Starlink lends smaller shops its larger clout

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Starlink Worldwide, Chicago, a media management unit of Bcom3 Group's Starcom MediaVest Group, is building new business by offering small and midsize agencies the benefits of big-agency buying power.

The 15-month-old unit is the brainchild of Bob Brennan, now chief operating officer of Starcom MediaVest Group and as of Jan. 1 president of Leo Burnett Worldwide, and Jack Klues, CEO of Starcom MediaVest. It was devised as a way to grow the group's media billings while managing conflicts.

"We were all scheming how do we make the business grow faster," said Mr. Brennan, who likened new business to fishing. "The more hooks you put into the water, the more fish you get. Starlink was just another hook in the water."

While a confluence of factors -- from a media brain drain in smaller shops to industry consolidation -- enabled the creation of Starlink, what drove its growth was Mr. Brennan's desire to grow Starcom.

MANAGING CONFLICTS

While few media agencies operate this way, the concept isn't new. Interpublic Group of Cos.' Initiative Media Worldwide has been buying on behalf of agencies for years, since it was called Western International. Mr. Brennan, however, said clients approached him looking for similar services, prompting him to move into that business as well.

The underlying factor was having the ability to manage competitive conflicts.

"How do we work with and protect client confidentialities when, in many cases, we're bound by traditional contracts?" he asked. At the time, Starcom had inherited a number of full-service contracts with client conflict clauses that would have forced it to give up business.

"If you have agencies as clients, you have to have a confidentiality model as opposed to a conflict model," he said. "We needed a company that could work in the context of a confidentiality model."

Messrs. Brennan and Klues recruited Bob Kubis, a veteran of Chicago agencies Leo Burnett USA and FCB Worldwide, as president of Starlink in July 1999.

Mr. Kubis said smaller agencies find it harder to compete against other shops with powerhouse media arms and can use Starlink to level the playing field. "I've had agency presidents tell me after meetings that when probed, the reason they didn't get the business was because they didn't have the media horsepower," he said.

The fourth media entity in the Bcom3's Starcom MediaVest Group, Starlink complements the traditional full-service media arms of Starcom and MediaVest as well as Web-based media agency Starcom IP. It also is the media arm for siblings Williams-Labadie and TFA/Leo Burnett Technology Group. In March, the agency launched Starlink & Mas to service Hispanic agencies and clients.

While Starlink has its own staff and capabilities in most media formats, spot TV and out-of-home media are managed using Starcom staff.

The hook is that agency clients can tap Starcom MediaVest Group's bounty of proprietary research, technology and expertise while being assured their competitive secrets aren't being compromised.

SHARING ASSETS

Starlink shares those global assets but has its own staff to plan and buy media, creating a multiplier effect.

"It's not a matter of one voice in the market," said Chief Operating Officer Ken Zasky, who splits his time between developing media strategies and running agency operations. "If a small client wants to do something overseas or wants to be in national TV or print, we can get that done for them. You could never have access to that as a small, individual advertiser."

The additional resource gives Starlink a beachhead with clients as other conglomerates buy up small agencies and try to absorb the media business within their networks. Starlink has already come up against that with its first outside client, McConnaughy Stein Schmidt Brown, Chicago, which was recently acquired by Euro RSCG Tatham (which also is affiliated with SFM Media). "They gave us permission to talk to [their] clients to learn what media resource they want to use," Mr. Kubis said.

Agencies also get Starlink as a partner for new-business pitches. "We thought agencies would want us behind the scenes, but everyone has wanted us in the client presentations," Mr. Kubis said.

Barkley Evergreen & Partners, Kansas City, Mo., for example, worked with Starlink in acquiring the Payless Shoe Source business.

"Starlink had the ability to contract directly with our agency and set egos aside, not battle over turf," said Mike Young, senior VP-director, media services at Barkley Evergreen.

Hanon McKendry, a small shop in Grand Rapids, Mich., began working with Starlink in May on clients Consumers Energy and ibelieve.com. As a non-commission, non-markup shop, Hanon didn't have an in-house media department, said Managing Partner Bill Danhof. In the past, it had outsourced media with Kelly Scott & Madison, Chicago, for projects and looked at Initiative as a potential agency. But Hanon has former Starcom and Leo Burnett staffers, so it signed on quickly when an opportunity arose.

"I have an extremely credible media department on the next floor -- it just so happens that floor is in Chicago," Mr. Danhof said.

ACCELERATED MODE

The multiplier effect works both ways. "The beauty of going after agencies is you can build your billing base in accelerated mode," Mr. Kubis said. "If we can go after a couple of agencies that have $300 million in billings and get all their business, we can grow from $320 million to $800 million quickly."

He added that the agency gets many leads from a variety of entities and can then channel those leads to agency partners, many of which are Bcom3 siblings.

Mr. Danhof initially was concerned about a Starlink eclipsing his agency to win the business. "The small agency talking to the big company -- obviously there's going to be some skepticism," he said.

"It was like all three of us getting married at same time with non-piracy agreements," Mr. Young said of the contractual assurances Starlink made with his agency and client Payless.

Such skepticism was a significant challenge for the agency. "They don't want Starcom or Starlink to be the Trojan horse," Mr. Brennan said. "If we couldn't adequately [address that issue], there was no way we could grow."

Beyond contractual assurances, the company recently took up part of a floor at One East Wacker Drive, a block away from its parent.

ESTABLISHING INDEPENDENCE

"We knew we wanted to establish our own independence because of conflict reasons, identity reasons and because we were jammed. Our people were spread over four floors at [Leo Burnett headquarters]," Mr. Kubis said.

With an open office environment typically associated with a creative agency, Mr. Kubis said the space is flexible and conducive to idea sharing.

Nearly opposite its parent's office space, Mr. Kubis and other management offices are actually cubes in the center of the floor. Staffers have the panoramic city views.

The layout fits well with the agency's fast-paced entrepreneurial environment. "They really don't know what the next day's going to bring," Mr. Kubis said. One media director brought in a scooter to work, which Mr. Kubis matched with three more.

The idea has apparently worked. Since its August 1999 launch with one internal client and a staff of three, the company boasts a staff of 42 serving 12 clients, generating annualized billings of $320 million.

Clients include Bcom3 owned or affiliated shops Bartle Bogle Hegarty, New York, and DCA Advertising, a Dentsu-owned agency, as well as independent agency Gardner Geary, Coll, San Francisco.

BARELY A DENT

But the agency has barely put a dent in the potential universe. Starlink analysis estimates U.S. measured media spending among independents and midsize agencies to be $15 billion and $20 billion of the total $65 billion media market.

"We think we can get 25% of that market," Mr. Brennan said.

Starlink's first-year growth was spawned by sticking close to home and focusing on Midwest agencies. It offered proprietary research and solicited credentials meetings with agency presidents.

"Within the first year, we had 29 new-business meetings," Mr. Kubis said.

For its second year, Mr. Kubis is eyeing the West Coast. And he's still trying to figure out how to penetrate the East Coast. "I haven't unlocked that one yet, but I'm working on it."

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