill sets, Denari said, it makes sense to combine digital and design into one division.
"We're starting with design ... the technology part of it should be seamless," Denari said. "We're going to be designing the experience first, and using technology to support the initiative."
Ray Begovich, a Franklin College journalism professor specializing in advertising and marketing, thinks Y&L's strategy is a strong one because there is need for expertise in the digital realm.
"So many people are so completely mystified by online marketing and advertising," Begovich said. "There's a lot of demand for a company that can handle the creative, back-end technology and the very complex task of digital media placement and evaluation."
Measuring the success of online ad campaigns will be among the division's biggest challenges, Begovich said. "TV has Nielsen, radio has Arbitron, and print has the Audit Bureau of Circulation," Begovich said. "So far, online advertising has no certified measurement standard and it makes determining value of ad placement and return on investment very difficult."
There are many firms trying to get a horse in the digital race, Begovich said.
"This is the new frontier and everyone is trying to get in," he said. "It's a difficult realm to succeed in, but if anyone can succeed, it's Young & Laramore. They have the resources and a proven track record."
Young & Laramore, which has 50 fulltime employees, has hired four computer programmers and designers and dedicated six employees to the division, with plans to add two to four more by year's end.
Though Y&L officials don't divulge revenue, Denari thinks the new division could eventually be at least as big as EchoPoint, which has 12 employees.
"Setting an artificial goal is not wise in a market like this, but we think its growth can be very strong," Denari said.
Indianapolis AdClub President Tom Hirons, who is also president of Indianapolis-based ad shop Hirons & Co., thinks Y&L's new venture has a solid chance at success.
"The digital sector has become well-defined and is moving toward becoming a fundamental requirement in any mature communications plan," Hirons said. "Now that it's evolving as a marketing and advertising medium, more people are realizing digital's unique production requirements. Young & Laramore has been very successful with their strategy with EchoPoint, and I'm sure they'll do well here."