As traditional agencies and new media shops continue to merge, most are maintaining independent operations while taking advantage of each other's strengths. So far, that approach has prevented big culture clashes.
Those in the business say that this hands-off policy provides a formula for success, and it's likely to prevail as consolidation continues in 1998.
POPPE, MODEM MERGER?
As one of the most recent high-profile acquisition companies, True North Communications and its agency relationships is being watched closely.
True North already owns a major stake of TN Technologies, including subsidiary interactive agencies Modem Media and R/GA, and late last year it snapped up Bozell Worldwide, including its interactive agency Poppe Tyson.
Rumors about merging Modem and Poppe, two of the most recognizable agency brands in the still nascent industry, are already flying. But Modem and Poppe executives denied there's anything behind the speculation, and said that in April they will unveil plans for how they will work together.
TN Technologies President-Chief Operating Officer G.M. O'Connell said it is "highly unlikely" the two would merge. He said TN Technologies is a holding company, and interactive agencies can use the traditional agency holding company system in much the same way that an Omnicom Group has both DDB Needham Worldwide and BBDO brands under it.
"I don't think from a business perspective that we'd be doing any favors by taking a brand out of existence," Mr. O'Connell said. The agencies "might compete, but they also might leverage each other's strengths."
He pointed to Poppe's experience with international clients as one of the more obvious synergies, especially with client interest in the worldwide arena surging. In Europe, its clients include SBC Warburg and Elizabeth Arden International. Its Hong Kong accounts include the Hong Kong Bank, and its new office in Malaysia handles the account for Astro, the country's first satellite broadcasting company.
Kevin Clark, chairman-CEO of Poppe Tyson, agreed with Mr. O'Connell and said the agencies will definitely continue as separate brands under TN Technologies.
When asked about the future and the differentiating of the two brands, he also mentioned Poppe's international expertise, as well as Modem's media-buying experience with clients such as AT&T Corp. as possible ways the agencies could work together.
Other interactive agencies, such as those within the Omnicom Group, are enjoying a laissez-faire holding company strategy. At the same time, most would like to continue building better relationships with their parent companies.
The most aggressive agency investor in interactive shops, Omnicom Group's Communicade, is best known among its interactive agencies for a hands-off policy. In fact, just two executives oversee Communicade: Managing Director Felice Kincannon and Chief Financial Officer Jerry Neumann.
Communicade reportedly owns 20% stakes in six interactive agencies: Agency.com, Razorfish, Organic Online, Red Sky Interactive, Interactive Solutions and Think New Ideas. And last September Omnicom acquired Eagle River Interactive Development Group.
"Omnicom is a very entrepreneurial organization," said Ms. Kincannon. "I'd call what we do with the interactive agencies facilitation. We believe they are the best in the business and as a consequence we believe they are very good at developing and planning their own businesses."
Eagle River President Kevin Rowe said while his company likes the independence, it would also like to take better advantage of Omnicom relationships.
"We would like to drive it a little closer. We don't want to be attached at the hip. Everybody here likes the independence," said Mr. Rowe. "I'd like to be close enough to take advantage of synergies. But that's it." He added that he expects Omnicom will also be able to help Eagle River with business experience as it prepares to make its own small agency acquisitions.
`MANAGE ON DEMAND'
Chan Suh, chairman-CEO of Agency.com, echoed Mr. Rowe and said Omnicom tends to "manage on demand" when it is called upon for expertise or advice.
"In 1998, I think we're going to try to partner with some of the other [Omnicom] companies," Mr. Suh said. "But at the end of the day, it's got to be the right company. It's like putting two panda bears in a cage. Sometimes it works and sometimes it doesn't."
Analysts say the friendly separation is the way to go, whether the interactive agency is an outside entity or an inside division.
"A lot of big agencies learned their lesson in the '80s with direct agencies, when they bought them and then weren't able to integrate them effectively," said Dana Tower, analyst with Forrester Research. "There were two different cultures and two different P&L's. ... Each had their own client, and the play between them didn't always work. Besides, the clients didn't want [a consolidated company] either."
Some culture differences are also cropping up with interactive/traditional agency purchases. Interactive agencies are generally populated by young technology and design junkies, while traditional agencies have a reputation for bottom-line concern and top-dollar suits. When the independent CKS Group--which already does about half its business in new media--bought SiteSpecific, both sides had some adjustments to make.
`NOTHING'S A SURE BET'
Seth Goldstein, former SiteSpecific CEO and now managing director of the Site Specific Group, said slowly getting to know the CKS people helped ease the transition. He said it also helped to have the traditional agency experience of Jon Adams, who was the chief operating officer of SiteSpecific. Now that the New York office of SiteSpecific has been integrated into CKS, Mr. Adams is general manager of CKS Group.
"I can't tell you how different it is from living on fumes," Mr. Goldstein said, comparing SiteSpecific's start-up days to its more financially secure footing now. "We weren't going out of business, but it was always around the corner. Like, if we lose that one client, we'll have to lay off half the staff or something. Now it's really great to focus on the work."
Even with his positive merger experience, Mr. Goldstein knows nothing is a sure bet. "We're still trying to figure all this out," he said. "Talk to me in six months and see if all this comes true."
Copyright March 1998, Crain Communications Inc.