Ad agency shuts down
after losing big clients
Advertising agency AdWorks Inc. and its PRWorks public relations division closed yesterday, laying off two dozen workers in the wake of losing major accounts, including Castle & Cooke Resorts and AT&T Wireless.
"Today was the last paychecks for some of the people," AdWorks President Darrel Kloninger said yesterday. "We're keeping a team of five people on board for a period of time to make sure clients get their materials and that bills get out."
Medical coverage for those put out of work will be paid through the end of August, but there will be no severance pay.
AdWorks has long been ranked third among Oahu advertising agencies, with annual billings at or above $20 million, according to lists compiled by Pacific Business News.
Kloninger would not reveal the amount of the company's debts or assets, and said he has no plans to file for bankruptcy.
"I want to try to do it ... where I do a variety of things that pay as much as I can without getting involved with a lot of legal mechanics (and) lowering the amount of money that goes to the creditors," Kloninger said.
Part of the plan is to sell the fourth floor of Eaton Square at 444 Hobron Lane, which Kloninger owns under AW Inc., a separate corporation. It houses AdWorks' office space.
The 6,000-square-foot office has been on the market for four months, and Kloninger recently lowered the asking price to $1.25 million.
AdWorks recently lost a contract with Castle & Cooke Resorts to competitor Team Vision, and a large account from AT&T Wireless, which eliminated the contract as part of its merger with Cingular Wireless.
When Castle & Cooke left, AdWorks downsized. But "AT&T was the blow," said Kloninger.
"It's not just AdWorks," he said. "It's a prevalent thing."
Large local accounts -- such as Bank of Hawaii, Nissan and Hilton -- have been leaving Hawaii for mainland ad agencies, "so it's been tough times in the industry here," he said.
When major advertisers move accounts out of state, it is difficult for the local industry to recoup the losses, said Martin Schiller, a veteran advertising executive and owner of the Schiller Agency.
"Account movement like this is not good for our industry because our pie is only so large, and you cannot replace major clients, when they move to the mainland, with local clients," Schiller said. "It just doesn't work that way, and probably the most devastating effect is on staff that will not be able to find jobs that easily."
"It's so sad," said AdWorks Vice President Patrick Bullard. "I mean, Darrel Kloninger did everything he could for 40 years to do some great advertising and put some significant clients on the map in Hawaii, like Aston Hotels and Budget Rent A Car, and through just a chain of unforeseen events, it just kind of comes to an end."
Bullard's arrival at AdWorks two years ago made waves as he brought with him the seven-figure Papa John's Pizza account from Myers Advertising Inc. That and his other accounts will travel with him to a new agency, and by Monday morning those clients will "have a permanent home and they'll be quite pleased," Bullard said.
He declined to name the new agency.
Kloninger started in the local advertising business in 1962 and opened an in-house agency for American International Travel Service in 1968, but split off in 1970.
"This has been a great agency for a lot of clients, and a great learning ground for a lot of really capable young people who've gone on to careers in other agencies," Kloninger said.
The agency has won an estimated 50 advertising awards in the last 10 years, he said.
He began representing Budget Rent A Car in 1964 when the company in Hawaii had 110 cars. Aston Hotels signed up in 1969 when it owned three economy hotels in Waikiki. It now operates 34 properties.
"We also for 16 years did Hilo Hattie, from when they were a tiny operation in Kakaako called the Honolulu Fashion Center ... and saw that spread throughout the islands," Kloninger said. "I'm proud to have been a part of that."