Big steps for Starcom

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By all rights, Starcom Worldwide CEO Jack Klues should be breathless about now.

In the 12 months since Advertising Age named Mr. Klues' Starcom its 1998 Media Agency of the Year, the media powerhouse won $1.2 billion in new business from clients such as Delta Air Lines, H.J. Heinz Co. and Coca-Cola Co., launched two divisions with big-bucks potential and branded itself in 75 markets.

The Chicago-based U.S. arm won 14 of 15 media-only pitches, including Canon, Toys "R" Us and Morgan Stanley Dean Witter & Co.

Globally, with the help of MediaVest, it snatched China's largest account, Procter & Gamble Co.'s $150 million media buying business from Zenith Media Services, New York, in December.

As the 1998 Media Agency of the Year continues to build on its stellar growth, Advertising Age has named the agency its 1999 Media Machine of the Year.

SURGE IN BILLINGS

Billings for the Leo Group offshoot also surged to an estimtated $8.5 billion, up 16% globally from a year earlier. Domestically, Starcom billings grew almost 28% to about $3.7 billion. It also opened offices in San Francisco and Los Angeles and bought the Spanish Media Estrategia, Madrid, its first-ever media-only acquisition.

"In many respects, we had a better year in 1999 than in 1998," says Mr. Klues. "In 2000, we'll be building on it."

The foundation from which it will grow is especially strong, considering the merger between Leo Group and MacManus Group, which has MediaVest. The media operations are expected to be linked in a holding company that will report directly to BDM, the umbrella of Leo, MacManus and Tokyo-based Dentsu, which has a 20% stake in the group. The media group likely will be headed by CEO Klues, Chief Operating Officer Bob Brennan, MediaVest Chairman-CEO Michael Moore as chairman, and MediaVest COO Kevin Malloy in an exec post.

SEVERAL DETAILS

The agency says details such as which operations will be merged have not been worked out. It is pretty certain, however, that although the companies share mega-clients such as P&G, Coke, Philip Morris Cos. and General Motors Corp., an outright merger is unlikely. That holds especially so in big markets such as the U.S. and the U.K., where Starcom has McDonald's Corp. and MediaVest has Burger King Corp.

Other conflicting accounts include Starcom with Delta Air Lines, Continental Airlines and TWA at MediaVest; and Andersen Worldwide at Starcom and Ernst & Young at MediaVest.

The Starcom-MediaVest holding company, has an estimated $11.7 billion in 1998 worldwide billings. With 1999 estimated billings of $16.5 billion, it would be the world's No. 1 media services company just ahead of McCann-Erickson's Universal McCann, with billings of $16.1 billion.

LEADS IN MAGAZINE ADS

Starcom was the country's largest buyer of magazine ads in 1998, the No. 2 buyer of syndicated TV and the No. 3 purchaser of cable TV. If combined with MediaVest, the new entity would jump to the top spot among cable TV buyers as well as bolster MediaVest's No. 1 spot in network placement and syndicated TV.

Operations likely will be merged in smaller markets, where neither business is particularly strong or large. Already, the two have done joint pitches, such as the $150 million P&G China account.

Starcom and MediaVest originally were invited by P&G in August to pitch separately for the December review, but they ended up presenting together following the fall announcement of the Burnett, McManus, Dentsu merger. JOINT PITCH IN GREECE

The two media agencies also did a joint pitch for P&G business in Greece, with a decision pending. They already work together in buying groups in parts of Europe, and have merged their Moroccan operations prior to the BDM announcement in November.

Issues that blocked a proposed merger between the two in 1998 have been resolved, says Mr. Klues, adding "I don't feel we're out of step in a philosophical perspective like I would've years ago."

Starcom, he says, has matured, while MediaVest places more emphasis on media planning than it had.

At Starcom, "we have grown in our appreciation of how to manage media as a business," Mr. Klues says. "We have evolved and caught onto it just as I think [MediaVest] evolved and understood that a media specialist company for the future is about more than just buying."

Exclusive of MediaVest, Starcom is gearing up for further growth, with Latin America, Germany and Scandinavia of special interest. In fact, acquisitions are planned for Germany and Scandinavia; three deals are in the Asian pipeline now, while Starcom looks at buying, building or partnering with shops in Australia and India.

LATIN EXPANSION

Starcom executives say Latin America will be fortified, with shops built in Argentina and Brazil and expanded in Venezuela; Mexico's leading position will be protected as well.

Mr. Klues predicts global 2000 billings growth will be in line with last year, but U.S. growth will see a far smaller jump than last year's stellar 28%. He says 10% is a more reasonable expectation.

"Our focus can't be on trying to match" that rate, he says. "Before [we] grow further, I want to make sure we've done everything [we] can do for people who have hired us."

Craig Sinclair, VP-advertising, Walgreen Co., which hired Starcom three years ago, says, "[Once] we worked with them it was pretty clear why they'd won so much new business. Their people were excellent."

Two big pushes for the agency, Mr. Klues says, are Starcom IP, which concentrates on Internet media planning and buying as well as helping clients link online and offline advertising, and Starlink, which handles media for mid-sized agencies rather than large advertisers.

STARLINK EXPLODES

In August, Starlink opened with three clients and billings of less than $20 million. December ended with 11 clients and billings just shy of $300 million. It is looking at opening a San Francisco office, and Starcom offices in the U.K., Canada and Greece have asked about getting Starlink offices as well.

From January through December, Starcom IP grew from one person, President Rishad Tobaccowala, to 27 full-timers and revenue greater than $4 million. Previous Web work had been handled by outside vendors.

"We are positioned where the future is going," Mr. Tobaccowala says, "both Starcom IP and Starcom."

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