LARGE, multinational advertising agencies are facing increasing competition from a new breed of agency: the small to medium-sized local start-up. Fast on its feet, competitively priced and eager to please, these agencies are beginning to have a real impact. Since 1990, more than 10 agencies have opened and this year more are expected to arrive on the scene. The entrepreneurs behind this boom are seasoned advertising executives who have worked for multinational agencies. Having seen a vacuum in the industry, these ad men have moved quickly to fill it. Mr Robert Lee and partner Alenn Woo are typical examples. After working for a multinational agency, they moved out and opened Senses Advertising in 1990. They realised clients had a limited choice of advertising partner. They could either go with a large, multinational, brand-name agency, or use a small creative shop that specialised in advertising production but could not provide all the services. ''That's one of the main reasons why there's been such an explosion in the number of mid-sized advertising companies now set up in Hongkong,'' said Mr Lee. ''Today's clients are realising it's no longer true that high-quality advertising can only come from the multinational agencies.'' Mr Lee also believes clients have become much smarter at dealing with ad agencies. ''Many of our clients also came from the advertising agencies themselves, so they know precisely what an agency can and cannot deliver. They set the standards and have high expectations based on their own experience, and if an agency can't deliver, they're fired.'' Multinational agencies are dropping the ball when it came to client servicing, he said. ''As financial targets set from headquarters become tougher to meet, the big companies take on more work, but trim the workforce. As a result, clients suffer.'' JRS was set up by three young executives who broke away from Ball Partnership. Ms Jesse Lam, a founder, believes small agencies fill an important void for many clients who feel intimidated going to a 4As agency with a small budget. She said many of the agency's clients have budgets of about $300,000-$500,000 per year and believed big agencies would not take them on, or would give them a low priority. ''That's why many come to us. As a small agency we can offer a very personalised service and very good prices, because our overheads are lower. ''All our clients are Chinese and most of the advertising we develop is in Chinese, and as our staff is totally Chinese, our clients feel more comfortable dealing with us.'' Mr Wilson Chan, managing director of Storm Communications, believes clients will defect to the smaller outfits in greater and greater numbers. ''Multinational agencies have brought much of this upon themselves. With the bean-counting mentality that seemsto govern the way they operate now, I believe they've become more tolerant of mediocre work. More work, less time to do it, fewer people to do it, just to balance the books. For a smaller company such as ours, we have the organisational structure and flexibility to give clients a much better level of service.'' Mr Keith Johnson started Mission less than a year ago and has grown to employ 12 people. He believes the future of the industry is in small, turn-on-a-dime agencies that can offer the full gamut of marketing communications services. ''The requirement of clients in the future is to deliver integrated marketing,'' said Mr Johnson. ''To us, the terms above-the-line and below-the-line are now obsolete, because we will consider every form of communications - not just advertising - when it comes to building the brand, which is what we are essentially here to do.'' He believes the trend towards smaller agencies is because they are more able to successfully deliver integrated communications. ''All our staff are integrators, but at the large agencies, each discipline [public relations, direct marketing and advertising] is its own profit centre, so they end up fighting each other for a bigger share of the budget, and this is not necessarily in the client's best interests,'' he said. As enthusiastic as these entrepreneurs may be about their business, they all agree there will always be a place for the big agencies. Said a Storm executive: ''Large agencies will always be highly desirable, relevant and effective for large multinational clients. Their worldwide networks can make it very cost-effective for a client operating in many countries. But these are not the kind of clients we are looking to work with. Small and medium sized agencies will capture an increasing share of the local, $2 million-to-$5 million clients.''