Cheil Communications

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South Korea's first advertising agency, created as the in-house ad agency for Samsung, 1973; began conducting Korea's first nationwide lifestyle surveys, 1977; began publishing Korea's first "Advertising Yearbook," 1979; set up a joint venture with Bozell, 1989; formed an alliance with Edelman Public Relations, 1991; set up Hakuhodo-Cheil, 1999; began working with True North Communications' FCB Worldwide, 2000.

Cheil Communications was founded in 1973 by Lee Byung Chul, the pioneering Korean entrepreneur who founded Samsung Group. Cheil, established as Samsung's in-house ad agency, was the first agency in South Korea.

By the time he founded Cheil Communications in 1973, Mr. Lee had already built a formidable business empire, including Samsung Electronics, started in 1969. He had long benchmarked South Korea's economic development with that of Japan, which historically has been several decades ahead of Korea. Mr. Lee was a close friend of the president of Japan's Dentsu ad agency, who in the late 1960s suggested that Korea would soon be ripe for mass advertising and marketing that would drive consumer demand.

Mr. Lee recruited journalists from Joong-Ang Ilbo, the newspaper he owned, to help set up an ad agency and enlisted partners with a variety of backgrounds in pharmaceuticals, foods, industrial products and financial services. Half of the co-founders came from Samsung companies and half were outsiders. They provided funding and the promise of advertising business. Among the agency's initial outside clients were Lotte Confectionary, Jinro Soju and Dongwha Pharmaceutical, some of Korea's largest advertisers.

Soon after opening its doors, Cheil established an alliance with the Japanese agency Hakuhodo and began sending workers to Japan to learn about the ad business and a variety of related services.

Over the years, Cheil expanded into promotions, public relations, brand consulting, research, marketing and Web page design. In 1977, it began conducting Korea's first nationwide lifestyle surveys-part of its effort to provide clients with sound demographic information. In 1979, it began publishing Korea's first "Advertising Yearbook," which continues as the reference of record for the industry.

In the mid-1970s, as durable goods made by Samsung Electronics became popular and more widely affordable, Cheil campaigns carried them into the popular consciousness. A Samsung washing machine became a runaway seller after ads portrayed a young wife pleasing her husband with clean laundry. The message was that even in Korea's patriarchal society, a woman could control her man by using a Samsung product.

Some campaigns won international acclaim for Cheil. In 1987, it received a Clio award for a Samsung Electronics TV spot called "Human Touch." In 1997, Cheil was awarded a Gold Lion at the International Advertising Festival in Cannes for its "Baby Eyes" spots about wide-screen TV sets.

As Samsung grew into an international marketer, Cheil grew as well. In the late 1980s, it began setting up an overseas network of 15 offices on five continents. In 1989, it set up a joint venture with Bozell, called Cheil-Bozell, which expanded its skills and enabled it to add new clients that would otherwise conflict with existing Cheil clients. In 1991, Cheil formed an alliance with Edelman Public Relations to expand its public relations business and build its own marketing institute.

Cheil steadily built a reputation for top-notch service, closely following its customers' needs through basic research, planning, execution and evaluation. As of 2000, approximately 64.5% of its clients had been with Cheil for more than 20 years.

Over the years, Mr. Lee always appointed his Samsung associates as agency president rather than choosing ad professionals. Its president since 1981, Pae Chong Yeul, is largely credited with the agency's many successes during his tenure. Even at the lowest point of South Korea's economic crisis in 1998, Cheil turned a $7.4 million profit. Mr. Pae accomplished this by listing Cheil on the Korea Stock Exchange and expanding into the Internet business. That year, Cheil built Korea's top portal site in terms of customers for Daum Communications. A new economic boom helped Cheil rebound quickly, and in 2000 it reported profits of $40 million.

Cheil expanded into sports marketing with Samsung Electronics' Olympic sponsorship both at the 1998 Nagano, Japan, Olympic Games and in 2000 in Sydney. The two campaigns were valued at $35 million and $79 million, respectively.

Cheil continues to strengthen old relationships and establish new ones. In 1999, it set up Hakuhodo-Cheil, and in 2000, it began working with True North Communications' FCB Worldwide, which won Samsung Electronics' $400 million global advertising account in December.

Although it expanded internationally and increased its non-Samsung client base to comprise 60% of its business, Cheil has yet to recruit many accounts from international marketers in Korea. As of 2001, it had only six international clients, including Pizza Hut, 3Com and General Motors Corp. That year, Cheil, the country's leading agency, had gross income of $142 million, down 5.6% over the previous year, on billings of $796 million.

In its effort to expand internationally, Cheil hired Korean-American advertising executive Michael Moon from Ogilvy & Mather in 2002 to head its international operation.

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