A Look at the Industry Leaders
Who could have predicted the Internet would become the hot advertising medium it is today? Who could have foreseen the interactive explosion? The Net spawned many new shops and motivated more traditional agencies to reinvent themselves.
Adweek presents seven shops, in no particular order, that have not only embraced this new technology, but are thriving on it. Some have grown organically, some are fiercely independent, others have received cash infusions from giant holding companies.
While their specialties and creative approaches may differ, all, we believe, will play a vital role in Web advertising in the 21st century. All share the savvy necessary to build the brands of the future.
Be it Boston-based Bronnercom or New York's Agency.com, the shops we profile have a proven track record of integrating marketing, advertising and the Internet. "The best way to predict the future is to invent it," wrote Alan Kay, a co-creator of personal computing. We agree. And we suspect the hot shops in these pages are doing just that.
Despite his well-earned reputation as agent provocateur and new media iconoclast, Agency.com co-founder and CEO Chan Suh readily quotes analog advertising pioneer David Ogilvy when asked about the current state of interactive advertising.
"The consumer is not stupid," Ogilvy said. Yet the industry, says Suh, is treating them as if they were.
"I think a lot of marketers and agencies today believe consumers can be treated like a bunch of eyeballs," says Suh. "If you tell them something often enough and long enough, they'll believe it. How disrespectful is that? Who do they think they are?"
For Suh, meeting consumers on their own terms has been paramount since he and partner Kyle Shannon, the company's chief creative officer, founded Agency.com in 1995.
The now-legendary birth of their interactive services shop--born before there was an Internet, let alone online advertising--created the paradigm in many ways for the meteoric rise of other online advertising and new media marketing companies. All were spawned in the wake of Agency.com.
While Agency.com nimbly crossed uncharted territory in the early years of so-called interactive advertising, i.e. banner ads, the company gained serious credibility from early naysayers by winning accounts from buttoned-down clients such as British Airways and MetLife.
However, it wasn't until giant advertising holding company Omnicom stepped in last year with a substantial investment that Agency.com came into its own.
A string of mergers and acquisitions throughout 1998 was capped by last month's initial public offering, through which the company hopes to raise $75 million.
Last year, the company reportedly earned $72 million in revenues from its headquarters in New York's trendy NoHo neighborhood--not bad for a firm that started in cramped, bartered digs in a loading dock in the Time/Life building with $80 and a Mac.
"There are companies we talk to that say, 'We like to be second in everything. That way there's no risk, and there's always an assured market,' " says Suh. "But this Internet thing has made it imperative that you take the lead, and people are feeling that."
Indeed, even as recently as three years ago, there was more wiggle room for interactive services companies to fail, or, at the very least, get gobbled up by the competition. The difference today? There's real money at stake, and the potential windfall appears to be turning into reality.
But what Suh values most is freedom.
Agency.com doesn't have to abide by the same antiquated rules that apply to the interactive shop's traditional advertising counterparts.
"We get to define what we do," says Suh. "That's the big emotional plus for us. While many of us have grown up with a lot of stuff [from traditional agencies], we hate it.
"We hate the whole culture around it: the haves and the have-nots, the creatives versus the production-only people. That whole thing, as far as I'm concerned, is very 1980s."
So very thirtysomething?
"Yeah!" enthuses Suh. "Exactly."
As far as Kathy Biro is concerned, building global brands has always been about direct marketing. The process is just turbocharged now that the Internet has come to the fore. "[Interactive media] is about personalization," she says. "It's data-driven and based on customer needs, not mass consumption. One-to-one marketing--that's the future."
For clients competing at the global level, "integration" is more than just a buzzword; it's a requirement. The ability to create seamless communications on a personal level--regardless of the medium--is paramount, Biro says. "There's no point to interaction [in the new millennium] if it's mass interaction," she says.
Biro, 46, and her cohorts at Boston-based Bronnercom have spun that mantra into nearly $1.5 billion in overall capitalized billings, a threefold increase since 1995, when Biro was tapped by founder and chairman Michael Bronner to lead a new 20-person unit called the Strategic Interactive Group.
John Hayes, executive vice president of global advertising and brand marketing at American Express, praised Bronnercom and SIG for helping AmEx "create more channels to talk to customers." The ability to do that across all media is one of Bronnercom's greatest strengths--and an absolute must for agencies looking to succeed beyond the year 2000.
By year's end, the unit will likely account for more than half of Bronnercom's overall revenues, which agency president David Kenny projects at $180 million, a 46 percent gain over last year.
"We felt we were onto something," says Biro, who was named vice chairman of the overall Bronnercom organization in early 1999. "But who knew it would end up being so big?"
Though the unit operates somewhat autonomously, the relationship between SIG and its parent is increasingly symbiotic. As global marketers demand "the same intellectual currency across channels," Biro says, client sharing has become the norm.
Bronnercom's direct marketing units work for clients such as AmEx, AT&T, FedEx, General Motors, Harcourt, Motorola and Seagram, all accounts SIG shares.
In fact, Bronnercom will only consider "wired brands"--large, highly Internet-savvy marketers--as new clients; and the name Bronnercom, which replaced Bronner Slosberg Humphrey in the spring, was chosen because it suggests a dedication to both traditional communications and interactive initiatives.
Biro and other Bronnercom officials are adamant, however, that the agency's future does not include selling outright.
In the last year, the shop was approached by numerous suitors. Cambridge Technology Partners, Electronic Data Systems and various agency holding companies were rumored to have courted Bronnercom, which chose to retain its independence.
"Why join a network when we can be the next network?" asks Biro. "Why be part of an empire when you can build an empire yourself?"
Instead, Bronnercom sold about 20 percent of itself to San Francisco-based investment firm Hellman & Friedman last December. The move helped it raise $60-80 million in operating capital, used mainly to staff and equip offices in New York, San Francisco and London. An office in Hong Kong and one in Miami are in the planning stages.
We're all so accustomed to hearing the word "digital" that, at first, the true meaning of the name Digital Pulp doesn't really resonate. Just another end-of-the-millennium Web company that will probably be lucky to be around when the clock strikes 2000.
But what Digital Pulp does, if not quite radical, is nonetheless novel in an era when most companies try not to straddle the barrier between the digerati and old-world media. The company attempts to marry the on- and offline needs of clients into one strategic package, drawing on the entire millennium merchandiser's bag of tricks--from HTML to the pulp of print ads.
Working out of space on Manhattan's East 23rd Street that can best be described as eccentric, the company's employees work amid Grecian figurines, and can step outside to the agency's back deck, 10 stories above street level, to shoot hoops on their very own basketball court.
With such unusual totems as inspiration, the company has come up with marketing campaigns including an online effort for 1-800-Flowers, which, via a parodied e-mail memo, encourages bosses to remember their administrative assistants on Secretaries Day. The agency's most noteworthy endeavor to date is also one of the most noteworthy transformations of the e-commerce age: the virtualization of egghead.com.
The company, formerly known as Egghead Software, closed its brick-and-mortar stores in February 1988 and moved its operations completely to the Web. Digital Pulp got the new online superstore off the ground in every way imaginable--from
building the site to creating the advertising campaign. In typical fashion, the company found unusual ways to "air" the television campaign, even giving it a brief run on British Airways' Concorde Vision video display in Times Square.
If Lee Nadler, the company's chief executive officer, has his way, such media-agnostic approaches to enabling e-commerce for digital clients will only proliferate.
Nadler, who joined the shop from agency client DoubleClick late last year, is particularly proud of a Digital Pulp effort in which television spots about a specific product referred consumers to a sale of the item being conducted on the Web 15 minutes later.
An improved version of the now old-hat idea of putting a company's URL at the
bottom of a TV commercial, applications of such hyper-integrated media should be more commonplace, Nadler believes.
"[It's] really using the power of each of the different media," he adds.
The company also works for a fair share of startups, such as takegoodcare.com, which aims to sell medical supplies to consumers online. For Nadler, the draw is working with the top management of clients to build their businesses.
"A lot of the interest has to do with being an entrepreneur every day instead of an ad agency," he says.
Nadler talks with enthusiasm, and not a little surprise, about how Digital Pulp landed the task of persuading telephone customers to order electronically from 1-800-Flowers.
"[Client CEO] Jim McCann came in here himself and said, 'Help me transition these customers,' " he recalls.
That is just the kind of business encounter Nadler seeks for Digital Pulp.
A few years ago, while many large agencies were busy trying to figure out how to compete in the interactive arena, Ogilvy & Mather was already at work. The network merged its interactive and direct units to create OgilvyOne in an effort to become a leader in the U.S. market. It worked.
Thanks to clients like IBM, Ogilvy is now the leading buyer of Internet advertising in the country. OgilvyOne is widely regarded as one of the premier models of how a traditional ad agency can operate successfully in the nontraditional world of cyberspace.
While other megashops are scrambling to catch up, OgivlyOne is shifting gears to stay ahead of the pack.
Just how far along are they? Think global.
"Our clients are coming to us and asking for global interactive strategies, not just Web sites," says Carla Hendra, president of OgilvyOne's New York office and worldwide director of direct/interactive marketing on IBM's global business. IBM, Jaguar and other global clients want "360-degree marketing" around the world, Hendra says.
Recently, Ogilvy held its first Global Interactive Summit in Prague, Czech Republic, for more than 100 of its top worldwide interactive executives. The very fact that it has that many speaks to the agency's performance.
What's behind the push toward global interactive strategies? A rush to control the chaos brought on by worldwide expansion. Clients' rapid and often haphazard push to build a Web presence often results in conflicting and confusing messages. "Within a large
corporate environment you can have people throwing up Web sites that have no consistency," notes Hendra. OgilvyOne is striving to provide such companies with an integrated approach.
To best meet that goal, Ogilvy has instituted a financial structure that could serve as the model of the future. Unlike some agencies, where different units compete for the same pot of ad dollars, Ogilvy has one bottom line for all clients shared by its different units. Instead of competition, the structure invites cooperation. Integrated teams from the general and specialty units work together to plan and present strategies. And the buck stops on both sides. The result?
A strategy that's right for the client, not some agency department's balance sheet. For IBM, notes Hendra, "There are markets where we might use only TV; in others we might use the Internet."
Another OgilvyOne asset is commitment from the top. Ogilvy & Mather chairman and chief executive Shelly Lazarus spent years in the direct marketing arena. "We need to use a mix of media to develop customers," she says.
Ultimately, the long-term impact of interactive marketing goes beyond Web marketing and e-commerce, says Lazarus. "As people rethink the impact of the Internet, they are rethinking their whole approach to marketing. That kind of mental energy is a positive thing for everybody."
When discussing what the agency of the future will look like, Razorfish CEO Jeff Dachis makes a characteristically brassy prediction: "The agency of the future isn't an agency," he says. "The agency model doesn't provide the strategic benefit to [clients] that it should and could."
A year or two ago, that bold statement would have been chalked up to 32-year-old Dachis' youthful bravado, but Silicon Alley's Razorfish now boasts the size, the clients and the capital to back it up. The 1,000-employee professional-services firm raised $33 million in an IPO and built a client roster that includes Charles Schwab, Revlon, NBC and Intel.
Razorfish, renowned for its design prowess, is poised for success in the new millennium thanks to its recent acquisition of i-Cube, a Cambridge, Mass.-based back-end systems provider and consultancy.
The skill set gained by the August acquisition, says Dachis, is key to differentiating Razorfish from other interactive agencies--and from traditional shops that he believes are in a precarious position. "Traditional advertising functions where media is used to promote and reflect upon the business model. In the digital world, it is going to go away," Dachis says.
Buying media on a program such as Seinfeld--whose "only purpose is to garner eyeballs"--will become obsolete once consumers can download episodes and pay for each show themselves. "The companies that are digital or can be digital are going to directly talk to consumers, and they're not going to need reflective companies," says Dachis.
"Ad agencies and the ad agency mechanics are absolutely in jeopardy," he warns.
Instead, Razorfish plans to concentrate on the same business strategy it's held since its inception in 1995: build online businesses, not banners. The New York-based company has created the user interface for Schwab's online brokerage, which includes SchwabAnswers, a content filtering tool, and the Customer Center Demo, an online account management tool with stock performance snapshots.
In fact, Razorfish is the lead Web development firm for a new Encyclopaedia Brittannica service. Launching this month at britannica.com, it combines the entire Encyclopaedia Britannica text, 75 magazines, its Web guide and books in print.
Kent Devereaux, EB's senior vice president, product development and editorial, says Razorfish's broad range of capabilities was the deciding factor in choosing the company over Organic, Agency.com, Rare Medium, Studio Archetype, Modem Media.Poppe Tyson and iXL. "We thought Razorfish had the best mix of front-end design expertise and back-end technology depth," Devereaux says. "The recent acquisition of i-Cube by Razorfish only strengthens that depth." --Adrienne Mand
Organic began life as one of a handful of Web design firms that focused almost exclusively on building sites for clients. But the San Francisco-based company, which now claims an expertise in e-commerce, is savvy about the inner workings of the Internet. Organic knows that the very nature of the Web is that it's in
constant motion--the quiet evolution of once-sacred business models are passe in this state-of-the-art medium.
In Organic's case, this realization has meant jumping aggressively on the e-commerce bandwagon, building sites for the likes of BarnesandNoble.com and Starbucks. It's also meant preparing for an interactive future where connecting with consumers can take many different forms.
"Clearly, this thing is going to become a mix of marketing, commerce and entertainment going forward; whereas before, it was more utilitarian," says co-founder and CEO Jonathan Nelson, who founded the company in 1993.
Nowhere is Organic's distinct vision of the future more apparent than on a site the company is creating for Sting and his tour sponsor, Compaq.
Though the final site isn't yet complete, industry wags describe it as not only a possible e-commerce location, but also a showcase for interactive entertainment and technology.
"They really understand media in the Internet space," says Seth Romanow, director of marketing communications for Houston-based Compaq.com. "[Organic] grew up on the Web and understands the notion of what makes people click."
Indeed. Organic Media bills several hundred million dollars annually, making it one of the largest buyers in the online business. Rather than simply concerning itself with buying ad banners, the unit delves into the deeper business of bringing clients' messages and e-commerce offerings to consumers.
Online that means producing everything from sponsorships to e-mail campaigns to building affiliate programs that place one client's content on another company's site because they target the same demographic.
The company has also bolstered its front-end capabilities by opening a public relations division, Organic Communications,
But as online marketing morphs into online selling, the trick for many companies is to try and build on its ability to deliver
the comparative drudgery of handling a client's back-end needs.
Thus, the company also opened a
consulting division this year, Organic Logistics, so it could help clients create strong customer-service support, which ranges from order fulfillment to call centers.
The goal? To make customer service part of the entire brand experience.
If all of these services form the
foundation of a robust interactive services company today, Nelson believes they are only an indication of how technology is changing marketing on a global scale.
"Marketing and commerce and globalization are really tied together in ways you don't see in traditional marketing," he says. Thanks to the Web, there isn't any lag time between what's hot in the U.S. and in cultures around the world, Nelson notes. People are accessing the same content at the same time.
Still, Nelson wants to distance himself and his company from the Internet's relentless buzz.
"A lot of people overhype this thing," he cautions. "This is not going to replace traditional advertising. TV commercials are not going to go away. What we are witnessing is the birth of a new medium and the growth of a bunch of companies."
Red Sky Interactive wants to stake out new territory: the sweet and mostly undiscovered spot where entertainment, marketing communications and transactions meet.
Founder and president Tim Smith claims his company has an "ulterior motive" for its work. It can't be disclosed, but it will build on such entertaining Red Sky inventions as Absolut DJ.
The shop has been on a roll with the spirits purveyor since January, when the first Absolut DJ, lodged within Absolut's Web site, turned users into digital disc jockeys--and viral marketers. Visitors were invited to assemble musical elements collected by noted spinners into a track, then e-mail it to friends. Recipients could return to the site to listen, alter and forward the music to others. San Francisco-based Red Sky and Absolut agency of record TBWA/Chiat Day, New York, then took the promotion offline, sponsoring parties at the Sundance Independent Film Festival in Park City, Utah, and the Montreaux Jazz Festival in Switzerland. The latter brought together three DJs in different cities who collaborated on mixes over the Internet.
These entertainment ventures, incorporating physical locations packed with live bodies and Web-based content, are the direction Red Sky is heading. It's what Smith calls "Interactive event-based activities." Absolut DJ is "an absolutely intriguing potential front-end for transactive mechanisms," he adds. Such events, or perhaps locations, will draw on the skills of co-founder Joel Hladecek, a former special-effects whiz and director of photography for theme-park simulation rides.
The focus on fun does not diminish the importance of its clients' marketing goals, Smith is quick to point out. Red Sky recently readied Nike for the relaunch of its first e-commerce site by designing and constructing it. Smith says his clients are realizing that "what were heretofore known as crazy little boutiques can do a lot more than what they had considered."
Indeed, the Red Sky client roster is impressive. It is the interactive agency of record for Procter & Gamble, Nike and all Miller Brewing brands. It works for financial companies Bank of America, Charles Schwab and Visa as well as winemaker Sutter Home and Bandai, the world's third-largest toymaker.
Still, Smith gets impatient with the way the online advertising industry harps on measurements such as click-throughs. For instance, he argues that it's a waste of time to scour log files that record every move a site visitor makes.
He also scoffs at critics who say it's hard to measure the return on investment of entertainment applications. The Nike site, says Smith, eclipsed the shoemaker's previous online sales in just four days. "I'm cool with the numbers," says Smith. "And I'm cool with the attention [our sites] are getting." --Susan Kuchinska