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William Esty Ad Agency Closing Its 50-Person L.A. Office

The recent rash of bad news at New York-based ad agency William Esty Co. has hit hard on the West Coast: The firm said Monday that it plans to close its 50-person Los Angeles office.

This followed word late last week from Nissan that it had fired Esty, which has handled the auto maker’s advertising for a decade and created the phrase, “We Are Driven.”

“It’s safe to say that our need for the Los Angeles office is no longer there,” said Joseph W. O’Donnell, Esty’s chairman of just one month. The Los Angeles office was created to service the $140-million Nissan account, which is now up for grabs.

The troubled agency’s planned layoffs aren’t just in Los Angeles, either. Up to 100 people are also expected to lose their jobs at Esty’s New York office. That follows Monday’s decision by Esty to drop its $40-million account with MasterCard, which it was already on the verge of losing.

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A feeling of despair reigned at Esty’s Los Angeles office Monday. “This comes at a terrible time,” said Bud Gilson, a West Coast senior vice president. After O’Donnell was named president of the firm, Gilson had said: “I really saw Camelot coming.”

But Camelot is hardly in the offing.

Over the past four months, the 55-year-old firm has lost nearly $300 million in billings. Most of these losses have been blamed on conflicts that arose with other agencies owned by its British-based parent, Saatchi & Saatchi Ltd. Esty’s billings have shrunk to $150 million.

“It’s the fastest erosion of a revenue base that I’ve ever seen at a major New York agency,” said Jim Agnew, West Coast manager of the ad firm J. Walter Thompson. Besides the most recent losses of MasterCard and Nissan, since Jan 1, Esty has also lost the $50-million Chesebrough-Pond’s account, the $40-million Dole Foods account and the $8-million Genesee Brewing Co. business.

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Some ad agency executives now privately say that Esty may soon be folded into one of the other U.S. agencies owned by Saatchi & Saatchi. But O’Donnell staunchly denied that late Monday. “Nobody’s merging with us,” he said. “I look at us as a brand new, $150-million agency that just opened up its doors.”

Inside those doors, however, is a drastically different agency from the one of just a few months ago. Now that Esty has lost its three largest clients, it lists its major accounts as American Home Products, Travelers Health Network and Texaco Inc. But Texaco, which owes Esty $1.1 million, sought protection from creditors last month when it filed under Chapter 11 of the U.S. Bankruptcy Code.

O’Donnell, who was recently fired from the post of chief executive at J. Walter Thompson, insists that all of Esty’s remaining accounts are “healthy.” And in a memo distributed Monday to Esty’s 450 employees, the message was clear: “It’s time to stop chasing and start building.”

Ad agency chiefs generally agree that the problem at Esty is not O’Donnell. The real headache is client conflicts that arose more than a year ago after Saatchi & Saatchi purchased Esty. Nissan executives, for example, were never comfortable with the fact that another Saatchi division handled Toyota’s advertising. Nissan plans to name a new agency by July.

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The pace of Nissan’s growth has slowed over the past year, and executives say its advertising has not clearly distinguished Nissan’s products from the competition’s.

Nissan USA--based in Carson--spent millions of dollars over the past few years trying to explain that it was changing its name from Datsun to Nissan. “With the name change behind us,” said Joe Opre, Nissan’s advertising director, “we felt it was time to move on and create a more unique position for Nissan.”

That is the same thing that O’Donnell insists he is trying to do with Esty. “No one is sitting here, ready to put a razor into their wrists,” he said. “As of today, we’re a new agency.”

Little Action Expected at JWT Yearly Meeting

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There’ll likely be some angry words from shareholders. But few ad industry observers expect much action at today’s scheduled annual meeting of the J. Walter Thompson advertising agency.

Last week, Don Johnston, chairman of the firm’s parent company, JWT Group, named two senior executives from the agency’s New York office to also oversee the company’s U.S. operations. Stephen G. Bowen Jr., the 43-year-old general manager of the New York office, was named president, and James B. Patterson, the office’s 40-year-old creative director, was named chairman. They succeed Johnston in the post, who has been acting head since the abrupt resignation two weeks ago of the U.S. unit’s former chief executive, Bert Metter.

Unimpressed with the latest changes is Alan Gottesman, an industry analyst at the New York securities firm L. F. Rothschild, Unterberg, Towbin Inc. “The new guys are not really new guys, but old guys with new hats,” said Gottesman. Between them, the two men have 34 years experience at the firm. “What’s ailing the company is its culture,” said Gottesman, “and if the culture is the problem, the solution is to reach outside of it.”

Shy Pittsburgh Agency Goes Madison Avenue

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One of the few big-time ad agencies to adamantly shy away from the nation’s two largest ad markets--New York and Chicago--isn’t being shy anymore.

Ketchum Communications Inc. of Pittsburgh said it had purchased the ad firms Hicks & Greist Inc. of New York and Mandabach & Simms Inc. of Chicago for a total of more than $10 million.

“You just can’t ignore the top two ad markets,” explained Gerald J. Voros, president of Ketchum. Why, then, had the privately-held agency generally ignored these two markets for nearly 64 years?

“We saw ourselves as different,” said Voros, “but now we see ourselves as a little less different.”

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We Can Take a Joke, Banks Spokesman Says

For weeks, California residents have seen ads for Household Finance Corp. that portray bankers as bumbling idiots. Now, the campaign, created by the Chicago-based office of the ad firm DDB Needham Worldwide, is about to go national. But few bankers are complaining, said Kirk Willison, a spokesman at the American Bankers Assn. “We recognize advertising for what it is,” he said. “In this business, you have to have a sense of humor.”


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