New Players Struggle To Emerge

Consolidation Opens the Door for a Wave of Hungry Young Agencies
BOSTON–Over the past several years, consolidation and contraction have held sway in the New England advertising community.
The region’s two largest mainstream players–Arnold Communications and Hill, Holliday, Connors, Cosmopulos, both in Boston–have been sold in recent weeks, to Snyder Communications and the Interpublic Group of Cos., respectively. At the same time, the once-thriving midsize agency ranks have been steadily depleted. While many formerly prestigious shops fight for survival, close offices or go out of business altogether, an emerging tier of young agencies struggle to break from the pack and establish themselves as the next high-fliers.
These shops basically fall into two categories. Some are adopting the mainstream agency model as a blueprint, such as Holland Mark Martin Edmund, Cohn Godley Norwood, Heater Advertising and McKay Fried Communications, all in Boston, and RDW Group in Providence, R.I.
Other agencies have enjoyed significant growth by concentrating on niche markets, most notably fashion-oriented Toth Design & Advertising in Concord, Mass.; medical specialist Lehman Millet in Boston; and technology shops Allen & Gerritsen in Watertown, Mass., Harpell/Martins & Co. in Maynard, Mass., and Partners & Simons in Boston.
These 10 agencies enjoyed a combined 70 percent increase in billings and a 68 percent improvement in revenues last year, placing them among the region’s biggest gainers [Adweek, March 30].
Whether traditional or specialty-driven, however, “the formula for success is simple,” said Skip Pile, president of Pile and Co., a management consulting firm in Boston. “Advertisers look for smart ads that are strategically grounded. Hire the best creative talent you can afford, one or two strategic people and fill in the gaps. It’s as simple as that,” Pile said.
A case in point is Heater Advertising, co-founded five years ago by former Hill, Holliday creative star Bill Heater. In 1997, the shop enjoyed a 110 percent jump in billings to $68 million and a 151 percent boost in revenues to $12 million, the largest revenue gain in the region last year.
Pile believes the Heater model of leveraging creative expertise for a small group of significant clients is worth emulating. Though the shop is arguably too dependent on Reebok International and Fleet Financial Group, it’s “making more money” from that roster than some shops with longer client lists, Pile said.
Diversification of services is also a good idea, said Bill Montbleau, an agency and client consultant in Burlington, Mass. “Agencies should be looking for ways to expand, get more market dollars . . . [and break into areas such as] sales promotion and not just be your same old broadcast-driven media agencies.”
Several agencies have taken diversification to heart. They include Harpell/Martins, which has expanded to the West Coast and established a media unit (see story below), and McKay Fried, which recently added new services such as design and promotion and formed an alliance with The Larkin Group, a fashion trade show firm in Newton, Mass.
A key to McKay Fried’s 150 percent billings increase last year, and the cornerstone of its strategy for future growth, is to work with clients on as many levels as possible, said agency president John McKay.
Shops must ask themselves, “Do you have a seat at the boardroom table?” working with clients on the strategic and planning levels as well as creating ads, McKay said. The more involved a shop becomes in client business, the greater the potential for agency profits, he asserted.