THE BEST AGENCIES: DEUTSCH RAISES THE BAR TO EARN AGENCY OF THE YEAR HONOR

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When some men turn 40, they celebrate by buying a red sports car. Donny Deutsch chose a white sport-utility vehicle.

Then again, Mr. Deutsch wasn't nursing a stereotypical midlife crisis when he opted for a Mitsubishi Montero instead of a proverbial Porsche. Rather, the chairman-CEO of Deutsch was managing a midlife milestone, one that appeared on the road to helping him realize a professional dream.

A DOZEN MITSUBISHIS

Last January, two months after Mr. Deutsch's birthday, the agency won the estimated $70 million Mitsubishi Motor Sales of America dealer ad business. Within weeks, he was piloting a new Montero.

Months later, in November, Mitsubishi awarded Deutsch a bigger ad prize: its national account, valued at $250 million. By then, the agency's parking lots were filled with a dozen Mitsubishis.

Madison Avenue needs no reminder of the momentous magnitude of winning a car account. For Deutsch, capturing Mitsubishi was a defining moment in what turned out to be a defining year. Over the last three years, the $800 million agency has transformed itself from a boutique into one of the largest independent full-service agencies in the country.

Once dismissed as an interloper within agency boardrooms (too outrageous, too parochial, too small), Deutsch now sits near the head of the table.

Today, Deutsch ranks as one of a handful of East Coast-based agencies to establish a strong presence in the insular Los Angeles market. It also offers up a smorgasbord of services-including media, direct marketing and interactive-that go beyond just strong creative.

"We've come of age in a lot of ways," says Mr. Deutsch.

NO SMALL ACHIEVEMENT

In recognition of those feats, Deutsch gets Advertising Age's nod as 1998 Agency of the Year.

That's not a small achievement considering Deutsch was up against one of the industry's oldest and most respected names: McCann-Erickson Worldwide. With $500 million in new 1998 billings and the evolution of innovative creative for categories such as credit cards and computers, runner-up McCann's year was just as monumental (see story, Page S-2).

Yet Deutsch's 1998 story is unparalleled. Mr. Deutsch and his agency spent the better part of the year building a solid relationship with the decisionmakers at Mitsubishi. Deutsch staffers earned thousands of frequent-flier miles; by November, they'd successfully snared the marketer's national and dealer assignments as well as its integrated marketing business.

Although it was a long time coming, Deutsch executives say the win was worth the wait. After three failed attempts in just over three years (Volkswagen, Mazda and Acura), the victory was just as much a milestone for the agency as for Mr. Deutsch.

"They just got it, as far as branding and integrated marketing," says Peg Dilworth-Hunt, Mitsubishi's marketing director.

AGENCY PROVES IT `GOT IT'

Deutsch proved it "got it" in a variety of other ways, too. Although the agency has enjoyed continuous growth since the mid-1980s, 1998 stands out as a noteworthy year. The agency proved it could evolve to meet client challenges, while at the same time strengthen its own operations.

On the creative front, Deutsch sharpened Mitsubishi's vague brand image with an edgy campaign urging consumers to "Wake up and drive." It launched a $30 million effort that transformed Baskin-Robbins USA's signature pink spoon into a wry, animated icon for the ice cream retailer.

Deutsch also proved it could adapt to clients' changing needs, taking creative for Ikea North America, for example, in a new, well-regarded direction; ads showed Ikea workers redecorating a bowling alley, operating room and subway car.

Throughout 1998, Deutsch bolstered its national integrated offerings with an influx of direct marketing and interactive staff additions. The agency's 3-year-old L.A. outpost metamorphosed into a full-fledged operation, while Deutsch spread its culture to a Chicago office. The shop enhanced its media-buying capabilities in 1998 by bringing a majority of outsourced media accounts in-house.

"The organization as a whole really developed," says Deutsch Managing Partner-General Manager Linda Sawyer. "In 1998, the new business and new hires really came together. The growth has been across the board."

EQUITY STAKES FOR GROUP

At the end of 1997, Mr. Deutsch rewarded Ms. Sawyer and six other employees with equity stakes in the agency. Currently, two managing directors and five partners hold an estimated 10% of the company. Mr. Deutsch holds the rest, but expects to increase employees' equity in the coming years.

That sense of partnership is what insiders say gives Deutsch its edge. "There's a lot of perseverance, there's a lot of passion," says Steve Jarmon, VP-advertising at Deutsch client Snapple. "They don't give up."

FROM ADOLESCENCE TO ADULTHOOD

Deutsch's roots are based in the print boutique father David Deutsch founded in 1969. The elder Deutsch ran the shop for 14 years before his son joined him as an account executive. Donny's only prior agency experience: less than a year at Ogilvy & Mather Worldwide as an assistant account exec on Maxwell House.

Six years later, David Deutsch handed over the reins. Since then, billings have increased over tenfold, from $70 million in 1989 to $800 million last year. By the end of next year, Mr. Deutsch hopes to reach the $1 billion mark.

Much of that growth is expected to come from the Los Angeles and Chicago offices-as well as from its direct and interactive offerings. The interactive unit alone, which had one client in 1997, ended 1998 with six.

Still, growth is largely an L.A. story. In June 1995, Mr. Deutsch sent Partner-Director of Business Development Peter Drakoulias to survey the West Coast market. Two months later, those explorations led to a small outpost in Santa Monica.

Over the next three and a half years, the West Coast office has grown exponentially, trading up smaller clients such as Buzz and celebrity chef Wolfgang Puck for the likes of Baskin-Robbins and Mitsubishi.

"When I started in October 1997 there were 15 of us; now there's about 160," says Los Angeles Exec VP-General Manager Mike Sheldon, who runs the office with senior VP-Director of Account Planning Jeffrey Blish and Exec VP-Executive Creative Director Eric Hirshberg. That team is in such close contact with the New York office that the Los Angeles executives refer to themselves as "just another floor" of the agency.

Deutsch executives say the office's success comes from careful hiring decisions, a lot of support from top management and the transference of "Deutsch DNA" through strategic relocations of New York staffers.

Even outsiders are taking note. Consultant Michael Agate, who advises marketers and agencies on the review process, notes it is extremely rare for an East Coast brand to thrive in the West. Adds Tom Hollerbach, CEO of competitor agency BBDO West: "The reason for his success is he hired a strong team of experienced West Coast executives who are backed up by their New York resource."

For all of the shop's growth, Mr. Deutsch, and his agency, are still highly scrutinized by competitors.

Boisterous, rabble-rousing, cocky, cry the critics. Mr. Deutsch's outspoken past lingers in the minds of many; the agency is often tagged as too self-promoting.

In fact, you can almost hear the collective "puh-leez" ringing through some quarters of Madison Avenue as word spreads of Ad Age's Agency of the Year selection.

Competitor Gerry Rubin, CEO-president of Rubin Postaer & Associates, Santa Monica, Calif., says much of the power of the Deutsch agency in Los Angeles centers on the man himself.

"Hollywood is a sound-bite town, and Donny gives great sound bites," says Mr. Rubin.

IMAGE IS `IRRELEVANT'

Although he named seven new partners, it's true the agency is frequently still defined by Mr. Deutsch's personality and early reputation. Add to that some recent losses, such as the $90 million Bank of America account and the $20 million L.A. Cellular business, and some in the ad world are sure to ask: "Deutsch? Really?"

But Mr. Deutsch is undeterred, calling his image in the industry "irrelevant" to the agency's ability to work for marketers. As for the most recent losses, they were the result of mergers and client buyouts rather than quality of service. NationsBank swallowed Bank of America; AT&T Corp. absorbed L.A. Cellular. In both cases, the incumbent agency of the new parent company picked up the account.

"The breaks even out," says Mr. Deutsch. "Clients get bought, clients get sold. You can't bang your head against the wall. You can only bang your head when a client fires you because you haven't been doing a good job."

Mr. Deutsch also dismisses criticism that his independent agency isn't global enough. He says an agency needs "six key offices" strategically located throughout the world to service 80% of marketers. Deutsch's expansion plans for 1999 include new offices in Miami and London.

Further down the road, Mr. Deutsch hopes to set up shop in Latin America and Asia.

PROUDLY INDEPENDENT

Clientwise, Deutsch is gunning to replace the telecommunications and financial accounts it recently lost. It hopes to toast those wins with a new beer account-all the while remaining steadfastly independent as others sell out all around him.

Mr. Deutsch claims he receives "a half-dozen calls every month" from suitors, although he maintains the agency will remain "independent for the foreseeable future."

While other competitors must answer to large holding companies, Mr. Deutsch says his shop only answers to itself and its clients. That, he says, gives him his competitive edge.

"As an independent, our Gods are our clients," he says-especially when they market such appealing products as cars.

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