This 1921 execution by Ayer's George Cecil for the Joint Coffee Publicity Committee introduced the concept of the coffee break. Ayer ad for an early Ford plane (1928) kicked off the first campaign selling air transportation to the general public. "The Voice with a Smile" is part of a long line of image ads Ayer has done for AT &T since getting the account in 1908. Here is one in the "Great Ideas of Western Man" series for Container Corporation of Amercia. Ayer turned high cost into a positive in this DeBeers ad for a diamond engagement ring with the line " Is two months salary too much to spend for something that lasts forever." Much of Ayer's work for AT & T has stressed the importance of keeping in touch with friends and loved ones-whether in person or by telephone. In 1988, boxer "Marvelous Marvin" Hagler graced both sides of a magazine page in a scratch-and-sniff ad introducing Gilette's Right Guard Sports Stick. One in a series of print ads for Jolly Rancher candy that underscore both its shape and its taste MASTER BUILDER OF BRANDS FOR A CENTURY AND A QUARTER, N W AYER HAS RESOLUTELY GONE ABOUT THE BUSINESS OF SHAPING THE IMAGES OF ITS ROSTER OF BLUE-CHIP CLIENTS

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The subtle but schizophrenic decor of the 35th floor of N W Ayer's New York headquarters on Eighth Avenue begins to tell the story of one of the oldest agencies in America. A vibrant floor-to-ceiling tapestry with the adage "big idea" created by agency chairman (and artist) Jerry Siano belies the gray walls that hint at this agency's other personality-that of a historically conservative 125-year-old shop.

Ayer is practically defined by its firsts: first color print ad, first radio broadcast, first to create the client/agency compensation system, first to build a commodity into a brand. Today, Ayer remains one of the few privately held agencies in America. With $945.2 million billings worldwide, it has a blue-chip roster of clients including DeBeers Consolidated Mines, AT&T Co., Procter & Gamble Co. and General Motors Corp. The agency has created some of the best-known, longest-running campaigns, among them DeBeers' "A Diamond Is Forever" and AT&T's "Reach Out and Touch Someone."

Despite its large size, (600 employees nationwide), Ayer has retained both a familial ambiance and its independence, a double-edged sword in today's cutthroat agency climate.

As the agency has gradually shed its old-line, patrician feel, a hold-over from its deep Philadelphia roots, it has been slow to grow, either by merger or by overseas expansion. Recently scuttled plans to merge with Hal Riney & Partners and with Ketchum Advertising last year, for instance, are forcing the agency to find new ways to compete. In fact, if anyone finds fault with Ayer, it's for focusing too heavily on its clients' business and not enough on its own development as a major player in the ad industry.

Yet despite the shortcomings that have resulted from a conservative management strategy, Ayer has weathered many storms and has remained intact, continuing to produce first-rate advertising for some of the largest companies in America-and the world. Indeed, British investor Richard Humphreys, who is part of an investment group that recently acquired 60% of the agency, was attracted to Ayer because, he says, "It's a pure agency. It hasn't been mucked around much. The values are very consistent. If there's any shortcoming it's that the agency is not as well known as it ought to be and not sold as hard as it should be."

Here's how it all began:

In the days of advertising's infancy, it consisted of newspaper selling. Francis Wayland Ayer, a 21-year-old New Englander fresh out of college and not satisfied with a teaching career, was searching for entrepreneurial opportunities. At the suggestion of the editor of a religious newspaper, The National Baptist, he began selling newspaper ads. And so the agency of N W Ayer & Son was born in 1869, named after his father and first partner, Nathan Wheeler Ayer.

Based out of Philadelphia, N W Ayer solicited advertisements for some 11 newspapers; seven years later, the agency had profits of $132,000 and a staff of 20 selling ads in hundreds of newspapers nationwide and in Canada.

Francis Wayland Ayer quickly recognized the need to expand and deepen the services of the agency beyond space-buying and created a policy of an open contract where the agency would represent the interests of the advertiser and try to get it the best possible rates. Soon Ayer did some rudimentary market research and copywriting, in the hopes of selling more ads for its customers. Ironically, at the time, Ayer didn't consider preparing copy an agency goal. The conventional wisdom in those days was that the advertiser knew its business best and should write its own ads. Nonetheless, by 1888 Ayer had Jarvis A. Wood devoting much of his time writing ads for tobacco advertiser Police Plug Tobacco and Procter & Gamble soaps with ad copy appearing in magazines such as McClure's and Cosmopolitan.

With the help of Henry Nelson McKinney, a salesman extraordinnaire, Ayer was the first agency to recognize the need for developing a brand identity rather than merely selling a commodity. The breakthrough account was for the National Biscuit Co. (now Nabisco). Ayer coordinated the packaging, trademarks, media and selling for Uneeda biscuit in the first-ever million-dollar ad campaign, catapulting that product, which was no longer merely a commodity but a distinctive brand, into turn-of-the-century celebrityhood.

Indeed, Ayer's success with branding the Uneeda biscuit in 1899 helped attract blue-chip clients including Cadillac and Steinway pianos and, in the '20s and '30s, Camel cigarettes, Hills Bros. coffee and Ford Motor Co. to the agency.

But most important, it caught the attention of American Telephone & Telegraph Co., which some 86 years later is inextricably bound with the identity of Ayer and remains the agency's largest account. In 1908 Ayer created the first corporate advertising for AT&T. In those days communicating a company image rather than selling a brand was considered heretical, if not preposterous.

What Ayer didn't represent was liquor advertising. Even after the repeal of Prohibition in 1933, the agency stuck to its dry policy, even dropping then-client Canada Dry because the ginger ale maker started selling alcoholic beverages. The agency also eschewed sensational advertising, refusing testimonials from celebrities and products it deemed of questionable value.

These values reflected the Ayers' puritannical values and would continue over time to shape the conservative character of the agency. Indeed, Francis Wayland Ayer's successor, Wilfred Fry, was willing to sacrifice profits even during the Depression to maintain the dry policy.

But conservative reputation aside, Ayer was quick to expand the reaches of advertising. Propitious associations with two clients, AT&T and the National Carbon Co. (a producer of batteries for radios), launched the agency into radio advertising. It was the first agency to arrange a broadcast program in 1922 for the first commercial radio station in America, KDKA of Pittsburgh. And more important, it inaugurated the first advertiser-sponsored broadcast entertainment program in the U.S. on Feb. 22, 1924, producing the National Carbon Co.'s program, the "Eveready Hour."

Meanwhile, Ayer would continue to thrive, spawning some major agencies along the way. For example, John Orr Young and Raymond Rubicam, both Ayer employees, started Young & Rubicam in 1923.

A new generation of employees surrounded Fry, including Harry Batten, who started at the agency at 14 and worked his way up to head of the copy department. Among the greats employed in the copy department were George Cecil, who in Ayer lore is credited with creating the idea of the "coffee break" in an ad for the coffee trade association.

Then there was the art director Charles Coiner (inducted into the Advertising Hall of Fame this year), who brought in artists including Picasso, Dali and O'Keeffe to create art work for advertisers, among them DeBeers, Dole and the Container Corp. of America.

Batten became Ayer's head in 1936. He was the first Ayer executive of the agency with a creative background, marking a turning point in an shop that had been run by entrepreneurs and businessmen. What he did share with his predecessors was a conservative operating style. Although he restructured the agency and started the Ayer training program, recruiting recent college graduates to the agency, he lost sight of the agency's long-term development. He didn't care for radio advertising, leaving an opening for other agencies to stake their claim in the broadcast arena.

What's more, Batten domesticized the agency, closing overseas offices that were opened as far back as the '20s in London, South America and Canada to accommodate clients such as Ford and Kellogg Co. when they started expanding abroad.

Although other agencies closed their European offices during World War II, many reopened after the war. Harry Batten, however, favored focusing on building domestic business. Advertisers interested in expanding their businesses abroad looked to competing agencies to service them. This strategy haunts Ayer even today as the agency tries to bolster its overseas presence.

But perhaps the most important decision that hampered Ayer's growth and standing in the industry was its staunch commitment to its Philadelphia base. As radio and TV production continued to thrive in New York, Ayer kept an office in New York, but management remained housed in 13 stories of a Washington Square building in the heart of Philadelphia's colonial historic center.

The torch was passed to Warner Shelly in 1958 after Batten's death. Shelly, an aggressive account man, is credited with expanding one of Ayer's seminal client relationships-DeBeers diamonds. It was Shelly who traveled to England and South Africa by steamship to meet with the Oppenheimer family, helping to coordinate the jewelry trade from Antwerp to Tel Aviv to New York.

And it was Ayer that first presented a study on selling diamonds as engagement rings that would revolutionize the diamond jewelry business. The "A Diamond Is Forever" tagline created in 1948 by Frances Gerety is still used today, 46 years later, and translated in some 50 different languages.

However, Shelly focused primarily on the agency's large domestic clients such as Chrysler, United Airlines and AT&T, rather than building business abroad.

It was up to Neal O'Connor in 1966, then only 39 and the newly installed ceo, to make the tough decision to part with old ways. He moved the agency headquarters to New York in 1973 and paved the way for Ayer's overseas expansion.

O'Connor proved his mettle when the agency was put in the hotseat on the AT&T business in the mid-1960s. Not only did Ayer retain the account, but it also started winning new business from Kraft, General Motors and what would later become a showcase account for the agency, the U.S. Army.

O'Connor asked Lou Hagopian, who was running the Detroit office, to move to New York so O'Connor could focus his attention on building international business, including the recently acquired Pan American World Airways account. Hagopian eventually rose to ceo, running the agency in the late '70s and mid-'80s-a time of heady growth and stellar creative and marketing achievements, capped by the agency's cash purchase of longtime P&G agency Cunningham & Walsh in 1986.

Among the agency's most memorable and effective campaigns was the advertising created for the U.S. Army. The challenge, says David Gantman, who heads up strategic planning for Ayer, was to find a way to motivate college-bound kids to join the Army. At the time the percentage of high school graduates applying to the Army was way down. The strategy was to go beyond merely the dollars and cents of subsidizing college education as a selling point by seeking to inspire self-fullfillment. The creation of the "Be All That You Can Be" campaign, which still runs today (although the account is now with Young & Rubicam), placed then third-place Army in first place over the Air Force, Navy and Marines in its number of recruits.

Indeed, long-time creative director Pat Cunningham, now president-ceo of Ayer New York, said the Army account was only one of many creative challenges that were met with great success. The most daunting test was managing the break-up of AT&T.

When phones were no longer leased, Ayer had to convince the consumer to buy AT&T phones over its many cheaper rivals. The idea, says Cunningham, was to show that a telephone is not a parity product. And so came the "You Get What You Pay For" campaign, which took a humorous approach on how AT&T competitors' telephones were always breaking down. The result was a huge market share jump for AT&T within two months of the campaign.

Cunningham and his lead creative director on AT&T, Keith Gould, now an Ayer managing partner, and Jan Keeler, exec VP on the account and currently an Ayer managing partner, faced many other challenges, including an increasingly aggressive approach by archrival MCI Communications Corp. The "Put It In Writing" campaign was one very effective stop-gap measure in stilling MCI's claims. And the overall corporate campaign based on the emotional need to communicate as expressed by the "Reach Out and Touch Someone" tagline has virtually become a part of the American cultural lexicon.

Only this past year, AT&T realigned its agency roster with Ayer ceding the lead creative on long-distance calling to Foote, Cone & Belding. But Ayer has retained $100 million in AT&T business by winning Young & Rubicam's portion of the account.

Unfortunately, the heady expansion that blessed Ayer as it did many agencies in the go-go '80s would end and some unexpected blows would halt the agency's growth. Most painful was a prolonged legal battle with the U.S. Attorney's offices in an investigation of Ayer's U.S. Army account. One of Ayer's employees pleaded guilty to accepting kickbacks from a supplier of recruiting films. Ultimately, Ayer was exonerated from any wrongdoing but lost the account in 1987, and with it a fair amount of morale at the agency.

The Army account loss was quickly followed by the Burger King fiasco. Ayer got a big boost by winning what was then one of the largest agency account switches-the $200 million BK account. But four different BK ceos, presidents and marketing heads and a hostile takeover by Grand Metropolitan resulted in the loss of the account within 18 months. "The problem was compounded," explains Siano, "because Burger King took an enormous amount of time from top management."

The creative and morale drain took a toll on the agency. When Siano became chairman in 1989, he inherited an agency still licking its wounds from prior mishaps. "I had to tell the staff that we lost Burger King on my first day as ceo," he says.

The expansion policies of the '80s and its move to larger, more expensive digs at New York's WorldWide Plaza in late 1989, followed by a global recession, resulted in a serious financial shortfall for Ayer in the early '90s.

Enter British investor and former head of Saatchi & Saatchi Worldwide Richard Humphreys, Korean media owner W.Y. Choi and a third investor who wishes to remain unnamed. They approached Siano about taking a stake in the agency. The infusion of capital, reasoned Siano, could get the agency back on track. At the time, Ayer was discussing the possibility of a merger with Ketchum Advertising, but Siano and other Ayer board members decided to take the Humphreys offer instead. "We were coming from further behind, we needed to accelerate our international growth but we didn't want to merge or be acquired like so many of the other agencies in the '80s," says Siano.

Ayer is quick to deflect any images of a British interloper a la Martin Sorrell. But an announced Ayer-Riney merger was called off several weeks ago.

According to Ayer insiders, Hal Riney got cold feet, while the Riney side said Ayer took too long to get to the altar.

Though Humphreys and the investor group did not buy the agency outright, their holding company, Adcom, holds a 60% interest in Ayer. Humphreys and his group are primarily focused on expansion-related activities including mergers or acquisitions. The agency entered into a joint venture with Ross Roy that combined both shops' direct marketing capabilities to form Worldwide 1 on 1 Direct Marketing Group. and is considering buying back Ayer Europe, in which it now holds a minority stake.

Now that the agency is debt-free, it can move ahead with its growth strategy. "If you're stuck in the middle size you're like a beached whale," says Humphreys. "We need to strengthen the Ayer brand and we're committed to growth."

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