Cheil Communications Inc is not only the largest advertising agency in Korea, but, as an affiliate of its largest client, Samsung, it is also one of the more controversial. While it has dominated the Korean market through a host of domestic and foreign brands, so far it has been unable to replicate that success internationally with other clients. In recent months, Cheil has revamped many aspects of its international network, but will this be enough to see it emerge internationally from under Samsung's shadow?
Cheil is a full-service agency with public relations and exhibition arms, and clients outside Samsung that include Daewoo. It is part of a major Samsung-owned conglomerate, which was established in 1954 as a wool textiles manufacturer. Its sports marketing services include high-profile and hugely successful Olympic Games initiatives - an array of talents which no doubt appeals to clients the size of Samsung and Daewoo. With more than 30 years' experience as Samsung's in-house agency, its brand knowledge is unparalleled. It's also a major spender in the world's seventh-largest ad market, with billings of more than $700 million.
With a net income for 2003 at $42.2 million, Cheil's domestic superiority is undeniable. But while it continues to handle the vast majority of Samsung's Korean accounts, it has had to share responsibilities for the global brand marketing campaign for five years now, first with FCB and now, after a protracted account review, with WPP.
The very concept of an in-house agency riles many in the industry. The special status such agencies enjoy, and are perceived to enjoy, is a poor way to ensure the best creative results, critics say. Moreover, Cheil's lack of experience in the world of global advertising has weakened it creatively, they add.
This perception leaves Mac Jeffery, a Cheil vice-president who splits his time between Seoul and New York, somewhat perplexed. He points out that not only is Cheil publicly listed in Korea, with Samsung only a minority shareholder, but its relationship with this client/owner is by no means as comfortable as some believe. "Samsung is not running a charitable operation," he says. "Cheil is still expected to reach performance targets." He admits, however, to a "slight advantage".
"All things being equal between agencies, Samsung will choose Cheil, but we still have to pitch," he says, citing Samsung's decision to award its global brand marketing campaign to WPP.
Quite how far this largesse towards a wider industry extends is debatable, though. Now the dust has settled on the Samsung review, it is clear Cheil's importance was greatly underestimated. WPP only controls the global brand marketing - the remainder of the account split is muddied, to say the least. And with many Samsung executives owning sizeable personal stakes in Cheil, it's doubtful if the ties that bind the two companies will ever be loosened entirely.
And the jury is also still out on Cheil's ongoing international push, with critics pointing to limited international services and clients in spite of 22 offices in 18 countries (including China, the US and the UK).
But Cheil has come a long way from the days when its currency as a creative agency was low. "Originally, Cheil was not in the market, so it did not have to bring in the best people," one source says. "The internationalisation of Samsung has forced Cheil to gear up."
No understanding of Cheil would be complete without taking into consideration the economy it emerged from, Maurice Levy, the chairman and chief executive of Publicis Groupe, says. "It has achieved a remarkable position in the Korean market but while it is well suited to Korea, internationally it is still a baby."
That said, 40 per cent of Cheil's revenue is now generated overseas - a far greater proportion than any comparable Asian agencies, although this figure is constituted almost entirely of Samsung accounts. Jeffery points to Cheil's choice of New York for the location of its global strategy centre as also indicative of a more international approach. Non-Koreans such as Joe McDonaugh, formerly of Ogilvy & Mather's Los Angeles office, have been added to Cheil's creative team. "Cheil realised that if it put that office in Korea, it would be too Korea-centric. To get the talent you have to be based in a big ad market such as London or New York," Jeffery says. But still the critics carp, arguing Cheil's work falls far behind its major rivals. "Domestically, no-one can touch it, but internationally, it is doing mostly co-ordination work and lacks services," one signs off.
With WPP now on Samsung and talk of local agency appointments to come, Cheil urgently needs to extend its fame beyond its Samsung client.
1973: Established as an affiliate of the Samsung Group
1988: Opened first overseas office in Japan
1989: Opened offices in London and Frankfurt
1990: Rebranded as Cheil Communications Inc
1998: Listed on the Korean Stock Exchange
2002: Became the first Korean agency to break the one trillion Korean
won mark in annual ad transactions
2003: Ranked 18th-largest agency in the world by Advertising Age
2004: Opened Milan office