Can Cheil move beyond Korea and Samsung?

Against the backdrop of Seoul's booming technology industry and the spreading phenomenon of 'K-pop', a confident Cheil is making concerted efforts to replicate its local successes abroad, Ian Darby writes.

D'Light store... highlights innovation
D'Light store... highlights innovation

The streets of Gangnam, Seoul, are flooded with young, well-dressed office workers mingling with the hip and wannabe hip. A digital screen strapped to an office block shows chunky local hero Psy performing the ubiquitous Gangnam Style. He might be having a laugh at their expense, but this doesn't seem to bother the well-heeled denizens of this part of town. Weaving between the high-rises and coffee shops, they seem more than a little proud that one of their own has become a global phenomenon.

The previous week, Psy had played a homecoming concert to an exultant 80,000-strong crowd in Seoul's City Hall Square. The singer is at the vanguard of the K-pop wave sweeping the world. This has its roots in a city with a population of more than ten million and a burgeoning cultural scene that expresses itself not only in the form of industrially packaged pop music but also in soap operas that are popular across Asia.

South Korea's other notable export is technology, with Samsung Electronics at the forefront of growth in the sector. The tech giant, part of the Samsung conglomerate that owns everything from a life insurance company to hotels and theme parks, recently reported record second-quarter profits of $4.5 billion. It may have been on the receiving end of a $1 billion US lawsuit brought by Apple (currently the subject of an appeal), but it's fair to say there is unstoppable momentum behind the behemoth.

Samsung's confidence is embodied in its prominent Gangnam office and the sprawling D'Light store and exhibition in the shopping mall below. Some 2,000 people each day take a tour around D'Light, which combines nifty interactive displays featuring Samsung's latest gadgets with self-justifying information about the company's contribution to the space race, medical world and environment. As such, D'Light resembles a big Apple store housing a corporate take on the Science Museum.

A short cab ride towards the river Han, which bisects Seoul to create a north/south divide not wholly dissimilar to London's, takes Campaign to the plush JW Marriott hotel to meet Jong-Pil Shin, the senior deputy director in the popular-culture industry team at the Ministry of Culture, Sports and Tourism. It's late afternoon and the lobby bar is buzzing with minor television figures and business executives sipping healthy juices and ginseng-based cocktails. Cheil Worldwide, the Korea-based agency, has arranged the interview, and a representative sits alongside to translate Shin's observations.

Cheil's client Samsung has a minority stake in the agency, and the ties are so close that many of the 1,200 staff at the Cheil Worldwide HQ in Seoul have e-mail addresses.

The relationship between Cheil and Samsung will prove to be fascinating but, for now, we're keen to talk to the government's representative (South Korea has technically been a democracy since 1987) about the boom in pop culture and how this might benefit the country's coffers and influence its advertising industry.

High passion, hi-tech

Shin argues that the K-pop boom, combined with a growing sense of Korea's status as a technology power, will boost the country: "In the past, we've mostly tried to promote Korea as dynamic, but the latest trend, with Psy playing a free concert to 80,000 people, blends this dynamism with passion - there's a growing industry in the passion of the country."

This sense of passion could influence the messaging of Korean advertising, and Shin points to soap operas, especially popular with young audiences, as a product-placement opportunity.

However, it is Korea's growing reputation as a technology hub that is perhaps having the greatest impact on its advertising industry, which for the most part has proved a closed shop to Western networks. The tech boom can be traced back to the Asian economic crisis of 1997 and subsequent IMF intervention to help Korea and other "Asian tigers" build an advanced infrastructure and diversify beyond traditional manufacturing.

This kick-start has helped Korea stay ahead of the curve. For instance, 4G was introduced in the country in 2006, a good six or seven years ahead of the UK.

It has also contributed greatly to the flavour of Korea's advertising, much of which seems to link traditional film and print formats with mobile and other interactive technology.

This impression intensifies on a tour of Cheil's offices on the north side of the Han. Samsung remains the agency's dominant client, and while this might have downsides (it's easy to see Cheil as merely an agency in name and an extension of the Samsung marketing department), it also has the effect of making Cheil, which is by far the largest agency in Korea, appear forward-thinking.

On the back of Samsung, it has built specialist teams in areas such as retail and brand experience that give it an integrated shape and allow it to create work that goes beyond traditional brand advertising.

Younghee Lee, the senior vice-president of mobile marketing at Samsung Electronics, says: "What we really concentrated on was strengthening the consumer relationship in all consumer touchpoints such as digital, shop and experience marketing."

Cheil's work for other clients also takes on this shape: its Cannes Grand Prix-winning work for the Tesco-owned Homeplus, for instance; or more recent work for Dunkin' Donuts, KT Corporation and the mineral water brand Minewater. This year, the Korea office landed 12 awards at Cannes across a range of clients, but Cheil still has work to do to diversify, especially overseas, where it has built a network of 55 offices on the back of its main client, Samsung.

Since 2008, Bruce Haines, the former Leagas Delaney and Leo Burnett UK executive, has been charged, first as the chief operating officer and now as the chief strategy officer, with helping to grow the network outside of Seoul under its "passion for ideas" banner. He reports to Nack-Hoi Kim, the Cheil Worldwide president and chief executive.

During his time in Seoul, Haines has developed a genuine affection for the country and believes that it, and Cheil, have many qualities that his team can export to clients.

"Even in Western markets, Korea is given credence for being at the leading edge of technology - there's a consumer acceptance (in Korea) of being sold to; but it's about the mobile and whole online experience, so we can go in with a Korean business card and talk about this area and are listened to. If we just talk about advertising, then they won't (listen)," he says.

In terms of Samsung, Cheil has built offices in the UK and other European markets on activity that is not traditional advertising. Indeed, much of Samsung's global brand work is handled by a roster of rival agencies that includes Leo Burnett, BETC and CHI & Partners. Cheil accepts this as inevitable and is now set to embark on a new-business drive to add non-Samsung work to its portfolio. Rivals believe that, with good global and local management in place, it will have a strong case.

Johnny Hornby, the founding partner of CHI & Partners, says: "There's a real opportunity for Cheil as it's doing some innovative stuff within Korea, and, with the confidence of Korean clients, it could export this. Korean companies have looked to Western agencies to help develop their global brands, but there's an opportunity for Cheil to bottle what it does in Korea and go out saying: 'Why don't you want some of this?'"

Cheil's plan is to build on its strengths in Korea - to grow its local offices on, as Haines puts it, "the interface between online and retail". He adds: "There's an attitude of: 'If something doesn't work, then let's try something else.'

"People don't stop to navel-gaze; there is constant movement. That dynamism is refreshing. We're not talking about the problem, it's about the future and how to make it happen."

However, Cheil does have its critics, who indicate that it could struggle outside Korea due to a lack of emphasis on creative standards. "It's an agency that isn't really an agency - most of the work is for one client. And most of the work is nothing to be proud of," one creative with experience of Cheil says.

This seems harsh given the award-winning work Cheil has created across clients in recent years and the abilities of the executive creative directors, Kate Oh and Thomas Kim. Oh's recent work for Samsung's camera range, culminating in the Insight Exhibition featuring photography by blind children, certainly seems something to be proud of.

However, Korea's fiercely hierarchical culture - expressed in severe deference towards authority and seniority - could prove to be a drawback in some overseas markets. Haines is adamant, however, that this won't be an issue. "We have to be global - a global company with an HQ in Seoul," he argues.

And this is seen in the recruitment of local executives to run local offices. Chris Harris, the former Leagas Delaney managing director, is the UK president, and his team includes the former Profero director Daniele Fiandaca as the head of innovation; Matt Pye, the former Ogilvy & Mather business director, as the managing director; and Logan Wilmont, the ex-DraftFCB executive creative director, in the ECD chair.

Investing in growth

Cheil also has investments in other agency brands that retain their own identities and distinct service offerings. These include a 49 per cent stake in Beattie McGuinness Bungay (set to become a majority holding in 2013). It also owns the US-based digital shop McKinney and recently acquired Bravo in China. In common with Western networks, it has identified China, along with India, as strong growth prospects, and the BMB brand could play a part in further growth in India following its 2010 launch in Mumbai.

This investment in non-Cheil-branded agencies, alongside a strategy to grow its own network, could propel Cheil into a larger role in the global ad market.

Yet, when considering the status of advertising in Korea, outsiders who have come into the market warned Campaign to avoid equating the boom in Korean pop and other mass culture with advertising, because conservative clients at the chaebols (the large, family-owned conglomerates such as Samsung, LG and Hyundai that dominate the Korean business world) often put the brakes on innovation.

It also seems that there is less Western influence on advertising in Korea than there is in, say, Singapore or Hong Kong. Those who know the market indicate that it's "Asia-heavy, not Asia-light". But, then, perhaps that's Seoul's attraction: authentic, restless and cutting-edge. Situated between China (and its 1.3 billion population) and Japan (which has invaded several times), and just 40 kilometres from the closed border with North Korea, Seoul has a dynamism all of its own - and a gritty, direct approach to creativity that some will find refreshing, others off-putting.

Samsung has thrived by exporting to Western markets. Now Cheil is attempting to prove that its brand of connected, integrated Korean advertising creativity can also catch fire in the West.

Population: 49.78 million*
GDP USdollars: 1.12 trillion*
Ad spend USdollars: 10.23 billion**
Internet users: 37.8 million***
Smartphone users: 26.2 million***
Sources: * World Bank; **ZenithOptimedia; ***eMarketer