TIME EUROPE
APRIL 3, 2000 VOL. 155 NO. 13
The New Ad Ventures
Hot advertising agencies with global ambitions see London as their biggest challenge. But is it?
By CHRISTINE WHITEHOUSE London
Most of the thousands of ads seen on American network television each year are instantly forgettable. But a few ads--and ad agencies--buck the humorless, hard-sell trend. Consider these. A gay couple gaze into each other's eyes and talk about commitment while buying a dining table (created by Deutsch Inc. for Ikea). An hiv-positive man runs 120 kms a week and finishes 10 marathons a year (Wieden & Kennedy for Nike). A beautiful transsexual lets, well, her hair down in a hotel room (Fallon McElligott for Holiday Inns).
Once dismissed as interlopers on pitch lists--too outrageous, too small, too parochial--these feisty, fast-moving agencies have since bagged an impressive number of blue-chip clients: Coca-Cola and Microsoft by Portland, Oregon-based Wieden & Kennedy; Lee Jeans, United Airlines and Timex by Minneapolis' Fallon McElligott; Mitsubishi, Pfizer and Tommy Hilfiger by New York's Deutsch. They've also garnered an impressive number of awards and accolades, earning the grudging respect of the monoliths on Madison Avenue. They are now leading a new wave of small, independently minded, creatively driven agency brands--others include German agencies Scholz & Friends and Springer & Jacoby, and Australia's The Campaign Palace--seeking to expand their horizons. And "a natural first step to becoming a global agency," says Deutsch's CEO Donny Deutsch, "is a London office."
British advertising is generally acknowledged to be the best in the world. For the past five years London agencies have picked up the lion's share of the Lions at the Cannes International Advertising Awards, the industry equivalent of the Oscars. Foreign agencies are eager to soak up some of that creativity. The U.K. market is also highly competitive, and most admen can't resist a challenge. "There's a feeling of 'If I can make it there, I'll make it anywhere'," says Martin Jones, managing director of the Advertising Agency Register, a service that matches clients with suitable agencies. Adds Hugh Derrick, managing director of Wieden & Kennedy's London office, "We wanted to learn from and contribute to a center of excellence."
More importantly, there's an economic imperative. Ad agencies are coming under increasing pressure from their clients to service them on a global basis. Since English is the lingua franca of international business, more and more multinationals are siting their European headquarters in or near London. Kate Robertson, CEO of Scholz & Friends U.K., says that before her office was set up in 1998, Scholz had to pass up important accounts because they didn't have a London operation. The agency has since worked for Toshiba on a major pan-European campaign.
Another factor is e-business, which is predominantly international and is mushrooming. Simon Anholt, chairman of World Writers, a London-based creative consultancy, charges that the ad industry has failed to keep pace with a growing demand for international competence. Of tens of thousands of ad agencies worldwide, over 95% are domestic agencies serving only the country, region or city in which they are located. Big corporations that want global campaigns usually approach one or more of 20-plus traditional networks like Young & Rubicam or Ogilvy & Mather that maintain full-service branches in every major city of the world--and then some.
While such global shops are perfectly adequate to fulfil the needs of an IBM or a Unilever, their bureaucratic, often cumbersome structure makes them less suited to an emerging, high-speed industry such as dotcoms, where advertising a product or service just a week behind a rival could mean the difference between success and failure. Such clients appreciate small agencies because they can command the faithful attention of the top talent.
But the greatest lure of the independents is their reputation for creativity. The most dynamic, energetic, exciting people tend to want to work for agencies with names like Blowfish, St. Luke's or Mother, not for large, faceless firms whose names are a string of initials of people that no one can remember. Fallon et al have built their reputations on "edgy," irreverent work that uses offbeat, sometimes gross humor. The conundrum they face is: how to increase their size without getting stodgy. Says Anholt, whose book, Another One Bites the Grass, looks at the cultural minefield that is international advertising: "Few network agencies are able to maintain that sort of risk-seeking passion in dozens of different countries at the same time."
Donny Deutsch insists that he is not about to follow in the footsteps of his compatriots J. Walter Thompson, whose arrival in London way back in 1899 was just the first step toward building a network of 255 offices in 88 countries. Deutsch talks about eight gateway "hubs" strategically located throughout the world to service 80% of marketers. Besides the current four offices in the U.S. to service the huge domestic market there, there will be a London office, which opens in late spring; one on mainland Europe; one in the Pacific Rim; and one in Latin America. "That's all you need for true global reach," he says, predicting that it will take five years to build.
But analysts estimate that it will take most small agencies double that time. A start-up in, say, Asia can create "a very big cost base without commensurate revenue benefits," says Lorna Tilbian, media analyst at WestLB Panmure. Many outposts, especially those with no referred business from their "lead" agency, don't break even until their third year of operations. That crushing commercial calculus is pushing even fiercely independent firms like Fallon to surrender their freedom. Last month, the agency was snapped up by French advertising giant Publicis, which has a decidedly less cutting-edge reputation. Maverick founder and chairman Pat Fallon defended the decision as the only way to finance his goal of building a global network of 10 to 12 offices within three years. Fallon will keep its name and operate as a separate unit within Publicis. "It's a new kind of network for the 21st century," he explained.
Perhaps. But many in the advertising industry will remember him as the man who once famously said that submitting an idea to a management committee at a big agency was like having your work bitten to death by ducks. Other independents will feel the pressure as they too get picked over by giants that are out shopping. For many of the hottest small agencies, the biggest challenge may be to stay that way.
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