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[amelia island, fla.] Maybe it was the sunshine. Or the warm ocean breeze. Something got into the executives this year at the annual American Association of Advertising Agencies meeting, where the overall theme was self-congratulatory and upbeat.

Last year's rain drummed up a lot of worry about strategic consultants encroaching on agency territory -- and other problems that needed fixing. But sun seems to have kept the mood light, even as the same problems continue to plague agencies.

O. Burtch Drake, Four A's president-CEO, led with an opening speech citing 12 reasons why ad agencies should celebrate. Last year, he kicked off the confab with 12 things they should fix.

Procter & Gamble Co. Chairman John Pepper gave a speech affirming the role of agencies; it received an extended ovation.

Still, the ongoing and niggling question of how to deal with competition from strategic consultants was never far from attendees' minds.

Jack Connors, chairman-CEO of Hill, Holliday, Connors, Cosmopulos, Boston, and Brendan Ryan, worldwide chairman-CEO of Foote, Cone & Belding, New York, got into a spirited discussion about consultants during a morning panel session.


"This consulting thing gives me a pain in the ass, frankly," Mr. Ryan said. "You know what it is that they do better? They're better at marketing themselves."

Mr. Connors, whose agency bills separately for consulting, countered: "As they eat into our pie, if only for self-defense reasons, we should eat into theirs."

He also believes consultants have a better business model.

"We come from the land of conflicts in the agency world. In the consulting world, they embrace conflict," he said.

For example, Hill Holliday handles John Hancock Mutual Life Insurance Co., Fidelty Investments and First Union Bank on the consulting side, while also serving BankBoston Corp. on the ad side.


One reason for fewer concerns about consultants may be in part because agencies realized during the past year that the threat could have been overstated.

Donny Deutsch, CEO of Deutsch, New York, said agencies are too often ashamed of being in the advertising business.

"Let's be proud of who we are," he said. "When the barbarians try to storm the gate," shops need to fight back. "We have brilliant core competency. [Creative Artists Agency] wants to be an agency? Bullshit. Consultants? Bullshit."

Linda Wolf, group president-North America of Leo Burnett Co., Chicago, said, "People aren't as afraid of consultants anymore. It's still a threat, but people are working with it."

Some see clients coming back to them for long-term strategy advice and others are even working together on projects with consultants, she said.

The continuing debate about compensation was never far from center stage, either.

Philip H. Geier Jr., chairman-CEO of Interpublic Group of Cos., in an aside during a speech mostly designed to warn agencies not to panic about the impact of new media, said some agencies are hurting the industry with new compensation models. He did not name names.

Messrs. Ryan and Connors also joined the debate about compensation.

Mr. Ryan said he doesn't want to become stuck in an hourly rate system because the agency's value is actually much greater.


"We sell time at a premium. And that's probably hurt the size of the agency and probably hurt the agency with clients we could get," said Mr. Connors, whose agency bills by the hour for consulting work. "But we're not embarrassed about that. We tell people right up front that we're the premium."

He did say that in fairness, it is easier to do that in Boston than New York, where a shop just around the corner can shave off a percentage point for the same account.


Integrated communications was one of the more prominent topics on the minds of many attendees, and was reflected in the numerous panels and speeches about the influence of direct and interactive marketing. At least four sessions were focused specifically on direct or interactive media.

"It's so hot right now because that's where the money is. Everyone is moving from the general advertising side to direct and interactive," said one executive.

According to industry figures, general advertising now accounts for little more than half of revenue at the largest holding companies.

Even those serious financial discussions were painted in rosy hues. Mr. Drake's top 12 items to celebrate included healthy ad spending gains, strong agency financials and new buyers of agencies or agency stock.

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