Ogilvy's Idea to Yield a Big Turnaround: Think Small

Revamp De-emphasizes Advertising, Puts Accent on Holistic Marketing

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NEW YORK (AdAge.com) -- Last Thursday, in front of the 1,300 staffers crowded in Manhattan's Cipriani restaurant, Ogilvy North America co-CEO Carla Hendra ruled that the 60-year-old agency would now be in "perpetual beta," a state of permanent change to meet a challenge faced by all the large agencies: How to retrofit a hulking beast of a company to compete in an increasingly media-neutral world, in which lean one- or two-office shops are beating their bigger brethren.
Ogilvy North America co-CEO Carla Hendra
Ogilvy North America co-CEO Carla Hendra

Starting immediately, the WPP Group-owned agency is trying to get small, requiring that client meetings center around four key people at the table -- marketing, creative, strategy and program management -- and it will gradually streamline its structure, doing away with many of its 20-plus departments.

The reorganization follows a round of layoffs -- between 50 and 100 staffers were let go last week, as reported first by Ad Age -- and a spare new-business period. And while Ogilvy has always preferred to grow with existing clients, there are stiff challenges on that front. American Express, its second-biggest account, last year added ever-hot Crispin Porter & Bogusky to its roster, yet again raising the specter of a split in this historically strong agency-client marriage.

"There has always been a Crispin; there's always a hot start-up," said Chris Wall, vice chairman-creative at Ogilvy, New York. "For small shops, the challenge is how to scale. Big brands do big things. ... It is easier for us to get small than for somebody small to get big."

Nimble competition
It's not surprising that Ogilvy plays down the Crispin threat, but within Mr. Wall's comment is a testament to that agency's strengths. Shops like Crispin have gotten good at managing to seem small despite a torrent of growth; big brands such as Burger King and Volkswagen have helped the agency blossom to 800 staffers, two U.S. locations and rumored international ambitions. While global marketers still need global agencies, at least for distribution, Crispin, Martin and Goodby, Silverstein & Partners have wreaked havoc on many of the bigger players, promising speed to market, freedom from turf warfare and the ability to change media channels efficiently.

Furthermore, the marketing business is no longer just about ads, as marketers move budgets and hold back on upfront commitments to keep more media in play for digital, nontraditional approaches and better leveraging of unpaid media. What it all adds up to for agencies is less compensation from traditional ad dollars -- and for many agencies, less compensation overall.

U.S. ad revenue from traditional advertising at Ogilvy & Mather Worldwide grew just 4.3% to $290 million in 2006, according to Ad Age estimates. For the network globally, revenue in 2006 grew in the low single digits at the Ogilvy division, while OgilvyOne, OgilvyAction and OgilvyInteractive all grew about 14%. Early indications are the agency saw an even greater shift in 2007 from its ad division to its digital and direct operations.

Ogilvy already has done a lot to anticipate the post-advertising world. It got out ahead of many of its rivals by investing in a full suite of marketing services, which it combined a couple of years ago under one profit-and-loss statement. With its work for Unilever's Dove brand, Ogilvy has one of the most successful integrated campaigns running today, a campaign it has also -- retroactively -- described as a word-of-mouth marketing effort. As far as the future goes, it's unclear what form the Ogilvy streamlining will take, but individual units organized by marketing discipline will remain active "sub-brands," because clients need to believe the agency has best-in-class capabilities, Ms. Hendra said.
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