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Fallon McElligott, Minneapolis, is evolving from a mass-media creative hot shop into a midsize agency and it's starting to dally in interactive marketing.

"We have to do it," said Mark Goldstein, president-integrated marketing. "An integrated agency's job is to know how its clients' customers receive information and use it."

While Fallon's recruitment last year of Mr. Goldstein, former president of Bethesda, Md.-based Earle Palmer Brown, was a turning point, the agency had founded a four-person New Media Technologies Group in October 1992 to explore alternative marketing disciplines, including interactivity.

Current projects include Internet and other online provider-based programs for clients Ameritech Telecommunications, Nikon and Timex Corp. Fallon also is working with Apple Computer to develop an interactive communications system for an undisclosed client.

But the agency is clearly still finding its way.

Among the challenges Fallon faces are cutting through the technological morass to deliver effective advertising and determining how to integrate interactive concepts into new-business pitches.

"There is not a new-business pitch since I got here that hasn't included interactive marketing in some form," Mr. Goldstein said.

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