At one time, not all that long ago, it was almost inconceivable that the denizens of Wall Street and the City of London could consider advertising worthy of shareholders’ attention. Agencies were regarded as entertaining, good at lunch, even useful, but slightly suspect, run and staffed by unpredictable people who were quite likely to argue with their clients and often had the impertinence to insist that they knew best. And who could say for sure that they didn’t? As the first Lord Leverhulme complained: “Half the money I spend on advertising is wasted, and the trouble is I don’t know which half.”
There are two responses to the attitude that prompts remarks like that. One is to admit that advertising is an inexact business and probably always will be, but this is not an admission that will encourage confidence in either clients or investors.
The other response is to surround the central function of the agency, producing advertising, with an elaborate range of supporting services in order to get as far away as possible from the bad old days of the idea salesman and into the position of the total communications consultant, a purveyor of top-level advice rather than a lowly supplier of words and pictures.
Not surprisingly, most agencies have chosen the second option, and over the last few years some have done it remarkably well, elevating the status of the industry to such an extent that the traders now look with interest at any agency that feels the itch to go public. No wonder our three young men—by now, it’s true, not quite so young—are confident that they will soon be in there rubbing shoulders with the other members of the advertising millionaires’ club.
Before that can happen, however, they must learn to package themselves for the merchant bankers, the financial journalists, and the assorted investment consultants who make up their target audience, and their first lesson is this: Good figures alone are not enough. Wall Street has to feel that the agency is a serious business with long-term growth prospects, run by a team of responsible and intelligent people, old heads on young shoulders, steady fellows who will ensure that the shareholders’ interests are paramount.
Some minor physical modifications are necessary here in order to make the principal company assets, the management, look as attractive as possible to the punters. Personal appearance assumes a greater significance than before. The untamed hairstyles, leather jackets, and boots that were so appropriate in the dynamic, slightly antiestablishment days will have to go. Wall Street likes suits, although these can be from Armani or one of the less stuffy designers. It also likes ties, once the badge of the gray plodder, but at least a hint of individuality can be retained by wearing a spotted bow tie, which has the additional advantage of being highly telegenic.
The more flamboyant aspects of behavior and personality will need a little attention, too, and any tendencies to rant or to say fuck every other word will have to be controlled. The editor of the Wall Street Journal would not be amused. In fact, the whole of one’s public face has to be looked at with the same critical care that is devoted to the image of a politician seeking election. But this is not a problem. It is just presentation, and presentation is advertising’s stock-in-trade.
The other disciplines and requirements involved in a public offering are a little more onerous, and perhaps the most tiresome of them all is to give the books an overhaul so that they conform to the rigid standards of fiscal probity demanded by the financial world. The agency’s detailed financial records will be exposed to close inspection, and some of the old carefree habits might cause raised eyebrows among the underwriters.
The garage bills, for example, might seem a little excessive. Does a company doing business in the city really need thirty-four BMWs, six Porches, eight Jeep Cherokees, three large Mercedes, and a Maserati in addition to a cab bill of several thousand dollars a month? Is it simple coincidence that the agency retains a catering consultant who happens to be the chairman’s wife? Was the boat in Florida always used for entertaining clients, even on that abortive and uncomfortable run to the Bahamas that ended so expensively with a broken mainmast? Who is this office maintenance man who lives in Westchester and who spends all his time working in the managing director’s stately country house? And which new business prospect necessitated a three-week trip to the Caribbean?
This rich cake, which used to be divided up between the board and the senior executives without reference to busybodies from outside the agency, now has to be stripped of its icing. Lean and prudent management is the new order of the day, and those generous annual shareouts will soon have to include investors, some of whom might not take kindly to the more exotic items that figure as expenses in the balance sheet. It’s a painful process, this full disclosure.
Finally, there are some adjustments to be made in the way the agency reports its own successes. Wall Street is actually going to take these announcements seriously, and the natural optimism of the press release, which rounds out figures to the nearest million or two, might backfire when income falls below stated expectations. Restraint and accuracy, which are not always evident in agency self-promotion, will have to replace airy and overhopeful hype.
It is even possible that there might be moments during the long months of preparation when the agency principals have second thoughts about going public. The obligations and restrictions mount up, and a future of behaving in a responsible and businesslike manner lies ahead, sacrifices that would be intolerable were it not for the fat checks that have mentally already been put in the bank, and the gratifying prospect of commercial respectability, one’s name in the stock-market listing, equal status with the tycoons. The ego will at last be fed. And, one fine day, it is. The public offering is made.
The weeks immediately following are happy weeks for our three young men. Their bank managers give them lunch and talk about portfolio management. Their staff, who have calculated the size of their winnings, look at them with a satisfying mixture of envy and admiration. Every morning, they turn to the share listing and see themselves immortalized, rich, and successful. And during the tedium of the daily round of meetings, they can divert themselves by planning how they are going to spend their money.
Bigger and more impressive houses are usually top of the list, and particulars from smart real estate agents start to outnumber marketing documents and conference reports in the attaché case. And then there is the choice of a suitably expensive hobby: for some the purchase of a speedboat; for others, art or opera or vintage cars or first-growth clarets. Maybe a condo in Florida, as well. Why not? We can afford it.
In many cases, the money goes out as suddenly as it came in. And at the same time, the days and years of reckoning begin, which can be rather depressing if that first flash of extravagance has taken care of most of the liquid cash. Future wealth depends on the agency’s performance and the value of its shares, and this is pointed out with irritating regularity by the swarm of security analysts that invades the agency every month.
For the most part, these walking computers know little about advertising and probably care less. They’re interested in figures—bigger figures. Every quarter, every six months, every year. How are they going to react to the news that you have resigned an account because the client is congenitally incapable of recognizing a good campaign when it’s stuck under his nose? They will not be pleased. They will suck their teeth and shake their heads. Temperamental behavior, they will say to themselves. It will revive their suspicions that advertising, for all its businesslike veneer, is still erratic and unprofessional, subject to whim and fancy instead of hardheaded management disciplines.
So the share price will drop—and with it, the paper fortunes of the agency principals.
The pressure to produce bigger profits and better dividends will have an increasing effect on the way in which the agency does business. When growth is an absolute requirement, the search for new clients will become more frenzied and, in some cases, much less discriminating. Accounts that the agency wouldn’t previously have touched for one reason or another—perhaps because the client is known to be a bullying megalomaniac or a notoriously late payer—now become acceptable, even desirable. Who cares if the man is a foaming idiot with a taste for kicking account executives around? Nobody said that life as a publicly quoted company would be easy, and his account will provide the extra billings needed to toss to the security analysts.
It will keep them quiet for a month or two and then, as relentless as slugs after lettuce, they’ll be wanting more. But where is it going to come from? It’s all very well being one of the fastest-growing and most promising agencies around, but that’s a position with limited prospects. An agency can’t keep growing indefinitely on purely domestic business, and if it doesn’t keep growing, those security analysts will be dispensing gloom and talking down the share price. The daily dips into the Wall Street Journal’s listings won’t be quite so pleasant. Instead of the warm glow, there will be a twinge of disappointment as the shares falter, then slump. Relative poverty! What can be done?
Some time ago, the Saatchi brothers started to promote a one-word solution to their growth problem, and it has been more successful (for them, at least) than the “unique selling proposition” in its finest hour ever was for Ted Bates (now a member of the Saatchi collection). That one word—as yet unrecognized by the Oxford English Dictionary but doubtless soon to get in there—was globalization.
Like understains and empathy, two other contributions that advertising has made to the English language, globalization was a new label for something that already existed. For many years before the word was coined, the large American agencies had been globalizing all over the place. It used to be called servicing international clients. Thus, if an agency had Colgate or Procter & Gamble business in the United States, it was natural to extend the arrangement into those more primitive markets such as Europe. Client and agency understood each other, they were used to working together, and they could transplant doctrines and working methods developed in Cincinnati to less enlightened parts of the world.
In those days, it was strictly an American preserve, because only the United States had the giant clients—Coca-Cola, IBM, Ford, Procter, Colgate—whose foreign budgets were big enough to justify an agency branch office. These branch offices rumbled along, picking up local business where they could, securely based on the income provided by the mother client across the Atlantic. British agencies found it very frustrating; they could pitch until they were hoarse for the British slice of an American giant, only to run up against the impregnable client/agency relationship that was so carefully maintained at Head Office, USA.
The great achievement of the Saatchis was to leapfrog all the long and usually fruitless nonsense of pitching for big American clients and just buy the agencies that had the business they wanted, using paper provided by the City. Once they had shown that this could be done, not just in the United States but all over the world, there was obviously a need to find a brave new description for it, and for the more wide-ranging marketing opportunities that could make it attractive to clients. We can imagine the search for the perfect label, the various combinations of international, multinational, growth, progress, wider business horizons, and a dozen other words and phrases that partly explained but never encapsulated the girdling of the earth.
None of them was quite right. None of them had corporate sex appeal. None of them was new. And then, enshrined in the pages of the Harvard Business Review, Maurice Saatchi found the magic word, credit (or blame) for which should go to Professor Theodore Levitt: globalization!
Well, the good professor may have invented it, but the Saatchis and the advertising business have now taken it over and sold it. Apart from its brevity and its world-conquering associations of thinking big, globalization fits the bill so neatly because it is not just the agency beating its chest; the client can join in, as well. We can all globalize together, treating the world as one market, leaping national boundaries with our toothpaste and soft drinks and detergent, selling aspirin and acne remedies from Nome to Tierra del Fuego, to thousands of millions of consumers who are going to be thrilled to find their favorite brand of catsup in every corner of the earth. Who could resist? It is marketing’s Promised Land.
Access to the Promised Land, unfortunately, is only available to agencies and clients who are not only globally aware but globally capable, and it is here that the British agency—publicly quoted and successful though it may be—is weak. Giant clients can’t be expected to globalize with domestic agencies. And sooner or later, without those giant clients, the growth rate will slow down, the security analysts will resume their nagging, and the agency may well be seized and swallowed in a takeover. In the end, there’s nothing to do but go over to the home of the biggest, most globalized clients and seek an arrangement with one of the mammoths of Madison Avenue. (Although nowadays they are likely to have less glamorous addresses like Third Avenue or Sixth or that distant netherworld called downtown. But what the hell; it’s only a long cab ride from the Pierre or the Carlyle.)