Modem Media Poppe Tyson

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O.S. Industrial Advertising formed by merger of de Garmo Inc. and O.S. Tyson & Co., 1974; merged agency renamed Poppe Tyson, 1976; Modem Media founded, 1987; Poppe Tyson acquired by Bozell, Jacobs, Kenyon & Eckhardt, 1992; True North Communications acquires majority interest in Modem Media, 1996; Poppe Tyson acquired by True North with purchase of Bozell, 1997; Poppe Tyson merged with Modem Media and renamed Modem Media Poppe Tyson, 1998; initial public offering, 1999; renamed Modem Media, 2000; Interpublic Group of Cos. bought True North, June 2001; Interpublic sold about 11 million Modem Media shares, reducing its stake to 0.6% from 41%, December 2003.

Poppe Tyson was founded as O.S. Industrial Advertising when two New York-based agencies, the Complan division of de Garmo Inc. and industrial agency O.S. Tyson & Co. merged in 1974. Fred Poppe was named president-CEO and Irwin Tyson was appointed exec VP; by 1976, the agency was doing business under the Poppe Tyson name. The shop opened with $7 million in billings and clients that included Otis Elevator, Oxy Metal Industries and Union Carbide.

Poppe Tyson grew to become one of the biggest U.S. business-to-business ad agencies, taking on additional technology accounts. In 1988, it had billings of more than $65 million. In the late 1980s, Fred Poppe resigned and the company went through a series of ownership changes that ended with the shop at Bozell, Jacobs, Kenyon & Eckhardt in 1992.

During this period, Poppe became one of the first ad agencies to embrace the Internet. The agency had been doing work for Silicon Graphics, a manufacturer of 3-D computer graphics workstations. Its Web design work for Silicon Graphics gave the agency a jump-start in the industry. Poppe created its own Web site in 1994 to solicit more work, making it one of the first agencies to do so.

Within 90 days, Intel Corp., Hewlett-Packard Co. and others had hired Poppe for Internet branding projects. Poppe's Mountain View, Calif., office staff swelled to about 190 and its New York staff to more than 300. U.S. Vice President Al Gore hired the shop to design the Web site for the White House. As one of the first agencies to do Web design work, Poppe saw its revenue increase from $10.5 million in 1995 to $35 million in 1997.

Perhaps its greatest claim to fame came in 1995, when client Netscape decided to sell ads on the browser. Poppe helped negotiate the first ad sale and created one of the first banner ads, a simple ad sold to AT&T Corp. for $40,000 a quarter. This event led Poppe into the ad sales business, representing Netscape and other clients, among them Excite. But the plan backfired as Poppe's sales force competed against each Web site's internal sales teams.

To remedy the situation, in November 1995 the agency quietly spun off DoubleClick, an independent, wholly owned subsidiary, to provide sales representation for clients selling ad space on their sites in an ad network (a business that represents various Web sites for ad sales).

Poppe, however proved less successful than DoubleClick. Revenue before Poppe's 1998 merger with Modem fell sharply, to about $22 million, and the agency experienced a period of management turmoil and disagreement over how much emphasis the agency should put on Internet work. The company planned to go public in fall 1996, but shelved those plans in December of that year, citing poor market conditions. Exactly a year later, True North picked up Poppe when it bought its parent, Bozell Worldwide.

Modem Media

Modem Media, on the other hand, was founded expressly to be a digital marketing company (hence its name, which co-founder Gerald M. "G.M." O'Connell admitted would quickly become outdated). Mr. O'Connell founded the shop with Douglas Ahlers in 1987 in Westport, Conn. For its first client, General Electric Co., Modem Media began building the GEnie online mall. Its work for GE gained attention and its client roster soon grew to include J.C. Penney Co.; Hammacher, Schlemmer & Co.; and Godiva Chocolates. Early forms of digital media efforts by Modem took the form of CD-ROMs, fax on demand and interactive voice response.

In 1996, Modem Media sold a majority interest to True North Communications and became part of TN Technologies, a holding company unit for TN's interactive properties. After months of rumors, in June 1998 TN merged Modem with the interactive components of Poppe Tyson. Poppe's traditional agency services were merged into True North's other assets. In 1998, the combined agency won a CASIE Award for a John Hancock Mutual Life Insurance Co. campaign.

The merged agency went public in early 1999 as Modem Media.Poppe Tyson and in 2000 the company dropped the venerable Poppe Tyson name. Its client roster included global brands such as Citibank, General Motors Corp., Delta Air Lines, General Electric Co., IBM Corp. and J.C. Penney Co. It lost one of its biggest clients in 1999 when it parted company with AT&T.

Modem Media gained a new lead shareholder when Interpublic Group of Cos. bought True North Communications in June 2001.

In Septmber 2001, it closed its New York office and laid off 7% of the company's total workforce. For the year, Modem Media had U.S. gross income of $103 million, down 23.3% from the year before, and interactive marketing revenue of $72.6 million, down 35% from the previous year, making it the country's No. 7 interactive shop.

The dot-com crash

Modem Media’s fortunes sank with 2000’s dot-com crash. Reported revenue peaked in 2000 at $134 million. It dropped to $97 million in 2001, $70 million in 2002 and $61 million in 2003. There were positive signs: Modem Media in 2003 reported its first full-year profit ($5 million) since 1999. Modem Media in March 2004 forecast full-year 2004 revenue of $65 million to $70 million along with improvement in profits.

Interpublic, raising cash to pay down debt and looking to focus its operations, sold its major stake in Modem Media in December 2003, selling 10.96 million shares for about $57 million. That left Interpublic with 148,000 shares, or a 0.6% stake. Interpublic continued selling shares into 2004. At the end of February 2004, it owned 130,000 shares, or less than a 0.5% stake.

Mr. O’Connell, who stepped down as CEO in January 2001, formally left Modem Media employ at the end of 2003. He became a part-time consultant effective Jan. 1, 2004, but continued as board chairman.

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