San Diego’s climate and attitude is as far removed from New York City as one can get, but not so when it comes to the quality and creative breadth of the local advertising community represented on the 2012 San Diego Business Journal Advertising Agencies list. Many of the 25 firms on the list have been in the community for decades, embracing the dawn of the digital marketing age and thriving through one of the rockiest economies in history.

The list is ranked by income from services for 2011 defined as fees from services, plus net media commissions.

Participating for the first time on the list is Covario Inc. at No. 1 reporting a 14 percent growth in local revenue from 2010 to 2011.

“Six years ago we were a software company with 10 people working over a Regional Transportation Center garage in El Cajon,” said Russ Mann, founder and CEO. “Today we have more than 200 employees globally, 100 of whom are in San Diego and now we’re moving into our new space across from UTC.”

Making the Change

Covario’s metamorphosis from a software company in 2006 that provided SaaS (software as a service)-based systems to become a leading SEM (search engine marketing) and SEO service and technology firm working with Fortune 500 companies such as Intel Corp., Procter & Gamble and IBM is due to hard work, vision, and to some degree fortuitous market conditions.

“We realized in our early stage that to become a full-service ad agency we had to redefine the role of advertising,” Mann said. “Our customers were telling us that they felt that ‘half of their advertising dollars were a waste, they just didn’t know which half.’ ”

Mann added that what triggered their growth was an interest in digital marketing and in particular, the ever-changing landscape of digital marketing.

According to the company’s website, Covario measures and helps optimize more than $250 million in annualized paid media spend and more than 1,000 branded websites through its SEM, SEO, display, broadcast and social media ROI measurement technologies.

“We help our clients rank higher on Google, Bing, Baidu, Naver, Yandex, get more traffic, and penetrate social media,” Mann said. “Our software tracks and prepares the analytics and does all the work in terms of automating the process.”

Also profiting from the explosion in digital marketing is No. 2 ranked Underground Elephant. The company’s dramatic growth from 2010 to 2011 is a result of highly targeted marketing at precisely the right time using the power of social media, according to Jason Kulpa, CEO. Underground reported a 151 percent growth in local revenue from 2010 to 2011.

“It’s an awesome thing when you’re trying to target a certain person for a certain thing,” Kulpa said. “An example is a client looking to target a woman in the 18-22 age group, single, churchgoer — we can place an ad specifically targeted to that demographic on a sidebar on her Facebook page and other social media.”

The name Underground Elephant derives from ‘elephant’ for the memory part and ‘underground’ for the behind the scenes sales funnel, Kulpa said. Underground specializes in what Kulpa refers to as “life decisions” that are made on the Internet such as where to go to school, insurance — things you want to compare and make an informed decision regarding.

“We were one of the first to market in the social media space and now it’s really hot,” Kulpa said. “Facebook gives a clear picture of what a highly targeted customer is looking for and the result is that the product offerings got a lot better.”

Kulpa said that Facebook needs to change as social media is “starting to become ‘uncool.’” He thinks that Facebook is well aware of what the trends are in social media; “that’s why they just paid a billion dollars for Instagram Inc.” He doesn’t see the future in mobile advertising yet, commenting that no one has figured out how to effectively market on mobile.

“But they will,” Kulpa said.

40 Percent Growth

Formerly ranked at No. 1, Digitaria Interactive Inc., is now No. 3 on the list, and reported a 26 percent increase in revenue from 2010 to 2011. The 2011 revenue figure was approximated by the Journal based on an April issue of Advertising Age.

Daniel Khabie, CEO, says that 2012 is tracking on a 40 percent growth from 2011.

“The major component of our growth is our focus on verticals,” Khabie said. “The company is diversified in verticals such as professional services, the health and wellness space, social marketing/digital, and product development.”

Digitaria was purchased by JWT in 2010, which in turn is owned by the holding company WPP out of the U.K. JWT is one of the world’s largest advertising firms. However, Digitaria operates as an independent agency, Khabie clarified.

Digitaria, whose name comes from a previously undiscovered star which was unknown because its light was reflected on another star making it shine more brightly, was founded in San Diego in 1997. Digitaria merged with Console, a technology company, in 2006.

It wasn’t until 2006 that Digitaria took off as a full-service agency, Khabie said.

Khabie continued that Digitaria’s differentiator is that in addition to the full-service agency work, they help clients create products — digital products and physical products.

“We actually helped a client design a new dashboard,” Khabie said. “In addition, we have a fully-integrated CRM (customer relationship management) component with data analytics helping our customers transform new ways to market — we look at marketing through a digital lens.”

Khabie commented that the advertising market constantly goes in cycles and believes that more businesses will embrace digital to differentiate themselves in a truly innovative way.

“Just like Netscape was to the browser,” Khabie said. “Facebook will be to the future of marketing as more and more interesting points of connectivity and engagement emerge.”

MiresBall, also new to the list at No. 4, reports a 15 percent increase in local revenue from 2010 to 2011. MiresBall is not new to the San Diego advertising agency community, however.

“In spite of the recession, we have continued to grow,” said Jonathan Forstot, director of marketing. “We increased our staffing by 20 percent this last year and we’re still looking to add staff.”

Forstot added that the agency moved just over a year ago to space that is double the previous space to a building on State Street downtown that was home to a former coffin company that they “redesigned into an open, creative work environment filled with light and art.”

Scott Mires and John Ball founded Mires Design in 1984 and in 2006 rebranded the company to MiresBall and Forstot commented that “the best part of our agency is that the creative talents of both men touch everything that comes into the agency.”

Forstot continued that a strength of MiresBall is that they are not limited to advertising, they start at the beginning to develop a strategy, conduct extensive research encompassing all aspects of the project, and, most importantly, make sure that the recommendation is something the company can execute.