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Needham ($847 million) is the smallest of the three, but it brings a strong domestic network to the merger. Some industry wags saw a resemblance between Needham's role in the deal and its Wheaties ads, in which pint-size Olympic Gold Medalist Mary Lou Retton gulps down cereal with the "big boys." Doyle Dane Bernbach ($1.7 billion) has the most to gain. After scoring numerous hits over the years with ads for longtime client Volkswagen, the agency attracted notice with its beguiling babies series for Michelin tires. But DDB lost several major clients in 1985, dropping $45 million in business with the exit of Polaroid and Atari alone.
For BBDO ($2.5 billion), the three-way marriage mostly represents more of a good thing, taking it from sixth to first place in the agency rankings. BBDO has been on a roll. It won top awards last year for its Pepsi ads. Last week Pepsi signed one of its most celebrated pitchmen, Singer Michael Jackson, to a new $10 million three-year contract, the largest such deal for a single product in advertising history.
Mergers almost invariably bring together some competing clients. But the new holding company has been structured as two separate agency networks in the hope that valued clients will stay. BBDO will be one agency, while DDB and Needham will make up the second. "There will be two equals," insists Needham Chairman Keith Reinhard, who will head the DDB-Needham network. "There's not going to be a low-priced spread here." A third entity, called the Diversified Agency Group and headed by DDB President Barry Loughrane, will consist of specialty marketing and advertising services. |
Despite the careful structuring, it is doubtful that all the clients will be pleased. One potential conflict was resolved early last week when Needham announced that some of its executives were buying the company's Los Angeles office and forming a new agency of their own, taking along Honda and other clients. Automotive clients still represented by parts of the new holding company are Volkswagen and Audi (DDB) and Chrysler-Dodge (BBDO).
Even in the age of the megamerger, advertising experts believe, there will always be a place for comparatively small shops. They can often best handle the needs of small to medium-size clients, which might get lost in the shuffle at a larger agency. Says Diane Rothschild, a former DDB executive vice president who formed a new company with ex-DDB Chairman Roy Grace this year: "The small agency offers the client hand-tailored, customized work." Boston-based Hill Holliday Connors Cosmopulus, with only $218 million in billings last year, won the prestigious Advertising Agency of the Year Award.
Smaller agencies will feel the most pressure in the coming months as they are picked over by the giants that are out shopping. But even some of the larger agencies will doubtless hear the footsteps of cash-rich competitors. Before it is over, the current wave of consolidation in advertising may produce agencies that will dwarf even BBDO's new three-part giant. As Mary Lou Retton might put it, "Watch out, big boys!"