Just hours before troubled interactive agency MarchFirst Inc. filed for bankruptcy last month, it sold its ad agency subsidiary McKinney & Silver to Paris-based Havas Advertising. The sale capped a tumultuous five-year merger-and-acquisition period for the Raleigh, N.C.-based McKinney, led by President-CEO Don Maurer.
In early 1997, interactive agency CKS acquired McKinney in a deal valued at $24 million, seeking to add traditional ad agency expertise to its services. Then, caught up in the dot-com-driven frenzy of growth, CKS merged with technology shop US/Web in 1998, and was acquired by consultancy Whittman-Hart in 2000, changing its name to MarchFirst.
Things went downhill fast for the previously high-flying MarchFirst, which at one point was hiring 90 to 100 people a week to meet new business needs, according to Maurer.
Hit by the dot-com crash, MarchFirst’s stock lost 95% of its value by November, and it started announcing layoffs. In March its stock was halted from trading on Nasdaq, and on April 13 it filed for bankruptcy and announced the sale of McKinney to Havas.
Through all this change, Maurer said, McKinney remained intact as a wholly owned subsidiary of its various parents, although it was not immune from the culture clashes and integration issues that resulted from all of the mergers. Now, McKinney is back to focusing on its core business: advertising.
BtoB: Do you feel like a survivor?
Maurer: Absolutely. Mostly, it’s because we never took our eye off the ball. We’re in business to build our clients’ brands. The Internet obviously plays a role in that, but it has to be balanced with other marketing communications tools. We incorporated the new thinking, but we didn’t change our business model.
BtoB: Throughout the wave of acquisitions affecting McKinney, beginning with CKS and culminating with the Havas acquisition, were you able to keep the culture intact at your agency?
Maurer: Absolutely. It was kind of hard for me personally at times. It was a balance, managing the southeast division of USWeb while continuing as CEO of McKinney. I think there is definitely a difference in an advertising agency culture and a technology company culture. They operate differently, the people are different and the cultures are different. You have to let the cultures develop the way they’re supposed to. If you try to change and go to a technology structure in an ad agency, it doesn’t work. In some ways, what I tried to do was shield McKinney from some aspects of what was happening at the parent company [with the wave of technology company acquisitions]. If there was anything that could dilute [our focus], any talk about things other than creative positioning, we wouldn’t do it.
BtoB: Looking back, was the acquisition and hiring frenzy in the agency business a mistake?
Maurer: I don’t think it was a mistake. There was a significant business need. We had more business than we had people. Because we were part of a publicly traded technology company, we had to meet Wall Street’s expectations, so you couldn’t turn down business. The problem with us, and with all companies, is that we were trying to do too much at one time, instead of focusing on the top five priorities. I believe that people and companies can do three things great at one time.
BtoB: Is it a flawed strategy for technology companies and ad agencies to merge?
Maurer: If the objective is clear upfront, they can coexist. We’ve learned a hell of a lot as an industry in the last 12 to 18 months. To me, the model works best when it’s an Internet division within an overall marketing communications or advertising agency company. The Internet is a critical tool, but you have to look at it from that perspective in terms of building a brand. The agency needs to be the parent, and not the other way around.
BtoB: How did culture clashes between USWeb/CKS, and later integration issues at MarchFirst, affect your relationships with clients and the work?
Maurer: I don’t think they affected our relationships. We all had different parts of the puzzle. We were trying to build the brand through advertising and marketing communications. They were trying to do the same thing on the Internet side but were focused on the Internet. We were always cognizant of who we put in front of clients, and made sure the work and people were up to standards. I think we were very protective of our clients. If we felt our client wasn’t getting the best value or service within MarchFirst or another company within our group, we’d change that and put new people on it. As we got experience with more and more people [at MarchFirst], we found people who fit with our same client attitude.
BtoB: What are some of the other lessons ad agencies have learned from the dot-com fallout?
Maurer: You have to look at the business fundamentals and what you do to build a business, and not take your eye off the ball. You have to convince a client’s target audience why that client’s brand is the better one. You can’t abandon everything else to make that happen. When radio came out, newspapers didn’t go away. When TV came out, radios didn’t go away. When the Internet came out, it was not like other communications vehicles would become obsolete. Some people, 18 months ago, believed that.