MARKETING SERVICES;RAPP COLLINS ZIPS INTO WORLDWIDE DIRECT-SHOP LEAD :OPPORTUNITY AND STABILITY TRANSLATE INTO HIGHER THAN U.S. GROWTH LEVELS

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Stability of economies in Latin America, improved communications infrastructures in that region and in the Far East, continued strength in Europe and strong foreign currencies bolstered non-U.S. returns in 1995 for the leading U.S. direct response agencies.

While the coterie of direct advertising agencies with non-U.S. operations remains small-only nine of the top 20 direct agencies measured by total gross income include foreign activities-the non-U.S. returns of these nine grew a staggering 37.9% to $385.3 million, which is more volume than they generated collectively in the U.S.

Part of the growth was mechanical: It took more dollars to buy most major currencies in '95. The German mark grew an average 9.4% against the dollar, the French franc 10.7%, British pound 4.2% and Japanese yen 10.1%. Even so, real growth was remarkable.

HEAVY BID FOR INTERNATIONAL

It's little wonder mega-agency groups like Young & Rubicam, Omnicom Group and now Interpublic Group of Cos. are investing heavily in their international direct arms.

The race for No. 1 in worldwide agency gross income was claimed by Omnicom's Rapp Collins Worldwide, thanks to a 33.2% growth in international gross income (revenue). Young & Rubicam's Wunderman Cato Johnson clung to its No. 2 spot as WPP Group's Ogilvy & Mather Direct slipped to third as its U.S. returns fell 16.1%.

Wunderman is reaping economic benefits from recent investments in data and telemarketing centers in the U.K., Spain, Germany, Argentina and Brazil. The agency grew 27.1% in non-U.S. returns (vs. 23.6% in U.S.) to $91 million gross revenue; Rapp Collins hit $94.6 million in non-U.S. gross income.

DATA CAPTURE LINK

Wunderman's linkup to such centers vertically integrates data management with data-capture sources, making the agency more competitive. The move enhances the agency's ability to transform data into knowledge, and secures for Wunderman hegemony in the market since there are fewer and fewer independent data-capture centers outside the U.S.

Three of the five offices Rapp Collins opened in Latin American in 1995 were joint ventures centered around data organizations (in Argentina, Costa Rica and Colombia).

"Even our growth in the U.S. [up 17.8% in '95] is connected directly to our state-of-the-art data operations in Dallas," says G. Steven Dapper, CEO of Rapp Collins.

EUROPE STRONG FOR WUNDERMAN

Although Europe is by far Wunderman's leading region outside the U.S. (81% of non-U.S. gross income), CEO Mitch Kurz says in five years Tokyo and Sao Paulo are likely to house the Nos. 2 and 3 offices systemwide (after New York).

Asia has a big advantage [over Europe] because of the new and advanced communications infrastructure, he says. "There [in Asia], postal, telecommunications, cellular and interactive capabilities are not burdened with ancient operating systems or phone lines like one might find in parts of Europe."

Government investment in infrastructure in Chile and Argentina are directly related to Wunderman's "enormous" growth in those countries. Its Latin American gross income advanced 65% to $6.1 million.

Rapp Collins' strength also is in Europe, where London's WWAV Rapp Collins holds a sizable gross income lead over the next direct competitor; its revenues grew 33.2% in '95. That shop is a recent merging of WWAV and Rapp Collins.

SOUTH AMERICAN BOUND

In addition to the three Latin American joint ventures, Rapp Collins opened shops in Santiago and Sao Paulo, the latter now employing 32 after gaining the CrediCard account (MasterCard) for Latin America.

Rapp Collins, too, sees Asia as the market of the future and just opened Rapp Collins Far East in Hong Kong, snagging Suresh Mathai away from J. Walter Thompson Co. as president (Asia).

Mr. Dapper says global solutions are being enhanced by RC's internal Internet access because it helps to manage the brand from a single point of view. "High-potential customers are very much alike everywhere. They think globally. Berlitz [gained in December '95], for example, says, `We want consistency around the world-Canada, South America, Europe, Asia-one coordinated message."'

BUSINESS TO BUSINESS GROWS

Much of the work outside the U.S. is business-to-business, says Wunderman's Mr. Kurz. Mass media fade in importance where consumer populations are a smaller percentage of the total.

"While the macro is B-to-B, the micro is a client base that is more engaged in the business of targeted direct marketing," he says.

In many ways, foreign markets are ahead of the U.S. in the fusion of direct marketing and promotion.

"There has been a tendency overseas for agencies to cluster all below-the-line activity. To keep your clients you need to constantly be broadening your capabilities," says Mr. Kurz, who notes the ultimate mariage de convenance occurred late last month when the French sales promotion and direct marketing associations agreed to merge.

Interpublic gained a fourth arm this May by purchasing DraftDirect Worldwide, which had just been cut loose by Cordiant. DraftDirect is the fourth-largest direct response agency worldwide.

"The link with Interpublic will give us new opportunities, new funds for growth," says CEO Howard Draft, whose agency expanded last year into India, Brazil and China. DraftDirect generated $27.6 million in non-U.S. returns, up 1.7%. Its U.S. side soared 59.2% to $51.7 million. Another IPG unit, McCann Direct, pulled in $29.3 million in non-U.S. gross income.

O&M REBUILDING

WPP's O&M Direct unit is trying to rebuild its huge U.S. base under new Chairman-CEO Reimer Thedens. U.S. revenues in '95 sprung a leak as the agency suffered from the losses (most in '94) of DowBrands, some American Express business, Microsoft Corp. and AT&T Corp., the latter two coming after O&M won the IBM Corp. direct account. AmEx just awarded the agency more business last month.

While the direct and promotion companies with international reach make up only a short list, more are looking beyond the U.S. for opportunities.

At WPP, promotion shop Einson Freeman merged in 1995 with WPP's MGA Partnership Marketing, and then this February joined with the parent's Promotional Campaigns Worldwide, London, to form Einson Freeman Promotional Campaigns with the assignment to promote IBM's PC.

Frankel & Co., long one of the strongest promotion shops in the U.S., has no international business, but Chairman Bud Frankel says, "With changes in the nature of business now, we're compelled to consider international."

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