NEW YORK (AdAge.com) -- The New York office of McCann Erickson is set to lose a huge piece of its blue-chip Verizon account to McGarryBowen, several executives familiar with the matter said, and McCann's Verizon Fios business has been thrown into review.
The exit of Verizon Wireless is a devastating setback for the marketer's longtime agency of record and one that could affect numerous staff positions at the Interpublic Group of Cos. network. Meanwhile, it remains to be seen whether McCann can hang onto the Fios account, estimated at more than $300 million in billings. A "jump ball" pitch between McCann, Dentsu-owned McGarryBowen and possible other agencies is said to be imminent -- and a last chance for McCann to hold onto the Fios business.
Two people familiar with the situation estimated that the revenue attached to the combined Verizon Wireless and Fios business is "in the neighborhood of $20 million to $30 million" and if both were to depart, it would lead to staff cuts of at least "double-digits."
McCann representatives referred calls to Verizon. Representatives for Verizon did not return e-mails by press time and a call to John Stratton, marketing chief for Verizon's wireless business, was not returned. Several McGarryBowen executives also did not return requests for comment.
Several other roster shops, such as Interpublic's R/GA and MRM Worldwide, do not appear to be affected by the shift, and some, like Interpublic shop Erwin-Penland, might stand to add more business as part of the moves. Agency representatives couldn't immediately be reached for comment or declined to comment.
The blow to McCann, New York, follows Verizon's decision last September to reach beyond the shop to give McGarryBowen responsibilities for the launch of the Droid phone. That assignment amounted to nearly $100 million in billings.
For McGarryBowen, which Ad Age named its 2009 Agency of the Year, the Droid assignment meant the return to Verizon's agency roster. The shop opened in 2002 with Verizon as its founding client, but the business was later yanked as the telecom looked to pare down the number of marketing partners in its employ.
That Verizon is now handing more business to McGarryBowen is a sure sign the marketer was pleased with the results of the Droid launch. Analysts estimate sales of 600,000 units at the end of 2009.
It's unclear what the moves mean for McCann's status on other portions of the Verizon account, like Verizon Communications and Verizon Business. The loss comes as McCann's New York office for the past six months has been run by Thom Gruhler, global account director of the Verizon Wireless business. That move was widely seen as a Catch 22: On the one hand it was a play that demonstrated the value of the account to the agency, but many said it took Mr. Gruhler's concentration off of Verizon and placed it on other business.
Verizon is the No. 2 national advertiser according to AdAge's DataCenter, with a domestic-marketing budget of $3.7 billion in 2009. The company represents one of Interpublic's five largest clients.
According to estimates, Verizon now has some 90 million subscribers, double what it was in 2004. Its most recent campaign from McCann is the "Maps for That" push that broke in October 2009, kicking off a mobile provider war between Verizon and rival AT&T, which filed a lawsuit in federal court claiming Verizon's ads were misleading.
More recently, Verizon has been making headlines as the Wall Street Journal reported it had scored a major coup with Apple. The WSJ said Apple has finally agreed to drop AT&T as the exclusive carrier of its iconic iPhone and introduce a version of the handset for Verizon. If that's the case, that handset, expected to ship next fall, would end the three-year lock AT&T has had on the iPhone in the U.S. *
One burning question is how the iPhone could affect Verizon's efforts for Droid, which it has spent the past year and significant marketing dollars touting as an alternative to the iPhone.
Verizon is reportedly also the carrier for a much-rumored "social-networking" phone from Microsoft code-named "Pink," for which more details are expected to be unveiled Monday.