For insecurity, there are few businesses like the advertising business. Even in the best of times, agencies' fortunes depend on their ability to retain fickle clients, who often switch accounts at the slightest whim. Some of the nation's largest agencies have become publicly owned corporations in recent years, and they feel a need to impress both stockholders and watchful clients with steadily rising profits. To do so, more than a dozen firms have ventured into enterprises well beyond the frontiers of advertising.
Lately the diversification pace has quickened. Young & Rubicam. which has become the nation's second largest agency under President Stephen Frankfurt, agreed two weeks ago to acquire J.K. Gill Co., a retail chain that sells books and office supplies through eleven stores in Oregon and Washington. Y. & R. openly admits that it wants to escape from the agency field's traditionally slender profit margins, which average about 4% of gross volume. From billings of $532 million, Y. & R. last year grossed $78 million. "We would have to have more than $100 million in new billings to bring in the same amount of gross revenues we can get from Gill's annual sales of $14 million." says Edward L. Bond, Y. & R. chairman.
LaRoche, McCaffrey & McCall has just picked up a half interest in Aqua Dynamics Corp. of Wareham, Mass., which cultivates oysters. Doyle Dane Bernbach agreed to purchase Snark Products Inc. (annual sales: $1,000,000), a New Jersey-based producer of low-priced ($125-$500) plastic-hulled sailboats. Quite naturally, the agency plans to handle Snark's advertising and capitalize on techniques that Chairman Bill Bernbach developed to plug a more famous low-priced product. D.D.B. hopes to establish Snark as "the Volkswagen of the sea." The agency also owns a 20% interest in Georg Jensen, an elegant Manhattan houseware and silver store; last year D.D.B. agreed to buy a small ice cream producer, Frose-Mar Corp., but the deal later fell through. "We will continue to diversify," says Senior Vice President James Madden, who has examined 300 potential acquisitions during the past six months.
Reflecting the Boss. A promising new area for growth opened up last spring when the American Association of Advertising Agencies agreed to permit its members to own media. The action came after several agencies had resigned from the association over its ban; among them were Minneapolis-based Kaufman, Spicer, which bought the New Richmond (Wis.) News, and Dallas-based Tracy-Locke, which purchased Tulsa's KCNW and Fort Worth's KJIM. Foote, Cone & Belding acquired eight cable-TV systems before the A.A.A.A. came to consider CATV an advertising medium and was influential in persuading the association to drop the rule against media ownership altogether. The stations serve 13,000 customers in New York, Colorado and California, and the agency often uses the systems to test-market its commercials.