Close-Up: Live issue - Omnicom tries to sort its direct and digital dilemma

Will Omnicom's merger of Claydon Heeley and Targetbase turn out to be a lifeline or a death sentence? Pippa Considine finds out.

Omnicom's Zulu network is no more. No-one seems remotely bothered about that, least of all the clients. The branding didn't mean that much to many people and the agencies under the umbrella, chiefly Claydon Heeley and Agency Republic, got on and did their own thing anyway.

But out from under the network banner, the plan is to make both businesses fly. Agency Republic will be part of the Republic Family, along with the interactive agency Weapon 7 and the technology outfit Code. The Republic Family plans to go abroad - New York in the summer, Asia next year.

Claydon Heeley, meanwhile, will become one with the US database marketing service provider Targetbase, sharing a P&L. Here, too, there are ambitions for relatively speedy worldwide growth.

Agency Republic definitely smells of roses. A really successful UK digital operation, it has plenty of momentum to take up the challenge of becoming a cross-platform creative agency. But Claydon Heeley is faring less well and has lost several chiefs in the past few months.

There might be a black-and-white logic to the Targetbase plan, but there are those who think that mixing a data-driven operation with such a creative agency means Claydon Heeley is doomed. It has been described by one industry on-looker as "a slow car-crash". Might this be an ill-thought-through answer to the question: "What do we do with Claydon Heeley?"

"This is absolutely not a defensive move," Leo Campbell, the deputy chairman of Claydon Heeley, says. "The agency is not going to disappear. The whole point is about its DNA, its creativity and reputation, and giving it a platform."

Targetbase is a highly successful analytical operation in the US, one of Omnicom's fastest-growing companies. The logic is that its data expertise will give Claydon Heeley new momentum, while Targetbase will get the ingredient needed to make it an interesting global network. The DM agency will endow it with the magic of creativity in return for some hardcore data-crunching facilities.

Whether the Claydon Heeley name stays or goes is in the air. Given the international nature of the venture, however, it's quite possible that it will rebrand as Targetbase sooner rather than later, ensuring a harder sell of its sophisticated data analysis approach. After all, Targetbase has proven itself to be a star in the US.

It's certainly a risk, especially when there doesn't seem to be anything fundamentally wrong with Claydon Heeley, which has been a strong contender in the market for many years. Omnicom bought it as a sales promotion agency in 1998 for more than £20 million; in 2004, as Claydon Heeley Jones Mason, it was Campaign's Direct Agency of the Year; in 2006, it was runner-up. True, it had a slow start in 2007 and lost the chairman, Jon Claydon, and the Zulu Network chief executive, Martin Brooks, last summer, with the managing director, Mike Welsh, now off to Craik Jones Watson Mitchell Voelkel. But it still seems to be going along fine, respectably profitable and with a client list including PlayStation and Egg.

However, just last week it lost the Mercedes-Benz client because part of the reorganisation involves the account moving to Weapon 7. Several staff will move with it and the agency will work very closely with Agency Republic, which has produced highly acclaimed digital work for the automotive giant.

The explanation for the move lies in a potential client conflict, as Targetbase has Honda as one of its clients. However, some sources believe that, under the terms of the new structure, Omnicom agreed that Mercedes' global advertising would be kept within the group. Either way, for now, it weakens Claydon Heeley in the UK.

Jon Claydon, now the chairman of the digital start-up Work Club, believes that whatever the ins-and-outs, the new incarnation of Claydon Heeley is critical and runs consistent with its 17-year track-record of reinvention.

"The agency's had five or six different iterations in its history. This is just the latest and I believe potentially the most powerful. It has had the creativity, buzz, energy and planning skills, but always struggled to build a market-leading data and analytics resource. And that's what Targetbase brings."

For Omnicom, this gives it two international operations, with digital at the heart of one and data the cornerstone of the other. The new chief executive of the Republic Family and former Zulu chief executive David Eastman, who came on board in August, claims responsibility. "I was given fairly free rein," he says. "My assessment was that we had two businesses rather than two integrated businesses ... the best idea was to split it into two; one focused on digital and one on data and direct. As clients become more data rich, Claydon Heeley was in danger of answering questions that clients had stopped asking. We needed to keep the creative DNA and make them into a future-facing agency."

There seem to be many good reasons for giving each agency its own space. Agency Republic was born out of a joint venture between Claydon Heeley and seven years ago, originally staffed almost entirely by Claydon Heeley people. As demand for digital grew, Claydon Heeley's clients were naturally referred to the sister agency.

But this had the side-effect of delaying Claydon Heeley's own development in digital and building resentment and tension between the two outfits.

Thirty-five per cent of Claydon Heeley's revenues now come from digital, so the two agencies are in direct competition. Without influential leaders, the task of managing the tension was increasingly difficult and nonsensical.

But it will take an equally skilled management to steer the melding of Targetbase and Claydon Heeley. Chris Gordon, the former global chairman of Rapp Collins, is the new chief executive of Targetbase International.

Gordon is clearly qualified to take on the task of developing an international network - he's been working at an international level within Omnicom now since 2003. And as a WWAV Rapp Collins man since 1992, he undoubtedly has a thorough grasp of the business of a direct agency.

There are, however, doubters who think that he is not cut of the right cloth to keep the maverick, creative nature of Claydon Heeley working its magic, especially during a huge moment of change involving a fundamental tenet of the agency's proposition.

However, Gordon is bullish about the job: "I'm extremely excited about the opportunity to bring Targetbase and Claydon Heeley together. For me, it fits exactly." He talks about his own "entrepreneurial nature", highlighting the launch of WWAV in Scotland and his pre-agency experience, when he helped launch a successful upmarket timeshare business.

He also dismisses there is a culture clash between Targetbase and Claydon Heeley, saying: "Actually, in terms of individuals and culture, they are surprisingly similar."

People from the 110-strong Claydon Heeley office have visited the 300-strong Targetbase HQ in Dallas, Texas and apparently hit it off. The next stage is for a handful of Targetbase people to relocate to London, before a number of Claydon Heeley staffers are exported to the US. If this works out, the idea is to roll it out into four or five key markets within the next 18 months.

The small matter of a partnership between the Omnicom DM agency Proximity Worldwide and Targetbase, announced in 2001 as "an important new global partnership" and apparently not officially extinguished, has yet to be resolved.

There is a lot that needs to be straightened out, not least of which will be the new corporate personality, but the gamble may pay off. "Claydon Heeley's like a shark; if it stops moving it dies," Claydon says. " If the two cultures can be melded sensitively - and I think Chris Gordon is absolutely on top of this - the potential is enormous."