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Financially troubled Compu-Serve is shifting from brand image advertising to direct response marketing, a move that leaves the role of agency of record DDB Needham Worldwide uncertain.

That and other marketing questions are rising at CompuServe as fast-growing rival America Online prepares to launch an aggressive TV campaign next month from TBWA Chiat/Day, New York.


CompuServe will launch a direct response campaign late this year to promote a redesign of its service. It's not known who will handle, but of CompuServe's three agencies, only DDB Needham has not done direct work for the company in the past.

"The bulk of our marketing will take place in the second half of our fiscal year," said Scott Kauffman, VP-online services. "What you won't see from us are big new TV campaigns from our traditional agencies... More and more of our funding will be moved away from general image campaigns and toward direct response."


CompuServe's move comes as reports surface that the company is slashing its $220 million marketing budget by $100 million.

Mr. Kauffman declined to comment on 1996 marketing or ad spending, calling the reported figures "rumors."

Separately, Cynthia Vahlkamp, VP-marketing for online services, resigned this month. Her temporary successor, Gail Walls, is director of relationship marketing at CompuServe.

Ray Gillette, managing partner on CompuServe business in DDB Needham's Chicago office, would not comment on whether his group was working on new creative. DDB Needham won the estimated $35 million CompuServe account in January.


Mr. Kauffman declined to comment on DDB Needham's status, but said the company was not reviewing its agencies.

CompuServe has also used the Martin Agency, Richmond, Va., and Resource Marketing, Columbus, Ohio, for direct marketing assignments on the launch of WOW! earlier this year. Exactly how CompuServe will use those agencies now is also unclear.

Asked about assignment specifics, Kelly Carson, an account supervisor for CompuServe at Martin, said she's still waiting on word from CompuServe.

DDB was brought on board with the other shops at a time when broad TV branding campaigns were popular among the Big 3 online services.

"It was all about building brand last year . . . and there was heady optimism all around," said David Floren, CEO of Martin/Williams, Minneapolis, which had the CompuServe account briefly last year.

A few months later, when Wall Street grew critical of Web and online-related businesses, "the account became a two-headed thing. We had to build brand and [subscriber] numbers," Mr. Floren said.


CompuServe is tight-lipped about subscriber numbers, especially since its base has remained at or below the 4 million mark during a growth period for rival America Online. AOL now has 6 million subscribers and plans to reach 10 million by next summer.

AOL's new TV campaign will "completely relaunch AOL as a media entity," said President Ted Leonsis. Mr. Leonsis declined to comment on ad spending, but the online service has budgeted $333 million for marketing this year.

Last year, the service spent $42.7 million on advertising from its $100 million marketing budget.

AOL also plans to send videotapes and other collateral materials to current subscribers to introduce the service's new features.

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