Apple Shifts TV Ads In-House as Chiat\Day Rift Widens

Apple Inc. has shifted to producing more of its own television advertisements instead of relying on agency TBWA\Chiat\Day, underscoring how the longtime partnership responsible for the company’s most memorable ads is fraying.

An Apple team made the iPad Air ad last year that highlighted the device’s thinness, as well as a spot this year with Robin Williams quoting from the film “Dead Poets Society” and other ads airing now, said Amy Bessette, a spokeswoman for Apple. The internal team includes at least two people Apple hired away from Media Arts Lab, a TBWA unit that only serves the iPhone maker, people with knowledge of the matter said.

The shift to more in-house campaigns shows that Apple, grappling with slower demand after years of surging growth, is seeking a fresh approach to regain advertising as one of its key competitive advantages. A rift between Apple and TBWA\Chiat\Day, which worked together on the company’s Orwellian Super Bowl ad in 1984, once would have been unthinkable, said Regis McKenna, a technology marketing consultant who introduced agency founder Jay Chiat to Steve Jobs in the early 1980s.

Apple began creating the ads in-house a few months after marketing chief Phil Schiller considered ending the company’s relationship with Media Arts Lab in January 2013, according to an e-mail from Schiller disclosed in April as part of a lawsuit with Samsung Electronics Co. Media Arts Lab had created iconic Apple campaigns for iPods and Macs, yet Schiller wrote that it hadn’t effectively countered Samsung ads that cast Apple as stodgy and poked fun at its installed base as cultish and geeky.

“If we need to do this, we should get going,” Chief Executive Officer Tim Cook responded at the time to a message from Schiller about possibly needing to change agencies.

Internal Team

Instead of ending the relationship entirely, Apple began building up its own team. Apple hired Tyler Whisnand, who had joined Media Arts Lab from Portland-based Wieden+Kennedy, to lead Apple’s creative team, according to the people familiar with the companies, who asked not to be identified because the changes weren’t announced publicly. Apple also hired music director David Taylor, who joined Apple in January, according to his profile on LinkedIn Corp.’s networking website. Neither responded to e-mailed requests for comment.

The company has also brought in veteran advertising executives from other agencies, such as Wieden+Kennedy’s Bill Davenport.

Bessette declined to comment on Apple’s relationship with its agency. The Cupertino, California-based company is holding its annual developers conference in San Francisco this week. Joanne Trout, a spokeswoman for TBWA\Chiat\Day parent Omnicom Group Inc., declined to comment on the companies’ relationship.

Agency Management

TBWA\Chiat\Day also changed day-to-day management of Media Arts Lab earlier this year. President James Vincent, who led the relationship with Apple since the unit was created, was promoted to CEO, yet is no longer involved in day-to-day operations of Media Arts Lab, according to a person with knowledge of the change. This person said the transition was unrelated to problems with Apple.

Erica Hoholick, a former Media Arts Lab employee, was rehired and became president of the Los Angeles-based unit, according to her LinkedIn profile. Vincent and Hoholick didn’t respond to e-mails seeking comment.

Tension had risen between Vincent and Schiller in early 2013, when Schiller was thinking of dumping the agency, according to the e-mails from the Samsung patent trial. After Schiller forwarded him a Wall Street Journal article entitled “Has Apple Lost Its Cool to Samsung?” Vincent responded that Apple needed to make radical changes to the way it did business.

Back to 1997

In his e-mail, Vincent said that included the need for more inventive advertising, including a bold new ad campaign to reset consumers’ perceptions, much as the “Think Different” ads had in 1997, when the company was near bankruptcy.

“This is not 1997,” Schiller wrote back. “Nothing like it in any way.” Besides its financial success, Schiller said Apple had superior products and just needed better ads to make that clear to consumers. “This doesn’t sound like a path toward making great ads for iPhone and iPad.”

The most surprising thing about the fractured relationship is Apple’s poaching of Media Arts Lab’s talent, said John Boiler, CEO of 72andSunny, Samsung’s ad agency. It bodes poorly for the future of the partnership because it diminishes Media Arts Lab’s ability to address Apple’s concerns or to find other business.

“Traditionally, that’s just a no-no,” Boiler said. “It’s an indication of some seriously broken trust.”

Post-Jobs Era

The partnership’s effectiveness had started to wane after Jobs’s death in 2011. While Samsung’s cheeky ads took aim at Apple’s brand image, Apple tried a variety of campaigns that failed to win accolades, including spots for its Siri voice-recognition service featuring Samuel L. Jackson and Zooey Deschanel, and a short-lived campaign about the lives of Apple geniuses.

People with knowledge of the partnership said that Vincent had been an effective translator of Jobs’s wishes to his team. Vincent has been less successful at coming up with ideas that pleased Schiller, who frustrated the agency with his lack of a clear vision, the people said.

Apple’s decision to create its own ads may be a result of the company’s own issues in filling the creative vacuum left by Jobs’s death, said Edward Boches, a professor of advertising at Boston University.

“More often than not, great ads come from a single confident decision maker making gut calls, not from someone with a paid title,” he said. “This could be a reflection of a customer that doesn’t know what they want, or doesn’t know how to make a decision.”

IPhone Ads

Media Arts Lab is still working for Apple -- including on current iPhone TV spots, such as one highlighting the device’s music capabilities -- though the process has changed in the past year. Now, the agency must compete with the internal team on each campaign, the people familiar with the companies said.

While Media Arts Lab’s finances aren’t broken out by Omnicom, the media company that owns TBWA\Chiat\Day, Apple represents the bulk of its business. Brian Wieser, an analyst at Pivotal Research Group LLC, estimates that Apple may spend $100 million a year with the agency. That’s less than 1 percent of Omnicom’s annual revenue, though losing Apple would be a big hit to its prestige.

“Momentum is really important in this business,” Wieser said. “A client will look harder at an agency that is seen as hot -- and the opposite is true, as well.”

Ad Scores

So far, the in-house efforts have helped stanch a decline in the impact of Apple’s ads since Jobs died, according to ad-monitoring company Ace Metrix Inc. Apple’s average score from this survey of hundreds of consumers fell in 2013 to 548 -- just slightly higher than the overall average score for advertisers - - from 621 in 2011. So far in 2014, Apple’s median score has risen to 564, according to Ace Metrix.

One question facing Schiller and Hiroki Asai, who helps run the advertising team, is whether to elevate its marketing game in the digital world. Media Arts Lab created a site on the blogging platform Tumblr for the iPhone 5C last year, though in April, Ad Age reported that Apple was set to add four digital agencies to its existing list of firms that handle its online strategy, a signal that it may be turning more in that direction. That would be a shift from Jobs’s approach, which was focused almost exclusively on TV and print.

Jobs eschewed hawking Apple’s elegant products in low-resolution online ads, as well as social-networking platforms such as Facebook and Twitter, where Apple couldn’t control its message.

“You still see Apple ads on billboards and buses and on the back of the New Yorker, but they’ve been invisible in social,” Boches said. “Then again, the most effective form of advertising is word of mouth, and Apple has always led in that.”

Before it's here, it's on the Bloomberg Terminal.