NEW-MEDIA'S SURVIVORS: Now that new media isn't the flavour of the month, international holding companies' digital ventures must stand and be judged

It seems only a short time ago that an "e" or "i" before everything

was seen as the sure-fire way to success in the digital age. And for the

world's largest communications companies, these letters spelt new

revenue streams and a mad scramble to build new-media expertise to pull

in this lovely new revenue.



The global holding companies ploughed millions into developing or

acquiring new-media specialisms while the bandwagon was still steaming

ahead. With hindsight, though, and as losses mount, many of those

investments are beginning to look a little foolhardy.



2000 saw the end of the new-media gold-rush and, just as they had

flocked to erect digital networks to service their increasing customer

needs 12 months earlier, so most of the major advertising networks have

had to cope with the fallout of what had been an over-hyped market.



The subsequent reality check has affected different agencies in

different ways, depending on their level of new-media investment and

geographical spread. Some agencies seem to have ridden both the wave and

its fall fairly well, others are now really starting to count the cost

of a knee-jerk strategy.



So, with the benefit of hindsight and in an industry still reverberating

from the bursting of the dotcom bubble, which types of operations have

proved to be the most effective and which holding companies have managed

to turn their investments into sound businesses despite the dotcom

downturn?



Well, despite the sweep of redundancies and belt-tightening, the bigger

advertising networks are still managing to maintain large digital global

networks. IPG's Icon Medialab, a Swedish-based company, has the biggest

army of staff of any of the global digital ad networks and claims to

handle most of its clients on a global scale. But scale and consistency

are clearly no panacea to profit. Despite IPG's continued investment,

Icon Medialab reported losses of about $240 million for 2000, and

proving that even the biggest holding company can make the poor

strategic decisions, IPG's other major new-media investment was the

e-business consultancy, marchFIRST, which filed for bankruptcy earlier

this year.



IPG's acquisition of True North in March this year also gave the company

a 43 per cent share in Modem Media, which continues to function as a

strong and established new-media brand across the globe. However, it is

yet to be decided how Modem will fit in with other new-media shops in

the IPG stable, namely Zentropy Partners, and this is something IPG must

now move quickly to address.



WPP's investments have so far proved a mixed bag. WPP.com's Ogilvy

Interactive, which has a workforce of more than 1,000 around the globe,

has a formidable reputation for both online marketing and its e-business

interfaces and strategy. Ogilvy Interactive enjoys the security of

long-standing clients, which include IBM and American Express. In terms

of new-media brands that maintain a link to their parent agency, Ogilvy

Interactive is probably one of the best examples. It has a persuasive

positioning, an established hold on the market and appears well placed

to meet its needs.



Conversely, WPP.com's other new-media brand, digital@jwt, suffers from

an identity crisis within the business world. Many industry watchers

don't seem to understand what part of the market the network operates

in. The group, which has a global strategic alliance with WPP.com's

digital outfit Syzygy (which only spans three countries), provides

strategic e-business services but out-sources its production needs to

external agencies, usually Syzygy. It has failed to communicate its

proposition and has lost ground to some competitors as a result.



Of the last of the big three holding companies, Omnicom's scattergun

approach has reaped rewards but has also led to some costly

retrenching.



Tribal DDB is Omnicom's fully owned, global digital services agency. Its

specialism tends to vary from country to country - in the UK, for

example, it specialises in media. The network has come a long way since

its early days as BMP Interaction. BMP TVI, which handles interactive TV

solutions for clients in the DDB network, was also spun out of the

network. The Tribal brand was created last year and now all of DDB's

digital interests are collated into the one network which should start

to pay dividends in terms of positioning and consistency of

offering.



Omnicom first ventured in to the new-media arena when, under John Wren's

impetus, it bought significant minority stakes in six of the brightest

US online agencies in September 1996. Shops including Agency.com, Think

New Ideas and the (now troubled) Razorfish were brought in under the

Communicade umbrella.



In many ways, Razorfish epitomises the end-to-end digital solutions

companies that marked the arrival of the new-media service agencies

three years ago and its subsequent fate has mirrored what has happened

in the wider new-media industry. Its approach, which at the time of its

formation was everything from back-end solutions to front-end creative,

typified many of its peers. It mushroomed into more than 13 markets

within 12 months of its inception and came to represent the overly

ambitious investment programme followed by so many others.



The agency shed more than 600 staff during the past year, has just

closed three European offices, including London, and is constantly

plagued by rumours that it is either on the verge of going to the wall,

or about to be merged with Organic, Omnicom's smaller digital agency

network. Omnicom's Agency. com has also seen its staff numbers ravaged

over the past year, but the network has responded by refining its

offerings and bringing its US-based digital marketing brand, I-traffic,

into the UK. Omnicom created a new agency model at the beginning of the

year by merging some of Agency.com's resources with those of the direct

marketing agency Claydon Heeley Jones Mason - a model coined by Havas

with its ehsrealtime merger.



Havas also owns the world's second-largest new-media network - Euro RSCG

Interaction, which has a global staff of more than 1,500. The network

has a number of other new-media brands, but none as comprehensive and

all-encompassing as the Interaction network. Its broad range of services

has made it a major player since its launch in 1997.



Of the smaller players, many have found that their size and lack of

advanced strategy have ironically helped them weather the downturn

better. At least they have not been so crippled by the cost of

redundancy and have fewer excesses.



Of the media independents, the most significant is probably Carat

Interactive, with 16 offices around the world. The company has become

one of the biggest interactive media buyers.



Tempus has built its digital offering through a series of smart

acquisitions and the resulting Outrider network has grown from being

primarily a investor in new media shops to a comprehensive network of

new-media operations.



It now stands as a well-integrated digital marketing agency.



Each of the networks' offerings is still in a transition phase, with

many not even clear yet on the type of service they should be offering -

from consultancy to creative and media solutions and technical support -

or how to best position that alongside the conventional advertising

offerings of their sister agencies.



The industry is also new and nebulous enough to make any real comparison

of financial performance across the groups difficult and relatively

meaningless.



The strength of individual local offices and the extent to which they

are fully fledged operations, rather than one-man units called in to

offer a new-media vision in new-business pitches, is hard to fathom.



But now is the time when companies in this area will sink or swim as

clients cut back their investment and demand accountability. And the

best measure of whether companies have made successful new-media

investments is, sadly, likely to be redundancies and office

closures.



AGENCY NEW-MEDIA BARONS RANKED BY STRATEGIC ABILITY



1. Eric Salama - WPP.com



Although WPP.com is only a holding company for all of WPP's new-media

properties, ask anyone anywhere in the new-media chain within the

network and they'll direct you upstairs to the chief executive officer,

Salama. WPP.com was set up in the summer of 1999 and under Salama's

direction has built an impressive web of global new-media brands.



2. John Zeigler - DDB Worldwide



As the director of digital strategy at DDB worldwide, Zeigler was

responsible for the consolidation of DDB's existing entities into the

new Tribal DDB organisation, as well as its strategy for the acquisition

of smaller new-media independents to form global forces such as

Razorfish and Agency.com. He also launched and oversaw DDB's first

interactive offering way back in 1994.



3. George Gallate - Euro RSCG Interaction



Gallate has been in Euro RSCG's ranks for the past 14 years and, as well

as being the chief executive of the digital network, he is also the

global account director on the agency's Intel client. Credited with an

early understanding of the importance of integration, Gallate has been a

key figure in the creation of Euro RSCG's interactive marketing network

across the globe.



4. Rens Buchwaldt - Icon Medialab



Despite the size and grandeur of Icon Medialab, it is not one of the

most prestigious new-media agency brands. However, it has an

unparalleled record for handling business across borders and as the

global chief executive officer, Buchwaldt has successfully steered the

Swedish-based network on a solid - although as yet unprofitable - global

course.



5. Rob Norman - Outrider



Norman was one of the main forces behind the growth of Outrider from the

holding company that it began as in 1998 to the integrated digital

marketing agency it has become. As its chief executive he oversaw

Tempus' shrewd investments in Good Technology and, most recently, the

new-media marketing agency Incline.



6. Sarah Fry - Carat Interactive



Fry is an old timer at Carat and was one of the guiding forces in the

formation of Carat Interactive out of Carat Freeman. Before taking the

reins as president at Interactive, she was the managing director of the

business-to-business and interactive services media divisions at the

traditional media agency and has been central to the growth of Carat

into one of the - if not the - biggest interactive media buyers.



7. Alastair Duncan - Zentropy Partners



Duncan has been working in the interactive field since 1990 and

spearheaded the launch of IPG's Zentropy Partners network as its

managing director. Although based in the UK, Duncan has also been a

force in bringing together skills throughout the network on a global

level.



8. Jason Goodman - Tribal DDB Europe



Goodman, an old timer despite his young years, has been with the DDB

network since its early days as BMP Interaction and as its president of

Europe he is considered both a domestic and global player in terms of

digital.



9. Marc Landsberg - Bcom3



This is Landsberg's second tour of duty at Bcom3 after leaving to start

his own web company and then returning. As the executive vice-president

for internet strategy, Landsberg is responsible not only for Bcom3's

Starcom IP brand but also the D'Arcy Interactive network worldwide,

which is in the process of realigning its disparate brands, which differ

in each country.



10. Gilles Elalouf - Publicis



As the director of interactive strategy, Elalouf oversees the

development of Publicis' digital strategy across the Saatchi & Saatchi

and Publicis networks. There is no Saatchi & Saatchi global digital

brand, but the agency works on digital projects with an integrated

policy, mixing traditional and new-media skills.



HOLDING COMPANIES AND THEIR MAJOR NEW-MEDIA BRANDS

PARENT AGENCY/Key clients TOTAL NUMBER TOTAL

GLOBAL OF CLIENTS

STAFF OFFICES IN FIVE

(OR MORE)

COUNTRIES

IPG ICON MEDIALAB 1,600 19 100

Sony Computer Entertainment,

Motorola, Siemens Medical

MODEM MEDIA (owns 43 per cent) 664 8 11

Citibank, Delta Air Lines,

Friends Provident, General Motors,

Unilever, IBM

ZENTROPY PARTNERS 550 12 5

Unilever, General Motors, Reebok,

L'Oreal, Emap, Coca-Cola

WPP.com OGILVY INTERACTIVE 1,000 38 5

IBM, American Express, Unilever,

Kodak, Nestle, Glaxo SmithKline

DIGITAL@JWT 250 n/s 5

Kraft, Ford, United Distillers &

Vintners, Unilever, Siemens

MDIGITAL 170 n/s 15

IBM, American Express, Ford,

Volvo, Nike, Kimberly Clark, Kodak

DIGITAL EDGE 150 20 6

Ericsson, Accenture, Colgate,

Xerox ,Chanel

Omnicom AGENCY.COM 1,100 12 10

Compaq, Adidas, Interbrew,

One2One, Reuters, Mviva,

Cable & Wireless

RAZORFISH 670 13 n/s

Glaxo SmithKline, Ikea,

Cisco Systems, Ford

ORGANIC 550 n/s 4

DaimlerChrysler, BT, Sony

PlayStation, Tommy Hilfiger

TRIBAL DDB 500 21 4

PepsiCo, ExxonMobil,

Anheuser-Busch, Kelkoo, Vodafone,

Volkswagen, Credit Suisse

Havas EURO RSCG INTERACTION 1,528 45 9

Intel, Peugeot, IBM,Volvo,

Visa, Orange

Publicis PUBLICIS NETWORKS 550 19 3

Renault, Nestle, Garnier,

European Central Bank, BT, BMW USA,

Deutsche Bank

Bcom3 D'ARCY INTERACTIVE 460 24 3

Fiat, Mars, Philips

STARCOM IP 114 8 6

Nintendo, Kraft, Fiat, McDonald's

Grey GREY INTERACTIVE 900 28 4

Glaxo SmithKline, Mars, Pedigree,

Lloyds TSB, Autobytel,

Whitbread, Fiat

BEYOND INTERACTIVE 400 23 10

Hasbro, Playtex, Canon,

Glaxo SmithKline

Cordiant CCGXM 400 12 9

Cordinant/ Singapore Airlines, Visa, Compaq,

Publicis Hyundai, Zenith Interactive

Solutions, Lloyds TSB, 40 8 None

Kingfisher

Aegis CARAT INTERACTIVE 200 16 8

Philips, Adidas, Pfizer/Warner

Lambert, Xerox, Radio Shack

Tempus OUTRIDER 300 11 5

IBM, Audi, Direct Line,

Nationwide, Telia



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