But if the map were redrawn today, it might look even more disturbing to Chicago shops.
"The critical mass of business is in New York, with a far greater client concentration," says David Beals, CEO of Chicago-based review consultant Jones Lundin Beals.
Of the top five holding companies, three are European--and base their U.S. headquarters in New York. East Coast concentration, however, is just one issue. Over the past 15 years, independent agencies and boutiques cropped up from Portland to Minneapolis to Boston, diluting the billings cartels of New York and Chicago. Chicago, always reliant on a package-goods heavy roster, has seen accounts once considered Midwest pieces of business become geography-neutral.
While there are still plenty of billings in Chicago, it's increasingly New York-based holding companies that are controlling the finances. Three agencies control 39% of Chicago's billings, according to Ad Age figures--Foote, Cone & Belding Worldwide, Leo Burnett Co. and DDB Worldwide. Two, FCB and DDB, are part of New York holding companies. While DDB has been owned by Omnicom Group for years, Chicago's second-largest holding company, True North Communications, only recently merged with New York's Interpublic Group of Cos. The largest, once-proudly independent Leo Burnett Worldwide, has bowed to a union with Manhattan's D'Arcy Masius Benton & Bowles to create what is now Bcom3 Group.
The agency that Leo built is now prepping for a public offering, a seismic shift for a shop that, more than any other, has defined the cultural landscape of Chicago advertising. "Leo Burnett as we knew it is dead and gone," says retired Worldwide Creative Chief Norman Muse. "That's a tough admission for me to make."
With Chicago's last two independent giants essentially ruled by Wall Street, global accounts increasingly stewarded from media-centric Manhattan and more agencies between the coasts stealing away market share, the question is valid: Is the Windy City ad community at risk of falling off the advertising map?
FOLLOW THE MONEY
To be sure, Chicago is still a huge market in both size and importance. It holds a prominent--if distant--second place behind New York in total billings, and its clients do business around the globe. Midwestern mega-marketers including Sears, Roebuck & Co., Philip Morris Cos.' Kraft, McDonald's Corp., Wm. Wrigley Jr. Co., General Motors Corp., S.C. Johnson & Son and Anheuser-Busch Cos. house accounts with Chicago shops.
If you're looking for a measure of Chicago's relevance, "Follow the money," says Dan Rose, president of Frankel, the Chicago promotional powerhouse now owned by French giant Publicis Groupe. "Clients vote with their wallets."
Fifty-three Chicago agencies raked in $15.2 billion in 2000 billings, according to Advertising Age's agency report (AA, April 23). But New York agencies billed $57.2 billion, nearly four times that of the Windy City with just three times the number of agencies. Divided equally, clients spent 39.4% more per agency on Madison Avenue than they spent on Michigan Avenue. Although it ranked second in size, Chicago limped in ninth of the top 10 U.S. ad markets based on average annual growth over the past 15 years, according to Advertising Age data (New York was seventh). During that period the 9.2% increase in Chicago's total billings outpaced only St. Louis, which grew at a rate of 6.5%. The entire agency industry, meanwhile, grew at a rate of 12.4% since 1985 and 10.6% over the last decade.
Worse still, Chicago's dismal 15-year growth rate included its best billings growth year. In 1998, Chi-Town shops posted a whopping 23.8% boost in billings, more than any other market, fueled by DDB, Chicago's win of McDonald's and a robust media bonanza from Bcom3's Starcom Worldwide.
Many Chicago agency executives point to the technology collapse as affirmation for having been slow to the dot-com gold rush, because although Michigan Avenue shops had their share of Internet clients, their rosters weren't dominated by them as much as their coastal brethren. "Now [West Coast agencies] might look at Chicago with envy," says Brian Williams, president of Interpublic's FCB, Chicago, and a former Burnett executive. "Chicago has a lot of stability compared to what they're going through right now."
Undeniably, the heartland advertising capital has been rooted in grocery basket products. Yet, its agencies have worked hard to move away from that typecasting. "My agency suffers from that [image] unfairly," says Gary Epstein, CEO of Havas Advertising's Euro RSCG McConnaughy Tatham. "We haven't had a majority of package-goods clients for [18 to 24] months. Our clients are all out of town. We don't have a Sears or a Kraft."
Nor does it have a Procter & Gamble Co., the $90 million account the agency lost in March 1999 after 40 years. Tatham Laird & Kudner, the predecessor to Euro RSCG McConnaughy Tatham, had 23 clients in 1985, of which half were package-goods marketers. By 2000, the ratio had shrunk to a little more than one-fourth; its clients today include Darden Restaurants' Red Lobster, Dean Foods Co. and Alberto-Culver. Bayer Corp. and Midas International left the agency this year.
An analysis of Chi-Town rosters shows most agencies have diversified from traditional meat-and-potatoes clients. Eleven of Burnett's oldest clients are package-goods marketers and 40% of its 32 clients at year-end were of the package goods ilk. FCB's take in package goods dropped from 40% in 1985 to 25% last year. About a third of the clients of Omnicom's DDB, Chicago, were in package goods as of last year, down from half in 1985. WPP Group's Ogilvy & Mather, Chicago, continues to be a Sears-dominated agency, but half its client base in 2000 included Helene Curtis, Kimberly-Clark Corp. and Kraft Foods. WPP sibling Y&R Advertising's roster is also dominated by Sears.
Most of the executives interviewed for this story contend agency location doesn't really matter and that a sign of a strong agency is its ability to win clients from other markets. However, consultants disagree that location is irrelevant, and client rosters seem to reinforce that viewpoint. While agencies have indeed been able to pull in clients outside of their time zone, the majority of companies on Chicago rosters are still in their back yard.
WALL STREET INFLUENCE
So powerful is the influence of Wall Street and Madison Avenue that as it pursued a buyer True North Commu-nications executives insisted Manhattan was the working headquarters for the holding company despite the fact that its Securities and Exchange Commission filings list its sweet home as Chicago.
"In one sense, the holding companies are now virtually all headquartered in New York, so the financial power is even more concentrated today among holding companies in New York and overseas," says Abe Jones, managing director, AdMedia Partners, who noted that global business is frequently controlled from Manhattan.
With the exception of DDB, the argument often heard from Chicago executives that Chicago outposts of Manhattan-based agencies have gained stature in their networks is largely untrue. Billings for the Chicago office of J. Walter Thompson, for example, have steadily shrunk as a multiple of New York's, from 92% in 1985 to 54% last year, according to Advertising Age data. The same is true for Omnicom's BBDO, as it went from representing one-fourth of New York's billings to just less than one-fifth. Ogilvy's Chicago office billings share has dropped to 22%, it's lowest since 1987. Ogilvy, Chicago, a decade ago accounted for 69% of the New York billings level. Y&R's Chicago billings in 2000 represent just 8% of its New York tally.
Over the 15-year period from 1985 to 2000, in fact, billings for the entire Chicago market have consistently hovered between one-fourth and one-third of the billings posted by New York agencies. Only DDB's Windy City operation had billings that eclipsed the Gotham mothership. Over the last decade DDB, Chicago, billings have grown to $1.53 billion, double that of the $757 million posted in 2000 by DDB, New York.
Contributing to Chicago's strength within the DDB network are clients Anheuser-Busch and McDonald's, which are said to represent one-fourth of the shop's annual revenue. Yet while Chicago is the largest office in the DDB network, "New York is the power base" says David Beals. "You're not going to connect Chicago people to the club of big players in New York holding companies because global activities is where the action is in terms of overall agency management."
As for FCB, until the mid-1990s, its Chicago office beat out the New York office in billings. In 2000, the office was on nearly equal footing with its Manhattan counterpart at the $1.3 billion mark after having represented just 66% of the Big Apple's billings as late as 1995. True North sibling Bozell, Chicago, struggled to retain its local identity after billings began declining in the mid-1980s to its current 13% of Bozell New York's total. Today, the Bozell name disappears entirely from Chicago after the shop was reorganized within Interpublic as the Chicago outpost of Campbell Mithun, Minneapolis.
Client rosters aren't the only things typecast. When it comes to creativity, Chicago has always suffered the blues, according to some agency executives. "Let's be honest, Chicago is never going to be looked at as a top-of-mind creative market," says Jim Schmidt, chief creative officer at Euro RSCG McConnaughy Tatham. "We've always built an image of being hard-working and responsible with creative." Mr. Schmidt's hometown boutique McConnaughy Stein Schmidt Brown merged with Euro RSCG Tatham late in 2000, following Tatham's struggle to lure a signature creative chief to Chicago after Bob Welke left in March of that year. The agency imported New Yorker Helayne Spivak, a big-name JWT worldwide creative chief-turned-consultant, but Ms. Spivak didn't want to remain in Chi-Town and filled in only on an interim basis.
Burnett has one of Chicago's few name-brand creative directors in Cheryl Berman and some rising stars like Executive Creative Directors Steffan Postaer and Jonathan Hoffman. But while the agency publicly boasts of its creative prowess, internally its creative department took a drubbing from retired Vice Chairman Rick Fizdale. In a scathing memo to former colleagues Feb. 9, he wrote, "I cannot shake the nightmare of the USA reel." Mr. Fizdale took umbrage with several works, including a test spot for P&G's Pert shampoo he called "so obvious from frame one that channel surfing becomes an option." He labeled one McDonald's spot a "waste of money, film and time." Then, Mr. Fizdale barbed a pair of spots for Kellogg's Rice Krispies Treats, calling the spots "contenders for the worst advertising, bar none, this company has ever made. ... It [and others] made me think that our creative department is populated by artless 17-year-olds playing at advertising." Mr. Fizdale closed the memo with the request to "Please rise above this sophomoric, uninspired ... idea-less, uncrafted blob of work."
"Chicago tends to be a place where great work is being done on a few things. It's always been that way," says Mike Sheehan, president of Interpublic's Hill, Holliday, Connors, Cosmopulos, Boston, who put in stints at Burnett from 1988 to 1990 and at DDB from 1999 to 2000.
The message is essentially that one or two marquee campaigns aren't enough to keep the dozens of bosses and clients happy. "We've done stuff that was very adventurous and it worked great, but we just need to do more of it," says Mr. Schmidt.
Since joining Y&R, Chicago, in 1999 as exec VP-chief creative officer, Mark Figliulo has been working to position the agency's output as boutique-style work. "Boutiques are the couture of the ad world where the ideas generated are more risky," he says. "They force the bigger agencies to up the ante." While Y&R has gained attention for its campaigns for Nascar and former client H&R Block, "The real opportunity for Chicago is to start doing breakthrough creative for big clients," Mr. Figliulo adds, asserting that Chicago is in the middle of a creative renaissance. "We just need the planets to align for us." Indeed, for every critic there are staunch supporters of the work coming out of the city. "Chicago creative is not an oxymoron," is an oft-repeated statement by observers. Chicago boasts two agencies ranked among the top 10 most-awarded U.S. agencies, according to Advertising Age sibling's Creativity.
There are highly creative signature Windy City campaigns, from Burnett's Altoids work to DDB's "Whassup" for Anheuser-Busch, which won the 2000 Grand Prix at the International Advertising Festival as well as dozens of other creative awards. But despite ranking as the fourth-largest ad-producing city in the world by billings in 2000 according to Advertising Age data, the Second City ranked 16th in the 2000 awards tally compiled by The Gunn Report. That's with the "Whassup" campaign from DDB, Chicago, being the second-most awarded campaign, according to report author Donald Gunn. New York ranked third behind London and Sao Paulo. San Francisco tied for fifth and Portland ranked eighth. Whassup with that?
Perhaps Chicago's low ranking is because U.S. agencies only took Cannes seriously since the late `80s, suggests Mr. Gunn, a former Burnett worldwide creative chief. But even U.S. shops tend to get overlooked in domestic shows, he adds. "Because people on the juries tend to favor non-multinational independent shops, big agencies do slightly less well," he says. But is Chicago creative overlooked? No, says Mr. Gunn, even if he believes that New York is the pre-eminent ad town.
"There is the chauvinism of New York from New Yorkers," concedes Bob Scarpelli, U.S. creative chief and newly appointed chairman of DDB, Chicago. "I think there probably still is this perception among clients that New York is the center of the ad universe but I don't think it's been the center of the ad universe for a long time. Maybe the leaders here in Chicago don't get the publicity or the forums [that] agency leaders in New York get but I know we're as well-respected [as they are]."
"Chicago should not worry about its position as much as it does," says DDB Chairman Keith Reinhard, who now works in New York but made his name in Chicago. "I've never understood why there is that sort of complex."
Those who have worked in both cities don't discount Chicago. "From my standpoint, anytime you're up against DDB, Chicago, or Leo Burnett you've got your work cut out for you," says Jim Ferguson, president and chief creative officer of Y&R, New York, who began his advertising career in Chicago. "I always considered Burnett like the Chinese army--they come at you in waves. You can look down Michigan Avenue and there are some great places there."
All over town agency creative directors privately talk of wanting to produce more boutique-quality work despite their risk-averse client bases. Yet they also say the entire industry lacks the spark it once had, particularly after the dot-com bust. "There's a lot of B-level work out there," says Dennis Ryan, chief creative officer of JWT's Chicago office, which handles, among other accounts, Miller Brewing Co.'s Miller Genuine Draft.
"Right now advertising [overall] is rudderless," says Joe Sciarrotta, executive creative director at Ogilvy in Chicago.
Another factor contributing to Chicago's current low profile is that it no longer has the blazing agency personalities that still populate other cities. There's no Pat Fallon, Hal Riney or Jeff Goodby. Mr. Reinhard moved to New York. Charlotte Beers now works in Washington. "Charlotte Beers, Burt Manning, John Kinsella, Keith Reinhard, Ralph Rydholm, they were the icons," says FCB's Brian Williams.
In some ways, the image of Chicago's ad community is as out of date as the city's unshakable ties to Al Capone. Advertising's golden age in Chicago was two or three decades ago when Burnett was pumping out critter icons like Tony the Tiger with the frequency of a factory, according to many observers. "The `70s were a great time for personality-driven, tug-at-the-heartstrings communication, that at that point in time, the Chicago agencies Leo Burnett, Needham and FCB were great at," says Susan McManama Gianinno, chairman and chief branding officer of Bcom3's D'Arcy Masius Benton & Bowles.
Some blame Chicago's waning star power on Wall Street's overpowering effect and proximity to Madison Avenue. Others point to the shift of strategic and creative influence from agencies to clients, which put the once-flamboyant industry on a short leash. One West Coast creative says Chicago has an image that is linked to Leo Burnett: "Big heartland clients, big brands and cartoon logos," an outdated view in terms of modern advertising.
"Any perception that Chicago was a cool place to be, etc. is gone. It disappeared 15 to 20 years ago, when Keith Reinhard and Charlotte Beers [left] there," says one New York agency executive. "It's a slow decline that will continue from a talent point of view, and the clients follow the talent. It'll come down to two or three agencies [in Chicago], just like in Minneapolis."
There's also a cultural divide--what New Yorkers may view as complacency is revered in Chicago as a sign of nobility. For example, when Ian Baer, now exec VP-director of directDeutsch, Los Angeles, transferred to Chicago from the Big Apple to be president of Omnicom Group's Rapp Collins, he asked his staff what competitors were up to. "I would get a lot of answers like `You know, Chicago is different that way. We're really not into each other's business, we don't stand around and gossip about what's happening at every other agency in the city."' Mr. Baer left Rapp Collins in May after the agency announced it would trim the full-service Chicago office to a support operation.
"It's not like the players are slouches here," says David Beals. "Chicago's always had a reputation of being a solid, straightforward place to do advertising. Less flash, less glitter. You can spin it positively or negatively."
Ruth Ratney, publisher and editor of Screen magazine, the local production weekly, spins it negatively. "Chicago is not on the map," she says. "We're the second-largest ad market in North America and we have no sizzle." She argued that agency executives here don't promote themselves like they should. "You pick up the phone of a New Yorker and they're blowing their horn. We don't have any stars. In the old days when [former Burnett Worldwide Chief Creative] Norman Muse was around, he created a lot of media attention."
"The Fairfax Cones and Leo Burnetts and Paul Harpers of the world, the people that started business in Chicago, there aren't people at that level today at Chicago agencies," says AdMedia Partners' Mr. Jones. He pauses, and adds: "It's hard to think of people [of] that stripe in New York agencies either."
Wacker Drive was crumbling after years of neglect. So too may be the city's talent pool for creative.
"The problem is if someone is going to move their family they want to go somewhere where if that job doesn't work out they can go to another agency," says Tatham's Mr. Schmidt. "People look at Chicago as a ... place where if it doesn't work out they just leave town," he added. "Sometimes I worry about the talent pool, that we're losing more than what we're getting."
Ed Eskandarian, chairman-CEO of Havas Advertising's Arnold Worldwide Partners, says he turned down the presidency of Needham Harper & Steers in the early `80s because he and his wife are from the East Coast and wanted to stay there. "I'd heard about the terrible winters--even worse than Boston," he says. Since turning down the job, "I keep wondering if I made a mistake," he adds.
"When you're recruiting, one of 50 think it's too cold and the rest think it's a great town to be in," says Bob Tesar, president of Chicago-based recruiting firm Tesar Reynes. "People realize we have crappy weather half the time. Economically, it's still as good a place as you'll find."
Still others find it hard to get local talent to leave town, especially as the economy has fallen flat. "It's been more difficult to get people out of Chicago," lamented one Minneapolis-based creative chief.
Not only do people stay put longer in Chicago, fewer than ever are starting their own agencies. Chicago has just a handful of midsize shops and fewer creative boutiques compared to a decade ago. "There aren't the number of people breaking away and starting their own companies in Chicago that there have been in New York and San Francisco, and that has left a dearth of midsize agencies," says Mr. Jones. "There's not an analogy of a Kirshenbaum or Deutsch that started 10 to 15 years ago that's become a powerhouse agency." Adds David Beals: "When we're looking for smaller agencies we find we drift to Minnesota." Chicago's insular nature has been both damaging and protective. Few outsiders have ever been able to start a full-service operation here with any success. Ammirati Puris Lintas, troubled throughout the network, was the last major agency to make the attempt. After 18 months, it shuttered permanently.
BREAKING IN IS HARD TO DO
It's hard for a brand new agency to come in and win an $80 million account," says Brad Brinegar, president of Leo Burnett USA. "Who's going to give it to them?" Mr. Brinegar speaks from experience: He left Burnett in January 1998 to start up the Chicago office of Ammirati Puris Lintas, which folded after it lost anchor client Ameritech. He rejoined Burnett in July 2000. Given Chicago's insularity, it's often easier to buy into the market. One reason why Interpublic purchased True North was to acquire the Chicago assets of FCB and Bozell. "This is a graveyard for outside agencies," says Peter Krivkovich, CEO of Chicago independent Cramer-Krasselt. "Chicago stands for long term. Outsiders come in with short hits and it just doesn't play."
A slew of shops that once called Chicago home include Lois USA and its predecessor Lois/EJL, which shut down in 2000, and Wells Rich Greene, which folded its Chicago operation in 1998 after losing flagship client Midas International. Independent agency Doner, Southfield, Mich., has mulled various Chicago acquisition targets including Jack Levy Associates, after twice opening and selling off agencies. Interpublic's Deutsch decided Chicago was its kind of town in 1998 when it set up shop to service its Mistubishi dealership account but little has happened beyond that.
"This is a very hard market," says Ogilvy's Mr. Sciarrotta. "I don't think this is a boutique town, this is a big client town. I had a boutique and most of our clients were from out of town."
Other shops opened by outsiders have had some success. Vickers & Benson set up shop in 1998 and still operates under the new name Vickers, Benson Arnold under its Toronto-based parent. Santa Monica, Calif-based Rubin Postaer & Associates opened a Windy City outpost in January 1999 that continues today, although its billings were significantly downsized when client Gardenburger hit the skids. Publicis Groupe's Publicis in Mid-America originally opened its doors in 1986 as a Hal Riney & Partners shop to service G. Heileman Brewing Co.'s Old Style account. Today the shop's roster includes mostly small and midsize accounts, including W.C. Bradley & Co.'s CharBroil grills, Novartis' Ciba Vision, and Principal Financial Group.
`NOT MUCH HOPE'
ut the market is not for everyone. "You need to have a real good reason to come into Chicago," says Howard Draft, chairman-CEO of Interpublic's DraftWorldwide. "What's your differential advantage going to be from the people that are here? It takes size to be able to service the big accounts. Unless you can move a big account into this market and service it, there's not much hope."
Only time will tell whether Chicago agencies will emerge stronger from their current retrenching and reorganizing. Because so many big-budget marketers call Chicago their home, it's unlikely the Windy City will fall into obscurity, most analysts and observers contend. Says Mr. Muse: "Chicago survives and probably Chicago advertising will survive in some form just because of the tenacious people."
Contributing: Cara Beardi, Hillary Chura, Alice Z. Cuneo and Laurel Wentz