Advertising's `Big Bang' Is Making Noise At Lastby
When Bruce Crawford met Allen Rosenshine for drinks at Manhattan's Century Club in August, 1988, Rosenshine's dark mood seemed to capture the disillusionment of Madison Avenue in the late `80s. Rosenshine, then chairman of ad conglomerate Omnicom Group Inc., lamented that he couldn't find a new chief for one of his big agencies, BBDO Worldwide Inc. And as a former copywriter, he was fed up with hawking debentures instead of honing ad slogans. So Rosenshine made Crawford a strange offer: Would Crawford take over Omnicom and let Rosenshine go back to running BBDO?
Crawford, also a onetime BBDO chairman who at the time had the plum job of managing the Metropolitan Opera, startled him by saying yes. The switch proved to be an inspired bit of casting. Says Philip H. Geier Jr., chief executive of archrival Interpublic Group of Cos.: "First, they had a great advertising man put it together. Then, Bruce came in to sort out the business."
DYNAMIC GIANT. "Sort out" is a profound understatement: The soft-spoken Crawford has quietly turned Omnicom from an unwieldy clutch of shops and styles into a coherent, dynamic marketing giant. Meantime, Britain's WPP Group PLC and Saatchi & Saatchi PLC--also products of `80s merger mania--are mired in financial problems. Now, their woes are giving Omnicom a chance to help reclaim America's primacy in advertising.
True, Omnicom has not overtaken WPP or Saatchi in size: With 1990 billings of $9.7 billion, it still trails the British giants, which have billings of more than $15 billion each. But Crawford has whipped into shape the diverse businesses he inherited from the 1986 merger of BBDO, Doyle Dane Bernbach Group, and Needham Harper Worldwide (chart). Despite a deep recession, Omnicom's net income jumped 11% in 1990, to $52 million. Revenue rose 17%, to $1.17 billion. And Omnicom's stock has easily outperformed that of its British rivals.
While the British paid top dollar for their acquisitions, Omnicom's three-way merger occurred before takeover prices spun out of control. As a result, its debt of $275 million is much more manageable than the total debt of WPP or Saatchi, which analysts estimate at well over $400 million each. So while those companies are laying off staffers to free up cash for debt payments, Crawford just plunked down $25 million to buy a stake in Abbott, Mead, Vickers, a London shop known for its droll ads for British supermarket chain J. Sainsbury PLC.
DREAM TEAM? But Omnicom's differences run deeper than the balance sheet. The Saatchi brothers and WPP's Martin Sorrell claim their umbrella companies generate new business by referring clients from ad agencies to direct-marketing or sales-promotion subsidiaries. Crawford, who started as an account manager for Procter & Gamble Co., puts little store in such notions. Omnicom tried something similar, but Crawford dropped it soon after he took over in March, 1989. "These are nice concepts," he says, but he doubts their efficacy. Cross-referrals now account for a negligible portion of Omnicom's business. Instead, Crawford keeps his focus on building his ad agencies.
Omnicom wasn't always so straightforward. Indeed, when Crawford, now 61, returned to advertising after his 3 1/2-year stint at the Met, the merger some had dubbed the "Big Bang" was being muffled by its own rhetoric. Rosenshine and other admen had promoted it as a dream team of three creative shops. BBDO devised the "Pepsi Generation" campaign; DDB coined "Think Small" for Volkswagen; and Needham told McDonald's customers, "You Deserve a Break Today." By running BBDO and a merged DDB Needham Worldwide Inc. as two separate agencies of similar size, they figured Omnicom would reap economies of scale and offer a full menu of services to their clients.
But the economies and synergies were illusory. Turf-conscious staffers at BBDO and DDB Needham wouldn't share information on recruitment or market research. And clients were unmoved by Rosenshine's plan to offer cut rates to those who doled out business to a number of Omnicom units. Says Rosenshine: "Ego and turf took a huge chunk out of our grand plans for centralization."
Enter Crawford, who employed the same bare-bones formula he used to wipe out an $8 million deficit at the Met. First, he shelved the rhetoric about synergy and focused on cutting costs, paring the holding company from 70 to 58 staffers. Next, he took control of Omnicom's third leg, Diversified Agency Services, which had become a bloated catchall for the group's small agencies and other marketing subsidiaries. By merging or selling unprofitable and overlapping agencies, among them Ammirati & Puris Inc., Crawford has trimmed it from 30 to 12 shops. Greg Ostroff, an analyst at Goldman, Sachs & Co., credits this "merging and purging" for Omnicom's robust earnings.
WIDE BERTH. As at the Met, where he allowed and even encouraged Artistic Director James Levine to stage an ambitious production of Wagner's Ring of the Nibelung, Crawford gives his advertising lieutenants wide latitude. Last year, despite deep doubts, he endorsed a plan devised by DDB Needham Chairman Keith L. Reinhard that ties agency compensation to the sales performance of a product. Although just five clients have signed up for the plan, Crawford says he has put no pressure on Reinhard to scotch it. Says analyst Alan J. Gottesman of PaineWebber Inc.: "Crawford runs the empire, and his ad executives make the ads."
That hands-off approach has also helped his executives cope with lingering fallout from the merger. At DDB Needham, staffers say Reinhard has finally healed a culture clash between DDB's slick New York office and Needham's more homespun Chicago staff. Having lost the McDonald's Corp. account in 1981, the agency was buoyed recently when it regained a $50 million chunk of the Golden Arches' national account. Another client, Volkswagen, credits DDB's fahrvergnugen slogan with raising consumer awareness. At BBDO, Rosenshine and Vice-Chairman Philip B. Dusenberry are churning out glitzy ads, including the current Diet Pepsi campaign featuring Ray Charles.
Meanwhile, both shops are shoring up their international networks. In addition to the Abbott Mead purchase, Crawford bought British agency Boase Massimi Pollitt Partnership to merge with DDB's London office. Now, Gillette Co., Joseph E. Seagram & Sons Inc., and other clients are giving the shops more overseas ad accounts. Still, Crawford concedes that Omnicom's roster of global clients is weaker than Interpublic's or WPP's.
Nevertheless, Omnicom's conservative approach may garner it more business, particularly from clients who are tremulous about the shaky finances of the British Goliaths. Backer Spielvogel Bates Worldwide Inc., a Saatchi agency, says client jitters have kept it out of the running for some new accounts. Crawford makes no bold predictions for 1991. But he says he will make more acquisitions to fill gaps in the overseas networks of BBDO and DDB. And he coolly predicts double-digit revenue growth, despite the recession.
Crawford's confident equanimity makes him a rarity in the hyperactive ad biz--so much so that even his more successful rivals are baffled. "He's not nearly as nervous and tired as I am," quips Interpublic's Geier. If Crawford keeps his cool, there may be a lot more nail-biting executives in ad land.