Among the Highlights of ’87 Was a Storyboard Only JWT Could Create

Forget Spuds MacKenzie, Donna Rice and Joe Isuzu. The most newsworthy name in advertising in 1987 wasn’t a pooch, a smooch or a mealy-mouthed mooch. Rather, it was one of the oldest names in the ad business: J. Walter Thompson.

Thompson is to advertising what its client Eastman Kodak is to film--a name that’s tops in the industry. Trouble is, in 1987 Thompson suddenly became more newsworthy than the products it promotes. Amid lackluster financial results, the agency and its sister companies were swallowed up by the British marketing giant WPP Group.

While WPP was busy becoming a top dog in the ad world, Budweiser’s Spuds MacKenzie quickly emerged as the top dog in beer advertising. But Spuds was hounded by some parents and teachers who didn’t like it when their kids started wearing Spuds T-shirts and buttons to school. And Pepsi sat stewing over its costly Michael Jackson ads until Jackson finally released his much delayed album. Then, of course, Donna Rice, the woman who made Gary Hart fodder for more jokes than Harold Stassen, suddenly showed up in advertisements with a big smile and No Excuses jeans.

Meanwhile, West Coast ad firms stole much of the national spotlight in 1987. “It was the year that the West Coast shined,” said Jerry Della Femina, chairman of the ad firm Della Femina, Travisano & Partners Inc. The Los Angeles office of his shop created the Joe Isuzu character who lied his way to fame. Also this year, the wildly popular clay raisins--created by Foote, Cone & Belding Communications Inc.’s San Francisco office--danced their way to commercial success.

And the folksy ad duo, Ed Bartles and Frank Jaymes, continued to score well as wine cooler spokesmen. Bartles and Jaymes were created by San Francisco’s Hal Riney & Partners, which surprised the ad world when it quit the account in a huff earlier this month. Another West Coast firm, Chiat/Day, grabbed the ad business from Nissan--the biggest automobile advertiser to change agencies in many years.

Oddly, the biggest ad firm in the world--British-based Saatchi & Saatchi--made few waves in 1987, although it did post record profits following a megamerger with several American ad agencies two years ago. But Saatchi’s top executives still tell analysts that they plan to slowly convert the huge ad firm into a company that concentrates less on advertising and more on consulting services.

This was generally a year of very slow revenue growth for the advertising industry. “That slow growth was the big trend in 1987, and it will continue in 1988,” projected James D. Dougherty, analyst at New York securities firm County Securities Corp. USA. Domestic revenue at major ad firms rose just 4.7% this year to $1.95 billion, he said. And with some advertisers slowly shifting their emphasis away from television and newspaper advertising to things like in-store promotions, the growth of ad revenue may slow even more in 1988, he said.

Still, it was Thompson that took advertising’s center stage in 1987. This is the 123-year-old ad firm that began creating ads the same year President Lincoln named Ulysses S. Grant as head of the Union Army. Today, Thompson creates ads for such familiar names as Ford Motor Co. and Lever Bros. And in the Los Angeles area, its clients include Vons Supermarkets and The Times.

When Thompson was purchased for $566 million in June, it became the first publicly held ad agency to be the subject of a hostile takeover. And executives and advertising analysts say that, alone, could have a profound affect on the advertising industry for years to come.

“The fact that you can accomplish a hostile takeover of an advertising firm without destroying that agency is a premise that no one thought possible,” said Jay Chiat, chairman of Chiat/Day. “Now that it’s happened, I’m certain it will happen again.”

And that might not be so bad, said Charles Crane, advertising analyst at the New York securities firm Prudential-Bache Securities. “It will force publicly held ad firms to pay more attention to their own bottom lines to avoid the fate that befell J. Walter Thompson.” In fact, Crane said, the mess at Thompson during the past year “exemplifies all that can go wrong with an agency--and an industry.”

The man behind the Thompson takeover says he is still interested in more acquisitions. “We’re looking at markets where the growth rates are substantially higher than at conventional ad firms,” said Martin Sorrell, chairman of WPP.

Just last week, WPP purchased for $26 million Mendoza, Dillon & Asociados, a Newport Beach ad firm that specializes in Latino advertising. Sorrell said WPP will continue to look seriously at such specialty firms--especially agencies with expertise in sales promotion and direct-mail marketing.

That, analysts agree, is the big growth area for ad agencies. “There is a shift away from major media advertising,” analyst Dougherty said. “The movement is toward things like yellow pages, direct mail and promotions.”

Dougherty is harshly critical of the high price that Sorrell paid for Thompson’s parent company, JWT Group, which also included the giant public relations firm, Hill & Knowlton, another smaller ad firm and a research company. “I don’t know if they got snookered,” Dougherty said, “but I do know that they certainly paid more than JWT is worth.”

Sorrell has heard the criticism, and he rejects it. “I don’t think you could assemble that group of companies for that price today,” he said in an interview. “You have the best name in advertising, the world’s largest public relations company, one of the top market research firms and a leading creative agency. You can’t put a value on that.”

What’s more, although Thompson lost nearly $450 million of business this year when such big-name clients as Burger King and Goodyear walked away, the agency also picked up nearly $300 million in new business from companies like Quaker Oats and Tenneco, Sorrell said. While news stories tend to concentrate on the lost business, Sorrell said, “people forget about the $300 million we gained.”

Thompson has laid off nearly 200 employees during the past year, and many analysts are projecting a much better year for Thompson in 1988--even though the some industry executives expect the firm to lose a few more large clients.

“The shakeout isn’t over at Thompson yet,” Della Femina said. “The ad world is waiting for the other shoe to drop.”