Overseas agencies find London tough

Three major overseas agencies set up London offices with great expectations last year (MW January 8 1998). Their performance so far has been a case of the good, the not-so-bad, and the downright ugly.

In corresponding order, the agencies in question are US-owned Fallon McElligott, the Bates-owned German agency Scholz & Friends, and US-owned Wieden & Kennedy.

The latest major start-up agency of this year, Springer & Jacoby, opened its doors last week, and it will no doubt study the performance of its three predecessors to gauge the market. There are more than 300 agencies in London – of all sizes and descriptions.

Martin Jones, managing director of client/agency intermediary the AAR, says: “It very competitive. And it is difficult for a new business to break through. There is a great range of agencies offering all types of services.”

Wieden & Kennedy, the agency touted as having the best resources and skills for the job, has had a miserable time. The UK arm was founded in April last year on the back of the £9m Nike account which it won from the then TBWA Simons Palmer.

Since then it has only managed to add one further client to its business, the Time Warner-owned cable channel Cartoon Network, which claims a £2m advertising spend. Of the ten senior staff who joined the agency just over a year ago, four have left. Last week, client services director Rob Forshaw thought his career interests were best served elsewhere (MW May 27). His departure follows those of managing director Mike Perry, planning director Alison Hoad and creative director Nick Gill.

None of those who have left will say much about their former agency, but there are reports of in-fighting among its small ten-strong staff, as well as interference from its US parent. No one from the agency was prepared to comment.

Contrast this to Fallon McElligott, which launched last October. Rather than haemorrhaging senior staff, it is looking to add to its 15-strong team. Like Wieden, Fallon came with a reputation as a creative hot-shop. It too inherited an account from its US parent – Lee Jeans across Europe, worth £9m.

However, the partners at this agency, who include Robert Senior and Michael Wall, were able to make a better fist of the hand they were dealt. They have picked up accounts for Radio 1; Trebor Bassett; IPC’s men’s titles, Loaded and Later; and they are contesting Timex watches and Mitsubishi Motors. The agency claims billings of £23m. Senior says: “We are very pleased with the way things have gone so far.”

Wall adds: “There is a certain amount of interest in us because we are new. Clients may not have a great deal of knowledge of the agency scene, but they are interested in seeing what is new out there.”

One observer contrasts the two US-owned agencies, saying: “Fallon has a very hippie mid-Western culture and people wondered how that would work over here. The answer is, they didn’t try. They let the people they hired over here run the operation their way. But with Wieden there was a lot of interference from the States. Mike [Perry] and the others were not allowed to run the agency as they had been promised and that led to a lot of tension and ultimately departures.”

Schloz & Friends has had a stable, if modest, start. Although the office has run campaigns for some of its German clients for the past 18 months, it opened an autonomous London agency in January 1998. It has not set the world alight, but has won a place on the rosters of some high profile clients such as DHL, Swedish Match, Oxfam, CNBC, and Cable & Wireless. The agency employs 34 people, and has billings of about £6m.

Account director Daniel Floyed says: “We have the right balance of clients and we are meeting our targets.”

There are few hard and fast rules to a successful agency launch. The London advertising scene is a mature market in which it is becoming increasingly difficult to stand out. The days of hot-shop agencies snapping up large numbers of clients from rivals in a short time are over.

The most recent agency to do this was M&C Saatchi in 1995. However, it was by no means a typical start-up. When Charles and Maurice were ousted from Saatchi & Saatchi, the agency they founded, they were able to take with them some of the most senior staff in the business, such as Bill Muirhead, who was the agency’s US chief executive before leaving to rejoin the brothers.

The brothers’ exceptional contacts meant they could also pull away clients such as BA and Dixons, which spend more than £40m a year each on advertising. Most start-ups would not put clients of that stature on their business plans until year three or four.

The more typical scenario is a shop such as HHCL & Partners, a successful outfit with high-profile clients like Fifa, Britvic, and the Automobile Association. Yet it has only recently made it into London’s top 20 agencies, even though it has been in business for 12 years and boasts billings of £158m.

Apart from sheer weight of numbers, a new agency also has to battle against being just another set of initials to a marketing director.

One seasoned agency observer says: “There are a few marketing directors who follow the agency scene and know what the key figures and agencies are doing. But most of them don’t. They are too busy running their own businesses for that. This means that there is a lot of ignorance of the agency world among marketing directors.”

So why do agencies come to an already overcrowded market? It is precisely that competition in the capital which attracts them.

As the AAR’s Jones says: “Networks feel they must have a base in London. It is important to them to be able to tell their clients they have a global, or more specifically a European, presence. London is still seen as a centre for advertising, so many of the networks make their European bases here.”

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