Agency.com Struggles to Win Back Its Good Name (Adage)


My Comment:
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A classical example of how being absorbed by the big and traditional won’t work in becoming the new generation agency…

A great enlightening experience not to repeat.

Read, learn and beware!

– Köksal.  

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A Less-Than-Ideal Integration Into TBWA Has Led to Defections of Top Execs, Loss of Business and Talent

by adage.com (Kunur Patel)

Five years ago, Agency.com was a premiere interactive brand, the fourth-largest of its kind in the country. Fast forward to today and it’s been passed by names such as R/GA and AKQA, new entrants such as SapientNitro and traditional ad powerhouses such as EuroRSCG, which has successfully integrated its digital offering.

Agency co-founder’s return didn’t fix its problems. It’s hard to pinpoint exactly what went wrong, probably because Agency.com has been plagued by a string of problems. It’s been in the news for all the wrong reasons, such as poaching a lawsuit against ex-CEO Don Scales and creating work from Subway to Skittles that missed the mark. Additionally, its U.S. headcount dropped 40% this past year, according to Ad Age DataCenter. Non-U.S.-based headcount tumbled 30%. Worldwide revenue was $47 million.

In retrospect, Agency.com’s now infamous and much-derided Subway pitch video a few years ago appears to coincide with the start of the slide, but observers say the nail in the coffin seems to be its disastrous integration into parent agency TBWA. So now the question is, what next?

According to TBWA Worldwide President-CEO Tom Carroll, “there’s no big unveiling; we may move some things around. There’s lots of chatter and talk. Right now, Agency is healthy, TBWA is healthy; we are all going forward.”

That depends on the definition of health. Agency.com lacks its own CEO or identity and has shed its once-vibrant creative reputation. One agency-search consultant described Agency.com’s reputation as plagued by mismanagement and poor performance and noted the shop won’t be included in any of the firm’s pitches “unless they prove otherwise.”

 

Absorbed into TBWA

It’s looking less hopeful that it can. In a business that’s so subject to the twists and turns of the economy and client business, there’s been plenty of agencies over the years that managed to bounce back after devastating periods. Cases in point: Omnicom’s GSD&M Idea City or Publicis Groupe’s Fallon.

But the difference is much of Agency.com has been absorbed by TBWA. Agency.com’s New York and London offices are embedded in TBWA offices, and of New York’s Agency.com staff, more than half are shared with Chiat/Day. Some in the industry murmur about more changes for Agency.com and how TBWA integrates other digital assets such as Tequila.

A few years ago, there was a major push to revive the shop and its identity. In 2007 co-founder Chan Suh had returned to day-to-day responsibilities to lift Agency.com out of its troubles. It was still a separate company, with its own profit and loss statement and CEO. At the time, he said running the agency he founded in 1995 would be “like getting the band back together.”

When he returned in 2007 Mr. Suh characterized the relationship between Agency.com and TBWA as “one of partnership.” But Mr. Suh quietly left his post at the end of 2009, and some speculate it’s because he no longer wanted to work at TBWA. (One-time Agency.com CEO Don Scales also left because of alignment disagreements with TBWA.) Mr. Suh now works at Omnicom on new ventures for John Wren.

Compared to other holding-company digital agency acquisitions that have both maintained their independence and kept top leadership, Agency.com has faltered.

 

Defections

“The founders are long gone and nobody’s ever taken it and given it momentum, so there’s never been a reason to attract top talent there,” one consultant said. “R/GA has done work that has been respected in the community, and I can’t recall anything from Agency.com that was noteworthy in and of itself.”

Bob Greenberg has stayed atop Interpublic’s R/GA, Trevor Kaufman is at WPP’s Schematic and Marita Scarfi, recently appointed CEO of Omnicom’s Organic, came up at the agency more than a decade ago. While Agency.com has been folded into TBWA, Organic, while loosely affiliated with BBDO, has fought for its independence at Omnicom. For 2009, it saw revenue increase 5% to $135 million.

There are some bright spots within Agency.com. Its San Francisco office has kept a staff of 50 and, by one estimate, brings in about $10 million of the shop’s overall revenue from heavy-hitting clients such as eBay, Apple, Nike and Ask.com. The office appears to work largely independently of sister offices.

Because Agency.com doesn’t have its own CEO, San Francisco head Jordan Warren reports to Mr. Carroll; New York and Chicago head Riccardo Zane reports through TBWA’s New York president Jamie Gallo.

The absorption of Agency.com into TBWA was meant to bolster TBWA’s digital chops. Mr. Carroll cites an example that it indeed is doing that, saying Agency.com people helped TBWA grab Twix creative duties from SapientNitro.

“The industry is going in an alignment direction,” said Mr. Carroll. “It’s working for us, so why would we get off it?”

 

Series of stumbles

2003: Omnicom bought back Agency.com in June 2003, seven years after it initially invested in the shop. At its peak in the dot-com bubble year of 2000, Agency.com reported U.S. revenue of $154.4 million and worldwide revenue of $202.1 million, with 1,500 worldwide employees, according to the company’s 2000 10-K filing. At that time, Agency.com was a publicly traded dot-com stock, with Omnicom Group its biggest shareholder. Agency.com ceased to be a public company in 2001, when Omnicom passed its interest in Agency.com to a venture called Seneca Investments.

2004: Chan Suh stepped away from agency operations to become chairman. Agency.com would end the year as the No. 4 interactive agency behind Avenue A/Razorfish, Digitas and Ogilvy Interactive, according to Ad Age Data Center.

2005: Agency.com turned 10 and saw U.S. revenue grow 26% from the year prior to $92.5 million, according to Ad Age Data Center.

2006: Don Scales resigned as CEO and was followed out the door by top talent. David Eastman began a short reign as CEO. Late 2006 marked the Subway pitch video, which the agency posted on YouTube, hoping it’d go viral. Instead, it became the object of industry ridicule, forcing the agency to resign the pitch. Agency.com was the 18th largest digital agency in the U.S. and saw revenue growth flatten.

2007: Mr. Suh returned as CEO with new office leadership to revive the brand. Of the new class, only Jordan Warren in San Francisco and Riccardo Zane in New York still remain.

2008: Agency.com sued iCrossing, its CEO Mr. Scales and former employees who had defected to the independent agency for poaching. The suit asks for $19.5 million in damages.

2009: Agency.com launched a brand site for Skittles that looked a lot like Modernista’s agency site from a year prior. Skittles.com used properties like Wikipedia, Facebook and Flickr for information about the brand. By the end of the year, Wrigley dropped Agency.com, Tribal DDB and Digitas for a digital boutique roster. Chan Suh stepped down as agency CEO on December 31, 2009. The agency had $47 million worldwide revenue this year, down 13%, according to Ad Age Data Center.

— Kunur Patel and Brad Johnson

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