INTERACTIVE MEDIA & MARKETING;RESTRUCTURING AHEAD AT O&M INTERACTIVE;DOWNSIZING LIKELY AS AGENCY TRIES TO INTEGRATE NEW MEDIA UNIT

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Top executives at Ogilvy & Mather, O&M Direct and O&M Interactive are discussing a restructuring of O&M Interactive that could lead to downsizing the unit.

The interactive division, established in 1983 under Martin Nisenholtz (now president of electronic publishing at The New York Times Electronic Media Co.), is the oldest group in the business. O&M Interactive brought in $4 million in revenue last year from blue-chip clients like IBM Corp. and American Express Co.

AN INTERACTIVE IDENTITY CRISIS

But in recent years the unit has suffered an identity crisis as O&M, like other agencies trying to grow an interactive business, has debated the role of new media in overall account management.

While some agencies delegated interactive work to an autonomous department, others have integrated interactive into the core agency. D'Arcy Masius Benton & Bowles announced this month it would absorb interactive subsidiary Einstein & Sandom into its core agency.

Executives inside O&M say the restructuring could take place as soon as monthend.

Top O&M executives confirmed they're evaluating models for integration, but declined to give specifics.

Ogilvy & Mather Direct CEO Wendy Riches said the company is looking to increase integration, but would not dismantle or shrink the interactive unit.

"The units are separate profit centers and offer different expertise. We have found a way of knitting together the network but also keeping the separate groups of expertise," Ms. Riches said.

DOWNSIZING A POSSIBILITY'

Of downsizing, O&M Interactive CEO Michael Troiano said, "It's always a possibility. That's the nature of the interactive business."

The unit currently employs about 40 people, a mix of approximately 35% full-time staff and 65% free-lancers.

According to executives involved in the decision-making process, one possibility involves reducing the separate interactive unit while ramping up company-wide Web access so all account and creative groups can develop Web strategies for interested clients.

AN*INTEGRATED UNIT

In this scenario, O&M Interactive would not have its own clients, but would service those managed by the general agency or O&M Direct. Ogilvy would choose the best production source, be it O&M's interactive group or an outside shop.

Ogilvy has traditionally handled interactive production using both in-house and outside resources to manage the work load, especially for IBM. That client, for example, has used some 10 interactive companies including O&M Interactive, CKS Partners, K2 Design, Poppe Tyson and Razorfish.

Another possible outcome would bring management of IBM's interactive account (but not production) inside the agency. Under this plan, a small team would remain behind in the interactive unit to maintain American Express's ExpressNet area on AOL.

AMEX LOOKS TO OTHER SHOPS

AmEx, beyond assigning the ExpressNet concept to O&M Interactive, is moving forward with additional interactive marketing plans for the Web. But the credit card company isn't planning to rely on the agency.

It uses O&M Interactive primarily to maintain ExpressNet, an AmEx spokeswoman said. It will use other, small interactive agencies for assignments in the future.

New York-based Agency.com designed AmEx's general Web site, which went live in late 1995. AmEx has also used interactive agency Proxima.

A bigger issue at the general agency, though, is an effort by two Ogilvy powers-Steve Hayden, president of worldwide brand services on IBM Corp., and Michael Walsh, chairman of Ogilvy & Mather Europe-to mainstream the Net at O&M.

Mr. Hayden, who declined to comment, has told people he wants to bring the Internet into every department.

STEP UP NET TRAINING

Messrs. Hayden and Walsh are pushing to step up Net training and access across the agency to prepare for the future.

But some managers are said to disagree with companywide access that enables employees to use the Web for personal use during work hours. Personnel are worried about layoffs because of the overlapping duties among staffers of all of O&M's units.

Mr. Troiano is known to be under pressure on profitability, despite the fact that revenues have grown from $500,000 in 1992 to $4 million in 1995.

He said O&M is looking at different ways to service clients, but added the unit would not dissolve.

"It's an integration, not an absorption," he said.

Contributing: Kate Fitzgerald, Bradley Johnson.

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