IQ News: Analysis – And They Lived Happily… ?

Agencies Are Looking For The Fairy-Tale Interactive Unit.
As a failed Pepsi ad campaign from a few years back trumpeted, when it comes to traditional agencies having interactive capabilities, well, “You gotta have it.” The ability to point to a floor of the corporate offices in which people wearing Skechers stare intensely at computer screens all day is de rigueur. Witness DDB Needham’s decision last month to rebrand its interactive efforts as DDB Digital, or the efforts by Young & Rubicam to put its interactive work under the umbrella organization Brand Dialogue.
But if interactive has the potential to be the Cinderella of the advertising world, transforming once-staid agencies into glamorous new media powerhouses, then how to build the perfect glass slipper, in which the skills of the traditional agency fit snugly with interactive communications, hasn’t yet been figured out.
Strategies range from secret partnerships to trumped up acquisitions, and there are still as many opinions about what structure might work as there are models. The most obvious way to get a piece of the action remains the home-grown approach. For instance, when Saatchi & Saatchi Worldwide opened Darwin Digital offices in San Francisco and New York in 1997, it gained clients quickly from its parent’s roster, including PeopleSoft and Hewlett-Packard, and chose executives with traditional advertising backgrounds to lead it. The entire operation is led by Coby O’Brien, a longtime Saatchi creative executive, and the 15-person San Francisco office is headed by Teresa Julian, a former J. Walter Thompson account manager.
Says Julian of the transition: “A lot of the disciplines we have on the traditional side do make sense–insight, strategy–but it has new application on the Web.” She says the advantages of the agency connection include agency-style business processes, account management skills and the ability to leverage relationships with existing clients.
However, for every Darwin Digital, there’s a TN Technologies. The True North Communications interactive unit, which still exists as a holding company for the firm’s interactive companies, was virtually taken over by executives from Modem Media, the new media agency that True North purchased in 1996. Why don’t such in-house units necessarily work out? It’s the culture, insists Tim Smith, CEO of Web design shop Red Sky Interactive, San Francisco: “Traditional managers are not the right people to start an interactive agency.” Smith, who’s rarely without a strong opinion, continues, “Within an interactive company, the most respected managers are those who can roll up their sleeves, do the programming and get the job done themselves. Those who come from a traditional background have a harder time leading their people.”
But, the alternate route, of acquiring a digital shop, and declaring, “Poof! We do interactive!” has similar dangers, he believes, unless the buyers take a hands-off approach. “If you … are willing to make a focused and intelligent effort in retaining brand and talent and intellectual capital within that firm and allowing them to do what they do, that can work,” says Smith, in whose company Communicade has a minority interest.
In fact, Jonathan Nelson, CEO of fellow Communicade shop Organic, San Francisco, describes relationships that can best be characterized as laissez faire with agencies in the New York-based Omnicom Group, which runs Communicade. “If I want an intro within the family they will arrange that and vice versa. There’s nothing that says we have to work together. In fact, we usually don’t.”
Regarding partnerships between interactive and traditional agencies, Nelson says, “I think most will figure they will need to partner with someone like us. Once that happens, I think you need to clearly delineate your turf. We do digital communication really, really well. They do traditional–outdoor, print, radio, TV–really well and I respect that.”
Red Sky’s Smith says he’s picky about who he’ll partner with, and thinks clients should be, too. “If I was a principal in a large agency, I’d … want to see a track record of [the two companies] doing things together, a cross investment of some sort, it doesn’t have to be money or stock–it can be time, people.”
But as proof that such collaborations are nice, but not necessary, one need look no further than Los Angeles-based Genex Interactive. The 3 1/2-year-old agency went from a digital production shop to becoming an interactive agency player in its own right when it snagged Honda’s Acura luxury car account.
Genex landed the business in 1996 after the entire account–both traditional work and inter-active–had left Ketchum Advertising. Genex CEO Walter Schild thinks his company prevailed because the client perceived the relationship with his company as potentially more stable than that with an ad agency. “An agency where they’re doing database and IT work is a much closer tie than traditional communications,” he says.
The Genex team includes people who can talk to the client’s team of decision makers, which now tend to include people from business, purchasing, procurement and IT. “We play really well with that group because we have as equally large a focus on it as on creative, while agencies are usually more focused on creative.”
Besides, many interactive executives have become embroiled in sibling rivalries with ad executives from other disciplines, says Bruce Carlisle, president of SF Interactive, LLC and a former account executive for Ogilvy Mather. They fight over the budget, he says, and attack each other’s expertise, partly because “it’s hard for an ad agency to put a value on public relations or direct response.”
Carlisle built his business model around being an interactive fairy godmother to agencies who appears on the scene only when needed. “It’s a fundamental piece of our pitch,” he says, “that we play by a special set of rules. We don’t attack the client’s budget or creative or strategic work.” Carlisle reports that about 40 percent of his clients are ad agencies themselves, most of whom let the client know they’re collaborating with an outside vendor.
But don’t count traditional agencies out. DDB Needham plans to prove that home-grown can work with DDB Digital. Says Steven Marrs, one of the unit’s managing partners, “As this medium evolves into more of a marketing and business channel, everything centers around the consumer–and brand stewards understand what the consumer insights are, because that’s their job.”
If other ad agencies’ digital stepdaughters have failed, he thinks it’s because they’ve failed to successfully integrate with the mother company. “The most successful way to achieve integration is being part of the process, being there at the conceptual stage, understanding the brand itself and how it can be communicated,” Marrs says. “I think it’s as simple as communication.”