Samsung said FCB will handle the lion's share of the $400 million the company will spend on advertising next year. But two incumbents-Cheil Communications and AG Worldwide-will continue to work with Samsung, and Samsung will roll out new advertising in three phases.
Kevin Smith, True North's chief financial officer, said True North expects its Samsung billings to be $150 million in the first year. That would suggest revenue to FCB of $22.4 million vs. the $140 million annualized revenue he said True North had from Daimler.
FCB becomes Samsung's first global ad agency as the South Korean electronics marketer looks to boost its brand's stature around the world. Samsung is behind leaders Sony Corp., Matsushita Electric Industrial Corp.'s Panasonic brand and Philips Electronics in sales of consumer electronics. Samsung expects to end 2000 with $28.5 billion in sales.
"We think we're ideally positioned to tackle the challenge of the digital convergence era," said Eric B. Kim, senior VP-global marketing operations, Samsung Electronics. Mr. Kim cited Samsung's consumer electronics and growing wireless businesses, and its strength in chip technologies as key drivers for the brand.
Interpublic Group of Cos.' AG Worldwide, New York, handled creative duties for Samsung in North America, and Cheil, based in Seoul, has led efforts globally. Cheil, whose North American unit is located at Samsung's Ridgefield Park, N.J., headquarters, continues as a significant partner.
The win gives FCB not only a much-needed financial boost, but a morale boost as well after its stunning loss last month.
"Coming on the heels of a totally undeserved Chrysler loss, this reaffirms to us that we have a truly great agency with a great business model that just works," said Brendan Ryan, CEO, FCB Worldwide, New York.
FCB's hiring was first reported Dec. 6 on AdAge.com and later confirmed by the agency and marketer. WPP Group's Ogilvy & Mather Worldwide and Interpublic Group of Cos.' McCann-Erickson Worldwide and Lowe Lintas & Partners Worldwide also vied for the plum account.
As part of an Interpublic coalition, Lowe was asked to create a proposal for Samsung, but the agency pulled out early due to possible conflicts with clients; technology companies Dell Computer Corp., 3Com Corp. and Thomson Multimedia's RCA consumer electronics brand are on its roster.
Samsung met with Ogilvy, but potential conflicts with IBM and Motorola meant Ogilvy's Conquest would have had primary responsibility for the account. In the end, it was an untenable arrangement for Samsung.
Mr. Kim said FCB's worldwide capabilities and chemistry between Samsung and the agency clinched the deal.
Samsung will continue to use AG Worldwide as a consultant on a project basis, Mr. Kim said.
Said Peter Arnell, chairman of AG Worldwide: "After seven years of hard work and contributions helping shape the platforms and assets that are known as Samsung today, I am proud and greatly honored to continue our ongoing role for a company that has truly become part of our family." Mr. Arnell is well-known for his role in crafting high-profile, sexy creative that raised Samsung's brand awareness considerably.
Mr. Kim said Samsung's $400 million global spending will include $200 million for global brand marketing and communications (which includes advertising) and $200 million for product-oriented ads.
Phase one of FCB's efforts will focus on brand. The first advertising is expected by spring 2001.
Phase two includes spending on specific products and the beginning of a transition into a global agency management structure that could take more than a year.
Phase three is expected to focus on local market activities, but it remained unclear whether FCB will lead all ad efforts deployed, given the fact that it will only have $150 million in billings for 2001.
FCB's competitive strategy unit, Chess Team, customer-insight arm, Mind and Mood, and database, digital and direct division, FCBi, will all work on the Samsung account.
Both Mr. Kim and FCB executives downplayed potential conflicts with FCB's global $350 million Compaq Computer Corp. account.
"Compaq has been our biggest customer for many years. ... We do a multimillion dollar business per year with Compaq," Mr. Kim said. Samsung supplies Compaq with components, PC monitors and other technologies.
Contributing: Laura Q. Hughes and Richard Linnett.