How’s Life for Dell’s Former Agencies?

NEW YORK Many column inches have been devoted to the topic of WPP Group building an agency to service Dell’s global marketing needs. After WPP beat Interpublic Group in December to claim the estimated $100 million in revenue on the business, the story shifted to how WPP would staff the agency, what it would be called (Synarchy? Enfatico!) and when it would launch its first big campaign.

Well, what about the “losers” in the Dell saga — the hundreds of agencies around the world that vanished from the client’s roster in the WPP consolidation? How big an impact did the shift have on them, and how have they rebounded since? In short, how is life after Dell?

In the U.S., the revenue hit was particularly significant for relatively small shops such as T3 in Austin, Texas, for example, which handled small-business-oriented interactive and direct marketing duties for the Round Rock, Texas-based computer giant. Dell represented about 25 percent of the three-office shop’s revenue. In light of such losses, layoffs were common at ex-Dell agencies, though most had ample time to prepare, given that the global review lasted about six months.

T3 found out definitively in February, two months after the review concluded, that Dell would be gone by June, said Gay Gaddis, the agency’s president and CEO. As a result, the shop redoubled its efforts in new-business development, adding clients such as ConocoPhillips and Robbins Brothers before the hand-off and Intel and Taco Bell after. That said, T3 still hasn’t completely filled the revenue hole created by the loss of Dell. It has come close, however, in part due to a reference from their former client.

“We worked hard. We worked hard to make it up, because it was a significant account for years,” Gaddis said of Dell.

Dell had been a T3 client since 1992, and revenue from the business helped the agency expand, opening a New York office in 2002 to handle some media buying tasks for the company. In additional, Dell’s needs prompted T3 to develop its data and analytics capabilities, as well as its ability to produce catalogs.

Dell also helped digital shop Critical Mass expand its footprint and capabilities. The Omnicom Group agency’s tenure on Dell dated back to 2002, with the business expanding over time into international markets such as Europe, said worldwide COO Chris Gokiert. The shop handled global digital duties for the company in both the consumer and medium-to large-business sectors.

Like T3, Critical Mass was able to plan for Dell’s exit, knowing that the writing was on the wall last fall when an Omnicom team was cut from Dell’s review. The last of the agency’s Dell business left in May. Since then, Dell has served as a reference and calling card for Critical Mass, which has added clients in consumer electronics, retail and e-commerce, Gokiert said. Reflecting on the loss, Gokiert said: “We weren’t happy with it, [but] it was a holding company [consolidation]. … Business is business, right?”

Although Dell represented about 10 percent of worldwide revenue at Critical Mass, which employs about 550 staffers in nearly a dozen offices, the agency was able to avoid layoffs by shifting Dell-dedicated employees to other accounts, Gokiert said. Three staffers also left for Enfatico. T3 saw about 20 staffers migrate to the new WPP shop but wasn’t able to avoid layoffs. The shop let about a dozen people go, according to Gaddis.

The impact on bigger shops, such as Omnicom’s DDB in Chicago, which handled business-to-business ads, was relatively slight, given the size of their networks. Dell supplied about only $2-3 million in revenue at an agency with estimated U.S. revenue of $660 million last year, said sources.