SMALL WORLD CREATIVE BOUTIQUES: O&M'S SYNDICATE SPOTLIGHTS SHOPS THAT LOVE THEIR FREEDOM

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Godzilla was right about one thing -- size does matter. Of course, as with cell phones, one school of thought holds that smaller is better.

This might be the rallying cry of today's advertising libertarians, a free-thinking breed that you'll mostly find running so-called boutique ad agencies. These small, independent shops revel not only in their feisty, nose-thumbing autonomy but in the creative freedom that comes with the territory.

It's the "swagger factor," as one proud possessor called it.

The huge multinational agencies have "legitimacy, network infrastructure and big money," said Jeff Odiorne, a partner at San Francisco's Odiorne Wilde Narraway & Partners. "Since we have none of this, we live and die by the swagger we convey through our work."

The link between large and small agencies, he adds, "is a healthy, symbiotic relationship."

THE SYNDICATE

Last week, Ogilvy & Mather Worldwide underscored the value of that swagger factor when it announced formation of The Syndicate -- a secondary network of independently owned boutiques that will collaborate on creative assignments for O&M clients and assist in pitching new business.

The announcement supports the contention that, even as the big keep getting bigger, small agencies remain a vital part of the ad community.

"The boutiques plow new ground, and there isn't enough new ground being plowed in our industry," said Keith Reinhard, chairman-CEO of DDB Needham Worldwide.

But outside of their obvious impact on creative work, how have the small shops -- most eschew the word "boutique" -- fared over the past few turbulent years. Trends toward agency consolidation, globalization of brands and agencies and increased participation in integrated marketing and new media have become industry obsessions.

Advertising Age surveyed more than a dozen top small U.S. agencies to gauge how principals see their role in the industry and how they've dealt with the changes affecting the agency business.

OPTIONS LIMITED

Overall, the small shops had a pretty good year in 1998 (see story at right), but many are finding their options for growth are limited. Most still are looking for that one big account to take them to the next level -- an elusive place where they can maintain their independence yet still work on high-profile brands and solve visible problems. But many have come to believe the days are long gone when a small shop could become a large one on the coattails of a bigclient. With that, perhaps, went the ability of a small agency to captivate the industry.

Jeff Goodby noted that his San Francisco-based Goodby, Berlin & Silverstein was named Ad Age's Agency of the Year in 1989, when the shop was only 6 years old and had billings in the $50 million range.

"That wouldn't happen now," he said. "There's less of a willingness to celebrate shops like this."

ON THE ROSTER

However, small shops are taken seriously by large advertisers these days. While they're unlikely to be named agency of record for a $100 million piece of business, they can certainly, in the post-Coca-Cola/Creative Artists Agency world, expect to win a sliver of business on a project basis.

"Big advertisers like to keep boutiques on the roster," said Mr. Reinhard, "just to keep fresh ideas coming in, ideas that are not processed out."

"We've become a more respected, viable choice for larger clients," agreed John Vitro, partner at VitroRobertson, a 20-person agency in San Diego that's one of O&M's Syndicate shops.

The current explosion of technology accounts has made it easier for small shops to get on the radar screen.

"We can go after legitimate startups, as opposed to going with the quirky clients, to get noticed," said Mr. Odiorne.

A case in point is Black Rocket, a San Francisco agency which has produced acclaimed work for Yahoo! and Discover Brokerage.

VISIBILITY RAISES CREDIBILITY

Working for recognized brands allows a small shop's efforts to actually be seen in the marketplace, as opposed to just at award shows. That adds to an agency's credibility, said Court Crandall, a partner in Santa Monica-based Ground Zero.

For example, his agency's talked-about "Say Something" campaign for Virgin Cola (part of the Virgin brand empire owned by high-flying Brit Richard Branson), was featured in a Newsweek article.

Yet small shops still have to combat false perceptions. Their work is not all condom shops and coffee houses. Agencies that responded to the Ad Age survey work for national brands such as Puma, Adidas, Borders, Yamaha, Fox Sports and Turner Broadcasting. They range in size from nearly 100 employees to as few as 16.

Then again, what about clients such as Checkered Past Records? Or the Lake Elmo Fire Department?

The latter is a client of Hunt Adkins in Minneapolis, a Syndicate agency that also does work for Northwest Airlines. That the agency can accommodate Lake Elmo, and have fun doing it, is one of the nice things about being a boutique. It can, though, be limiting.

"The whole idea that boutiques are relegated to doing condom-shop and hair-salon ads was tremendously harmful for us," said Eric Tilford of Core, a respected St. Louis small agency also in the Syndicate. The image of boutiques as self-indulgent places where you typically found "wacky ads" spread, turning the term itself into, he said, a "dirty word."

Making matters worse, he added, "a lot of creatives jumped on that bandwagon and didn't find it insulting."

SHOCK VALUE

Work for small advertisers often thrusts boutiques into the spotlight. For example, a shock-value campaign for a clothing store from Gyro, a Philadelphia agency, drew widespread press attention several years ago. The campaign featured a photo of convicted murderer Jeffrey Dahmer.

But these small shops face myriad real-world pressures.

Gary Goldsmith, currently vice chairman and executive creative director at Lowe & Partners/SMS, New York, was a partner in one of the Big Apple's most admired boutiques, Goldsmith Jeffrey, which was merged into Lowe in 1997. He cited the steady increase in the quality of work coming out of big shops, as well as their recruitment of talented creatives from the boutiques, as factors that "chipped away at us. It made things more difficult for many small agencies."

Mr. Goldsmith and his partner, Bob Jeffrey, sold to Lowe when they realized, despite their reputation for stellar work and their collection of One Show pencils, the possibility of getting to the size and level they wanted had disappeared.

"We felt we could no longer compete on just a creative level and win," Mr. Goldsmith said. "If you look at the small shops now, there's not a tremendous level of growth, even though they do good work."

CLIENTS THAT HELP GROWTH

The big challenge facing these agencies, he said, is "how do you attract the kinds of clients that want the caliber of work that you do, but also want all the other things that bigger agencies can provide? The smaller clients that let you do the kind of work you want to are here one day, gone the next. They're not the clients that will let you grow a business."

Most of today's top small shops are trying to deal with this by presenting themselves as nimble, necessary alternatives to big agencies.

"We're assault teams, as opposed to standing armies," said Greg Di Noto, creative director of Di Noto Lee, New York.

Indeed, many contend that, if anything, the merger-and-acquisition frenzy that has overtaken Madison Avenue has presented boutiques with opportunities.

"It's created a vacuum for smaller, more agile resources that can focus senior talent on important problems," said Mr. Di Noto.

Added Patrick Hunt, president of Hunt Adkins, "It widens the gap between what we are and what they are," a reference to agencies such as hometown rival Carmichael Lynch, now owned by giant Interpublic Group of Cos.

"But you need to have a real point of difference," cautioned Steven Grasse, CEO of Gyro, whose biggest client is R.J. Reynolds Tobacco Co. Gyro has succeeded in building its reputation as a specialist in reaching the youth market.

"You have to have a reason," he said, "why a big client would come to you.".

GLOBAL CHALLENGE

As the small shops struggle to find that special client or to firmly establish what makes them different from their peers, they also have to deal with the same business-side issues the giants are addressing, such as globalization of brands and interactive advertising.

"The struggle to apply strategic branding messages to the new media will be crucial," said Fred Hammerquist of Hammerquist & Halverson, Seattle.

On the flip side, he sees an opportunity: "The big agencies won't push [interactive advertising] creatively. They'll approach it as another profit center."

Some shops have dealt with these challenges head-on, forming their own interactive divisions or handling limited global ad efforts for clients. Others are keeping their heads low and hoping they'll be able to handle these issues without losing their shirts.

"We're largely ignoring them," quipped Alex Bogusky, vice chairman and creative director at Crispin Porter & Bogusky, Miami, which last year crossed the crucial $100 million billings threshold.

EUROPEAN OFFICE EYED

On the other hand, Gyro, already a global creative resource for Puma, is scouting space in London and expects to be operating in Europe by the end of the year. In London, the agency said it intends to run a combination clothing store and tattoo parlor as well as an ad shop.

Agency consolidation has also put small shops at a disadvantage when they pitch against deep-pocketed rivals.

Tracy Wong, chairman and creative director of WongDoody, Seattle, pointed out that his shop "spent up to our eyeballs" for multimillion-dollar reviews for Jenny Craig and the Fox Family Channel, neither of which it won.

Discussions about pockets and their relative depth, of course, lead naturally to discussions about selling out.

Mr. Reinhard said there's a natural progression for a small agency. "If it gets hot, it grows. If it grows, it needs resources. If it needs resources, it sells," he said, adding that a shop either gets bigger or smaller.

"You can only tread water for so long," Mr. Reinhard said.

Coupled with this problem is the difficultly in maintaining profit margins for a small shop. Selling out can become particularly appealing, said Mr. Hammerquist, "when you look at your financials and you realize it's your money on the line."

CASH NOT NEEDED

Call it hubris or call it prudence, but most of the small agency principals interviewed -- every one of whom says he has been approached to sell his agency within the past six months -- aren't ready to cash out yet.

"We feel we've put too much into it," said Mr. Crandall of Ground Zero. "We're just at the cusp of what's possible."

In the final analysis, while these small shops all seem enamored of their coziness (in terms of their own culture, their close relationship with clients and their intimacy with the work), they still pine for the larger platform that big brands provide -- and that big agencies routinely play on.

Many believe that while selling out will afford them access to the latter, the price they'd pay in surrendering control of their own agency brands is too high.

"This is still my baby," said Mr. Bogusky, who is in his 30s. "I'm not looking for an exit strategy. I'd want to know whether you can take care of my

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