Tough road for Simon

By Published on .

An employee of Simon Worldwide played a big game-and the company lost. McDonald's Corp., which accounted for 77% of Simon's first-half revenue, fired the promotions shop Aug. 21 in the wake of McSwindle. Simon's second-largest client, Philip Morris Inc., which contributed 8% of first-half revenue, and Philip Morris Cos. sibling Kraft dropped the shop Aug. 23. Simon that day acknowledged unspecified "other clients" also terminated relationships.

Simon, with revenues approaching $800 million last year, virtually overnight lost more than 85% of its business. Its stock-trading at $3.05 before the bad news-tanked, closing the week at 42 cents.

Ties between Simon and McDonald's ran deep. The fast feeder was Simon's first client when the shop opened in 1976.

Simon's relationship with No. 2 client Philip Morris came by merger. Cyrk, a publicly traded promotions agency that derived the lion's share of revenue from Philip Morris cigarette promotions, bought Simon for $63 million in 1997.

People close to the companies say Simon Worldwide CEO Allan Brown has had a decades-long relationship with David Green, former McDonald's senior VP of global marketing who now runs e-commerce efforts for the Golden Arches. A person close to Simon said Mr. Brown and other senior Simon officials "had close, personal relationships" with many McDonald's executives. The individual said a number of Simon executives "were scheduled" to attend the bar mitzvah Memorial Day Weekend of the son of Peter Sterling, McDonald's VP-media.

Mr. Green through a spokesman denied personal ties drove the relationship, saying, "It's a business relationship." Mr. Sterling was not available at deadline.

In a restructuring, Cyrk this year sold a unit that made corporate promotions products; Cyrk then renamed itself Simon Worldwide, with Simon Marketing as a subsidiary.

The Justice Department said the company itself is not suspected in the prize fraud case. But Simon faces a tough road given the damage to its reputation.

"How do you rebound from that? I don't know that you do," said Steve Gundersen, CEO of Gundersen Partners, an executive recruiter specializing in advertising.

Contributing: Cara Beardi

Most Popular
In this article: