Agency: Fallon London
By Arun Sudhaman, campaignlive.co.uk, Friday, 09 October 2009 12:00AM
By 2010, the Korean agency Cheil was hoping to be one of the top ten advertising companies in the world.
That goal no longer exists for Samsung's in-house agency, now ranked 16th among the global ad networks. It is tempting to view the shift in priorities as a casualty of Cheil's inability to compete outside of its Korean stronghold.
But that isn't necessarily true. Cheil's ambitions remain suitably, well, ambitious - perhaps befitting an agency that owes its success to Samsung, a company that can't ever be accused of diffidence.
After buying London's Beattie McGuinness Bungay last year and expanding it into New York, Cheil has its sights set firmly on becoming a global network that can compete with the big boys.
Neither is Korea's biggest agency alone. Recent months have offered ample proof of the designs that in-house agencies have on the advertising world.
First Hyundai revealed it was dropping the US incumbent Goodby Silverstein & Partners in favour of its own agency, Innocean, mirroring a similar move made in the UK at the expense of VCCP last year. Then Toyota threw its roster shops a curveball by announcing the formation of two dedicated in-house marketing operations.
The revival of the in-house agency owes everything to Korea, where they never really went out of fashion. They were a key feature of the traditional chaebol - Korean conglomerates such as Samsung and Hyundai - which, at their peak, led the country's economy.
Government-mandated restructuring of these conglomerates in the late 90s led to several in-house agencies being sold off to the likes of WPP and Omnicom, with exclusivity contracts in place to ensure the chaebol business tap was not turned off. When those contracts expired, though, many companies, including Hyundai, SK and LG, launched new in-house shops.
"For all its obvious faults, the chaebol business model still has a deep resonance with that generation of salary-men and, not least, echoes the ingrained need for a self-reliant and unambiguously Korean way of doing business," a Korea specialist at WPP explains.
Grey Korea's chief strategy officer, Steve Yi, is more direct, pointing out that the in-house agency is a means by which the parent company can ensure that adspending becomes a "revenue channel". In Korea, the strategy has paid off handsomely. "The volume of buying power is used by an in-house shop to place itself in a relatively high ranking to get invited to competitive pitches for other brands," Yi says.
It means that Cheil, according to its global chief executive, Bruce Haines, now counts 60 per cent of its Korean business from non- Samsung clients. Haines would dearly love to replicate this outside Korea, which is where this story runs into trouble.
"Despite brave attempts in the past to manage overseas media from Seoul, most chaebol with international advertising needs have become clients of the global media agency networks," the WPP source says. "This leaves the in-house ad agencies with an acute problem: without the control of media monies and selling largely inappropriate Korean-style creative in local markets."
Haines is nothing if not realistic about the challenges facing Cheil and in-house agencies in general. Outside their home markets, they are disproportionately reliant on their parent companies.
"Diversity is the driver for everything," he admits. "A downside of working with one global client is that many people with the talent we want are not attracted to such an agency."
This is best illustrated, perhaps, by the mediocre creative standards that continue to plague in-house agencies. "There's no doubt it's getting slightly better, winning some awards here and there, and getting a little bit of recognition at Cannes and some of the larger shows," Yi points out. "But notice that the in-house agencies usually parade work from their in-house client in a lot of these cases."
LG Electronics has a Korean parent that owns the in-house shop HS Ad, formerly known as LG Ad. However, Dominic Chambers, LG Electronics' European marketing director, says: "I don't believe in in-house agencies."
He adds: "It's hard for them to act as a usual marketing agency would because, inevitably, they get treated as an internal function and do not have the objectivity or skills from cross-brand experiences."
It is worth pointing out that not every in-house agency is created equal. Cheil, for example, has been actively courting the foreign media for several years, as it attempts to position itself as a more international player. Hyundai's Innocean, meanwhile, is viewed as being considerably more local in its outlook, despite plans for seven new international offices alongside the existing nine.
The transformation of chaebol marketing teams may offer the in-house agencies their best shot at global relevance. LG Electronics, for example, counts an Irishman as its chief marketing officer, and is increasingly being led by Koreans raised abroad.
Haines says this generation understands that making the parent company the priority does not necessarily improve standards at its in-house agency. "That thinking has gone, mainly because Samsung has changed so much," he explains. "But we would be pretty stupid if we made a move which wasn't designed to please Samsung."
That dichotomy haunts in-house agencies' every attempt at foreign development. The BMB buy is a tacit admission that the Cheil name does not appeal to Western clients; as BMB grows - Haines points to Sao Paulo and Mumbai as expected locations - the Cheil presence can expect to mutate accordingly. "In Western markets, it is quicker and easier to do it with a different brand," he admits.
"The other challenge is that ad agencies acquired by Korean ad networks face the possibility of a talent exodus," Yi notes. "Cheil and HS Ad will tell you they have changed for the better and are different, but it's a smokescreen for the instinctual make-up of a Korean conglomerate. You can make surface changes, but you can't take the chaebol culture out of these in-house agencies. It's like cutting off your right brain."
Regardless, the appetite for growth displayed by the in-house shops is being viewed with more than a hint of wariness by the international networks that count the parent companies as key clients. Toyota's US agencies, Saatchi & Saatchi and Team One, were reportedly bemused by the carmaker's appointment of its new in-house shops.
Hyundai has dropped local agencies in the US, UK and Australia in favour of Innocean. However, Haines denies that Cheil acts as an intermediary between Samsung Electronics and its global agency of record, Leo Burnett.
"For foreign agencies - both creative and media - in-house agency involvement remains a necessary part of securing the parent company's business," the WPP source explains. "While the chaebol agencies ruggedly pursue their own agenda ex-Korea, and yet, necessarily, seek partnerships with the global networks, the relationship between the two camps is bound to be strained."
But Haines, at least, believes there is one network that Cheil can learn from - Lintas, the original in-house agency that began life within Unilever, before being bought by Interpublic. "I have used Lintas as an example of how we can change," Haines says. "Maybe not its past couple of years, but certainly the first 50."
This article was first published on campaignlive.co.uk