Are They Agencies ... or Marketers?

Smaller Shops Are Spending Less Time Building Ads and More Time Investing in Products and Business Concepts

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SAN FRANCISCO ( -- Seattle shop Wexley School for Girls, like many agencies, has been building its base the traditional way, with assignments from Microsoft, Jones Soda, Washington Mutual and Nike. But it really wants to profit not just from selling a tagline, a viral video or even a high-concept marketing strategy but from patents, trademarks or other intellectual property with the potential to pay out.
Not your typical ad execs: Wexley's Cal McAllister (l.) and Ian Cohen want to 'charge less for advertising and bring in more money on the back end.'
Not your typical ad execs: Wexley's Cal McAllister (l.) and Ian Cohen want to 'charge less for advertising and bring in more money on the back end.' Credit: Remy Haynes

And after experimenting with various concepts, Wexley has sold its first package, a "Miss Mobile" wireless beauty contest that combines a traditional Miss America-style pageant with the telephone voting of "American Idol."

"It's a turnkey project," said Cal McAllister, Wexley co-founder, who has licensed the project to Virgin Mobile for one year. The agency's overall goal, he said, is to "charge less for advertising and bring in more money on the back end."

'Miss Mobile'
The package allows mobile-phone users to take photos of themselves or friends and send digital pictures of the beauties to Virgin's mobile website. As part of the contest, Virgin Mobile customers peruse the photos over the mobile web and vote for favorites. Each month a winner is selected.

Since its launch this spring with mentions in Virgin Mobile e-mails and customer newsletters, more than 1,200 photos haven been entered in the contest (without any prize offered), and more than 15,000 customers have viewed the contestants and voted. The site has generated 460,000 page views, a Virgin Mobile spokeswoman said. The revenue comes from text-messaging fees but depends on the individual's text-messaging plan.

"So far so good," said Virgin Mobile spokeswoman Jayne Wallace, adding that it's "a little too soon to make a real evaluation." Havas' McKinney is Virgin Mobile's general-market agency.

Wexley follows a growing number of shops, from Crispin Porter & Bogusky to Brooklyn Brothers, that are tinkering with income-producing models that move away from commissions, retainers and consulting-type hours and fee models.

Brooklyn Bros. goes pharmaceutical
Brooklyn Brothers, which calls itself not an advertising agency but a "creative enterprise," has put its money where its mouth is -- to the tune of hundreds of thousands of dollars, according to partner Paul Parton. The shop is in final stages of developing Premcal, a premenstrual-syndrome treatment it is marketing along with a physician who developed the product. It's put out feelers about trying to place the product on "Live with Regis and Kelly," and talks also are under way with home-shopping network QVC.

Giving full range to the Brooklyn Brothers' portfolio is another new product, a coconut drink have named Oco. The shop intends to take a popular Latin American workplace drink and market it as a sexy night-club libation. "We are a creative enterprise -- we use creative to create profit," said Mr. Parton. The shop's clients include the History Channel and New York Rangers.
Jeff Hicks, Crispin's president-CEO
Jeff Hicks, Crispin's president-CEO

The pain of writing checks in the hundreds of thousands, meanwhile, is offset in part by the belief that the shop's exit strategy will involve sale of its incubated products to companies such as SmithKline or Coca-Cola Co. for tens if not hundreds of millions of dollars.

Jeff Hicks, Crispin's president-CEO, said his agency's recent purchase of Radar Communications, a market-research company focused on consumer behavior, will help the agency and its clients innovate. If a line extension or a new idea evolves, Crispin may become involved in new businesses that can be independent of its clients or in which agency and client have shared participation.

Diverse revenue sources
These revenue streams aren't new to the shop. Crispin has created a number of nontraditional projects, such as a Burger King game for Xbox priced at $4 that has sold in excess of 3 million units. Also, in addition to its traditional advertising arrangement with apparel manufacturer Haggar Clothing Co., Crispin serves as its marketing department: It has a hand in store design, e-commerce and product development. For that, it gets an equity stake.

Though the agency is compensated separately for that work, it does not hold on to the intellectual property it develops.

Both Wexley and Anomaly, New York, have begun developing cosmetic products. Wexley is working on a lip-care product with Purpose-Built, a New York cosmetic and home-fragrances start-up. Anomaly declined to give details about its venture.

Anomaly, one of the first shops to look outside the small-agency box for revenue, has had mixed results. Anomaly had once gathered licenses for a suite of ringtones for college teams and built a technology platform to serve them to customers. But the platform was subsequently sold when it became clear ringtones sales were cooling.

More investments
The shop isn't giving up, though. It recently became a principal investor in ShopText, which allows mobile-phone users to text-message codes printed in magazines, on billboards or in other media to buy products and have them delivered and has opened Lucky Media, a company that places ads on the backs of lottery tickets.

Undoubtedly, the experience of trying to make money like a marketer is if nothing else, is providing shops some insight into the plight of the clients who hire them. Brooklyn Brothers' Mr. Parton said the experience has made clear that the job of coming up with marketing ideas is much simpler than developing products. That's given him a better appreciation for the trials of being a client -- putting together assembly lines, dealing with package developers and the like.

"We thought our part was the hard part," he said. "The ideas and positioning, the aesthetic and the tone of the art."

No need for clients

Tired of getting paid only for taglines or other creative ideas? Ad agencies are putting their marketing chops to the test with a number of ventures that will allow them to make money while they sleep. Here's a sampling.
This agency is collecting money from the sale of Jawbone, a mobile headset for which it serves as the marketing department and gets income from handset sales.
It may have been fired by Wal-Mart, but Bernstein-Rein is still making money from retail, via a chain of almost 50 retail salons, spas, and stores Mr. Bernstein owns and plans to franchise.
A cure for PMS and a new coconut water beverage are under development, backed with hundreds of thousands of agency dollars. The exit strategy imagines millions, if not billions, in profit.
Crispin's Burger King Xbox game is a top seller, beating even Electronic Arts in sales. Crispin's also eyeing partnerships resulting from ideas generated from its acquisition of Radar Communications.
After years looking for a big fish, or a product it could license and sell, Wexley trademarked a Miss Mobile contest, thinking it could be sold to carriers. Virgin Mobile snapped it up.
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