USWeb/CKS, the biggest interactive marketing agency, is out shopping. What's on the list? Traditional ad agencies.
"We've been looking at a number of advertising agencies," says President Toby Corey, "and our plan is definitely to acquire some key advertising groups [to add to] our operation this year."
Mr. Corey says USWeb/CKS is seeking ad agencies that share its beliefs in where the world and Internet are headed.
SHOPS THAT SEE OPPORTUNITY
"It's probably going to be the smaller, hot shops that potentially see an opportunity to join forces with us, or a middle level," he says. "It's not going to be a large, established company."
USWeb/CKS is going full force on the Web, adding 500 Internet-related jobs a quarter.
But in promoting the offline expansion, Mr. Corey is building on a philosophy of integrated media and marketing that the CKS branch of the family has been pitching, with mixed results, for more than a decade.
"Marketing communication has got to transcend all media," says Mr. Corey, 37.
"The core message here is it's got to be integrated in order to be successful. . . . [Traditional] advertising is going to become a larger percentage of our business. We view that as an absolutely critical platform going forward," he says.
That's a new twist for USWeb, which bought CKS Group in December to form the No. 1 player in Advertising Age's first-ever Interactive 100 ranking of the largest interactive marketing agencies.
This was not a merger of equals: CKS had more revenue and was profitable. USWeb has never made a dime, but it was growing faster and had the off-the-charts valuation of a Net stock.
The merger brought together two complementary, tech-savvy players: USWeb, a provider of Internet business technology services, and CKS, an experienced provider of creative services. The combined entity has the management, scale and capabilities to deliver--assuming it doesn't fumble.
A 'FIRST-TIER PLAYER'
"It's certainly considered a first-tier player in the space, not only because of its size, but because of its experience," says Jupiter Communications analyst Drew Ianni. Mr. Ianni, once a CKS account exec, strongly supports expanding USWeb/CKS' traditional agency business to deliver integrated marketing.
Adds Prudential Securities analyst James Dougherty: "It appears that the thing is jelling reasonably well. [But] they have to execute; they can't screw things up."
USWeb/CKS came in third last October in a Forrester Research ranking of the capabilities of interactive service suppliers. Even so, USWeb/CKS scored only 28 out of 50 points. (The top two scorers, Cambridge Technology Partners, Cambridge, Mass., and Agency.com, New York, rated 32.5 and 29, respectively.)
The comparatively low scores reflect the industry's youth, says Harley Manning, Forrester's research director.
USWeb/CKS' strongest suit is strategy, with other strengths including technical prowess and the ability to manage old and new media, says Mr. Manning. He also cites the network of local offices as an advantage, adding that the company has raised the quality and consistency of service across its network. Early on, he says, USWeb's quality varied considerably among branch offices.
As for weaknesses, Mr. Manning says the company's Web interface design has room for improvement. Even with its technical abilities, he says, USWeb/CKS has its limitations.
NOT RIGHT FOR EVERY JOB
"If your life depended on a very difficult systems integration job, you probably wouldn't hire USWeb/CKS, or you would hireUSWeb/CKS credo: 'Evolve or die' USWeb/CKS and a systems integrator," he says.
"The story of USWeb/CKS is really a story of a company that is a little stronger in some areas than others, but really doesn't have any major flaws," Mr. Manning says. "They're like the player that can do everything well" but still may lose to others when it comes to one specific skill.
50% MORE EMPLOYEES
USWeb/CKS, which moves its headquarters Aug. 1 to San Francisco from Santa Clara, Calif., is raring to grow.
The "Internet professional services company," as Mr. Corey describes it, has expanded employment 50% this year to 2,928 people in 69 offices spread over 53 cities in 12 countries. Revenue is expected to nearly double this year to more than $400 million from $228.6 million last year.
"Our goal is quickly to become a multibillion-dollar" business, says Mr. Corey. "Either you evolve rapidly or you die."
USWeb/CKS went outside in November to recruit CEO Robert Shaw, the respected former exec VP-worldwide consulting services at Oracle Corp. Mr. Shaw, 51, is a sharp contrast to his twentysomething predecessor, Joe Firmage, who stepped down to pursue and promote the study of UFOs and other topics. The free-spirited ex-CEO still has ties to USWeb/CKS; the company last month invested in a consulting venture formed by Messrs. Firmage and Corey.
WORKING IN INTERNET TIME
USWeb, originally bankrolled by Ziff-Davis and ZD backer Softbank Corp., has been evolving at Internet speed. USWeb opened in December 1995 as a franchiser of local Internet business service shops, shifted gears in 1997 to buy up about three dozen Web-service companies and went public in late '97. Before the CKS merger, USWeb offered a range of services including strategic consulting, site development and integration of the Internet with a client's existing computers and processes.
CKS, populated early on by a band of Apple Computer expatriates, built a practice starting in 1987 around packaging, point-of-purchase materials, corporate identity and branding. From its start, the Silicon Valley-based shop lived, breathed and promoted technology as an efficient way to produce and deliver marketing communications.
CKS was one of the industry's earliest champions of interactive marketing, creating promotional materials on floppy disks and in-store kiosks.
DANCES WITH AGENCIES
CKS danced with Madison Avenue, selling 28% of the agency in 1995 to Interpublic Group of Cos., which still owns a stake in the combined USWeb/CKS. CKS rounded out its limited general-advertising practice by buying Schell/Mullaney, a small New York tech agency, and McKinney & Silver, a well-regarded regional agency in Raleigh, N.C., in '96 and '97, respectively.
CKS then stopped acquisitions to focus on what it already had. Even so, it never fully realized the promise of integration. CKS worked with an array of major marketers, but never produced the broad, global brand-building ad campaigns that are central to many integrated plans.
CKS went public in December '95, the month USWeb opened, and was a hot stock until its shares plummeted 63% one day in November '97 on disappointing earnings.
Seeking a fix, CKS' board in spring '98 began shopping the company. CKS and Goldman Sachs & Co. approached 10 companies about mergers or partnerships. Nothing materialized.
At the suggestion of an institutional investor, on July 28, 1998, CKS Group Chairman-CEO Mark Kvamme picked up the phone and called Mr. Corey. On Sept. 2, USWeb announced it would buy CKS to form the modestly named Reinvent Communications. The $540 million stock deal closed in December. Another company had sued over rights to Reinvent, so the merged venture opened as the somewhat clunky USWeb/CKS.
"Culturally, I think it's still two companies," says Jupiter's Mr. Ianni. "When you have a primarily creative culture [at CKS] mixed with an engineering-centric culture [at USWeb], there's going to be some culture clash. But they seem to be moving forward." Merging cultures, defining vision and keeping growth on track are the company's key short-term issues, Mr. Ianni says.
WORKING HARD FOR UNIFIED IMAGE
USWeb/CKS--legally, it's still USWeb Corp.--is working hard to act like a unified entity.
"Our integration is complete," says Mr. Shaw. "We can put that behind us and really begin to drive this company."
The company last year started a program to promote its culture to staff, sending posters, wallet cards and mousepads with the mission statement and values. This is more than the typical corporate warm-and-fuzzy logic.
"Morale drives every aspect of our business," says Mr. Corey. "That's the No. 1 thing I worry about."
Every employee gets stock options and Mr. Corey spends considerable time working to keep the staff focused on the long-term play rather than the roller-coaster Net stock.
"Our stock price has a significant impact on morale," he says.
(USWeb/CKS traded last week at about $25.50 a share, giving it a stock market capitalization of $1.9 billion. The stock, which went public at $7.50 a share in December '97, has ranged from $7.75 to $47 during the past year.)
FROM DROPOUTS TO PH.D.S
USWeb/CKS' diverse staff ranges from high school dropouts to MBAs and Ph.D.s. The average age is 31. Attire ranges from tank tops to, when Fortune 500 clients are in sight, suit and tie.
"We have our share of blue-haired, nose-pierced professionals," says Mr. Corey.
Employees reflect the diversity of the work--and the breadth of competitors USWeb/CKS bumps up against in an exploding, broadening market. USWeb/CKS' identified rivals range from com-puter and computer services giants (IBM Corp.) to ad agencies (Ogilvy & Mather Worldwide), from interactive services players (iXL) to giant consultancies (Andersen Consulting), from telecos (AT&T Corp.) and Internet services (America Online) to software sellers (Microsoft Corp.).
WHAT THE HELL IS IT?
What the hell is USWeb/CKS? Mr. Corey describes the business as "Internet professional services" or "e-business services," with the task to transform existing enterprises and adapt new ventures to "the Internet economy" by fusing strategy, creative and technology.
"The magic ingredient here is being able to fuse these three disciplines together," says Mr. Corey. "That's the hardest part of the business. In the past, technology and creative were like oil and water. Today, it's absolutely necessary" to combine them.
Just 55%, or $125 million, of USWeb/CKS' $228.6 million in revenue last year came from Internet and interactive services, according to Advertising Age estimates. That still put USWeb/CKS far above rivals on Ad Age's chart.
The rest came from various CKS services, such as traditional advertising, packaging and brochures. Before last year's merger, such non-interactive programs accounted for even more, 73%, of CKS' revenue.
NON-WEB WORK GROWING
Given the rapid growth of its Internet services, Mr. Corey says non-interactive work now makes up about one-fourth of USWeb/CKS business.
USWeb/CKS boasts it works for 46 Fortune 100 companies, though it doesn't divulge its full client roster. Clients do include Apple, America Online, CNN/SI, Fujitsu PC Corp., Levi Strauss & Co., NBC and Sears, Roebuck & Co. The company often has multiple clients in an industry, though USWeb/CKS acknowledges in Securities & Exchange Commission documents that it probably will have to forgo some potential marketing communications assignments in the future that involve direct or indirect competitors.
While pure Internet stocks are the rage, Mr. Corey argues USWeb/CKS' multidisciplinary, integrated scheme will pay off as advertising and e-business services converge. This philosophy builds on the credo of integrated marketing promoted for years by CKS.
"Forget your Internet advertising program. Where's your integrated media program?" says Mr. Kvamme, 38, chairman of USWeb/CKS and former chairman-CEO of CKS.
USWeb/CKS has work to do. "There's definitely a brand perception problem about whether USWeb/CKS is a traditional ad agency, are they a truly integrated marketing communications agency or are they leaving traditional advertising behind?" says Patrick Tickle, director of corporate branding and Internet marketing at SGI. The computer marketer moved its ad account last year from CKS to what is now McCann-Erickson/A&L, San Francisco.
"I periodically hear people say, `So are those guys still doing advertising?'|" says Mr. Tickle. "That question pops up a lot. If I were them, I would make sure that is something I fixed."
Even some existing clients don't seem aware of USWeb/CKS' interest beyond the Net.
HIRING A LEADER
George Riedl, director of new-business development at Walgreen Co., saysthe drugstore chain hired USWeb/CKS this year to help build a commerce site because it's "the leader in Web consulting" with unmatched experience in Web retailing.
"We also like the fact that Web consulting is their sole focus," he says.
Except it's not the sole focus.
Mr. Corey wants to draw more attention to USWeb/CKS' offline services to complement its strong Internet play.
"We view ourselves as having to really explain our advertising capabilities," Mr. Corey says.
The company is working now to better integrate McKinney, with the intent to eventually make USWeb/CKS the ad agency brand.
McKinney, meanwhile, helps open doors: Mr. Corey met earlier this month with three people--the CEO, the chief information officer as well as the marketing chief of Royal Caribbean Cruises, a McKinney client.
`TYPICAL OF NEW DECISIONMAKERS'
"This is very typical of the new decisionmakers," Mr. Corey said during a phone interview while flying back from that meeting. "It's a blending of technology and marketing people."
Acquiring another offline agency or agencies could help USWeb/CKS compete more directly with the likes of O&M for large integrated accounts. Mr. Corey says USWeb/CKS' point of difference will be deep capabilities in technology that allow its work to tie in more closely with clients' business processes.
'AWARDS ARE MEANINGLESS'
How many ad agencies would be comfortable as an integrated arm of USWeb/CKS is an open question.
USWeb/CKS is known more for its advocacy and use of technology than for its creative product. In style and approach, it comes across far more like a consultancy than an ad agency. Mr. Corey has little patience for the agency world's obsession with creative awards (though USWeb/CKS issues press releases promoting its awards).
"Awards are meaningless to our business," he says. "All we care about is the impact we have on our clients' business."
When USWeb hired BBDO West, Los Angeles, to do a 1996 ad campaign, Mr. Corey says, developing award-winning work seemed as important to the agency as creating work that delivered results for the client.
"It's a very different mindset and a different philosophy," Mr. Kvamme says.
DISDAIN FOR OLD-LINE EFFORTS
Mr. Kvamme shows similar disdain for the way agencies implement technology.
"There is no ad agency that can even come close to doing any real technology," he says. "It does not exist. Their idea of technology is coding HTML pages. It's a joke, it's absolutely a joke."
Mr. Kvamme, the largest individual shareholder in USWeb/CKS, is laughing all the way to the bank.
Copyright July 1999, Crain Communications Inc.