For all the flack the ad industry gets for being a prehistoric business heading for extinction, its biggest companies are proving hardy beasts.
With the exception of the embattled Interpublic Group, the owner of McCann Erickson, Lowe and FCB, the worldwide revenues of the big four groups grew encouragingly last year.
The largest, Omnicom, which houses BBDO, DDB and TBWA, saw revenues up 7.8 per cent on 2002. WPP, the parent of J. Walter Thompson, Ogilvy & Mather and Young & Rubicam and the second-biggest holding company, grew 7.3 per cent. Publicis Groupe revenues soared by 58.3 per cent, but this is deceptive as the 2002 numbers include only three months of Bcom3 revenues.
Interpublic, down 2.2 per cent, was one of only four of the top 20 groups to suffer revenue falls. But even at Interpublic the future is looking a little brighter - despite first-quarter losses for this year almost doubling on 2003, revenue grew 6 per cent. There was further cheer at Omnicom too, which announced a 17 per cent rise in its first-quarter 2004 profits.
But despite fuller coffers at the big groups, observers continue to question the viability of their agency networks. Lintas, Bozell, Bates, D'Arcy - all were once-famous agency brands that disappeared over the past decade.
And why? Not only because they fell victim to cost-cutting by their holding companies, but because global advertisers are willing to go for smaller agencies with big ideas that cross borders. Just as advertisers no longer need a factory in every country, nor do agencies need to have offices everywhere.
Mother is a good example in the UK. Outside Clerkenwell, the agency only has one other office, in New York. JWT, which lost Boots to Mother last December, has 312. Mother produced its first pan-European work for Orange last November and the recent "I wish" campaign for Coca-Cola is set to run in the US.
McDonald's surprised everyone when it chose the DDB-owned German agency Heye & Partner for its global repositioning campaign. The agency, which has three German offices and one in Zurich and Vienna, was picked over roster rivals that dwarf it, such as the mighty Leo Burnett Chicago.
Even in Asia, a market still new to brand building where advertisers usually go for the large networks, there have been some big victories for the smaller shops. The Singapore-based 10AM Communications' triumph in the regional pitch for Sony Ericsson was one of the biggest last year.
The case studies are piling up, adding to the legacy set by the likes of Diesel, which hired the Dutch hotshop Kesselskramer, and Puma, which uses the Philadelphia-based Gyro. But the breed of agency emerging on top is neither big nor small, but somewhere in between. Dubbed the "global micro networks", these agencies are known for their creative firepower and strategically placed offices.
Bartle Bogle Hegarty, Fallon and Wieden & Kennedy are the most prominent of the bunch. All three have offices in similar parts of the world not only as they are suitable locations for clients, but because most are recognised as cultural and creative hotspots.
BBH, part-owned by Publicis, has offices in London, New York, Singapore, Tokyo and Sao Paulo; Fallon, which is fully Publicis-owned, is located in London, New York, Singapore, Tokyo, Sao Paulo, Minneapolis and Hong Kong; and Wieden & Kennedy, the only true indie of the trio, is in London, New York, Tokyo, Amsterdam, Hong Kong, Portland (where the agency launched to service its founding client, Nike) and Shanghai. All have won global clients by proving they can crack the toughest of all briefs: advertising that crosses borders. Not easy, as Simon Sherwood, BBH's group managing director, says. "Producing good advertising is bloody difficult. Doing it across borders is much harder. Doing it globally is nigh-on impossible," he explains.
BBH has been showing the world how to do multimarket advertising well for some time now. Widely regarded as a trailblazer at the art, BBH's image-heavy, copy-light trademark style has meant its work, particularly Levi's and Lynx (Axe elsewhere), can run almost anywhere.
W&K has produced consistently exciting work for Nike and Vodafone in recent years, while on top of campaigns for Nestle's Purina Pet Care brand, BMW and Sony, Fallon's pan-regional advertising for United Airlines is also impressing on the international stage.
But how has the work been translating into new business? All three have reason to be pleased this year. W&K was unfortunate to lose its global Aiwa brief after Aiwa's parent, Sony Japan, took it inhouse, but the Portland office made up for it by landing Starbucks globally.
Fallon's Asian offices have been leading the charge for the network since London won the £70 million Sony Europe account. Fallon Singapore won Volkswagen across 44 markets in Asia, seeing off DDB and TBWA, while the Hong Kong office scooped the regional account for EDS.
BBH has been building its position on the Unilever roster at such a rate that it can't be called small for much longer. It won Surf in the UK and the US to add to Lynx, Impulse and Bertolli, is in contention for the global Flora business, and more could follow if Lowe runs into more trouble after a string of hefty losses. Bailey's, Hoegaarden and Mentos are other global briefs to go to BBH.
David Wethey, the chairman of Agency Assessments International, calls the rise of the micro networks "a tremendous step forward for the industry" but doesn't think they'll force their bigger rivals out of the picture.
"Crucially, they give advertisers another option," he says.
The big networks will eventually have to cut down on the number of offices and look to "hub and spoke", Wethey predicts, adding that WPP's Red Cell (which has 44 offices) will be the last agency launch we'll see on that scale.
But it's not going to be easy for the micro networks either. They know they could be crushed by one account move, so are under pressure to attract and keep the best talent wherever they're based, and produce consistently outstanding work.
John Gerzema, a managing partner of Fallon Worldwide, says: "It will be a continual struggle to earn respect. What we are offering is completely different. We all have to convince people of the mantra 'to outsmart not to outspend'."
Editor: Robin Hicks
Group Art Editor: Justin Marshall
Art Editor: Pat Brock
Production Editor: Michael Porter
Group Production Manager: Jane Emmas
Cover: Rose Hardy @ www.debutart.com
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