ADVERTISING

King-sized ad agencies

July 7 1986
ADVERTISING

King-sized ad agencies

July 7 1986

King-sized ad agencies

ADVERTISING

When the giant U.S. advertising agency BBDO International Inc. merged with two other New York-based firms in April, company officials proclaimed that they now worked for the largest ad agency in the world. But their claim to that title was short-lived: less than three weeks later Saatchi & Saatchi of Lon-

don overtook BBDO by paying $630 million for the third-largest U.S. ad agency—New York-based Ted Bates Worldwide Inc. Now, the two brothers who direct the huge new conglomerate offer clients the services of 7,000 employees in 28 countries—including Canada. Maurice Saatchi, 39, and Charles, 42, have staked out ambitious goals: eventually, they say, they want to handle up to 20 per cent of world advertising spending—a total estimated at $225 billion in 1985.

The Saatchi brothers’ rise to dominance in the industry has been swift and dramatic: only 16 years ago they opened a fledgling agency in London with newspaper ads urging Britons to eat Jaffa oranges from Israel. Now, their network of agencies represents 60 of the 100 largest corporations in the world. And many of those companies hire agencies capable of running global advertising campaigns—a practice which has accelerated mergers. Still, representatives of small and midsize firms say they provide more personal service and can devise regional ad cam-

paigns more easily than the worldwide giants who have many contracts. Shrinking profit margins have also fuelled the merger trend.

In response to the profit squeeze, Saatchi & Saatchi and such rivals as BBDO have sought to maintain profits by increasing their volume of business through expansion. But consolidation

has raised conflict of interest issues: as major firms merge, clients who are bitter rivals often find themselves sharing the same firm.

When the Bates agency joined the Saatchi & Saatchi empire, the action led to the loss of a 56-year-old Canadian contract selling toothpaste and soap products for Colgate-Palmolive of New York. Colgate was unwilling to continue working with a firm affiliated with Saatchi—which works for its archrival Procter & Gamble of Cincinnati, Ohio. Instead, Colgate will divide a yearly contract worth $110 million between two smaller agencies—a development that encourages executives in midsized firms. Eric Miller, president of one such firm, Toronto-based Miller Myers Bruce DallaCosta Harrod Mirlin, says he is optimistic about coexistence with the giants. Declared Miller: “The mergers block us from global business because we cannot take it on, but we may get greater domestic business as a result.” Clearly, despite their size, the new firms have not eliminated competition.^