FEW AD AGENCIES HAVE CASHED IN ON WEB REVOLUTION LIKE TBWA CHIAT/DAY

It’s been said that the biggest beneficiaries of the dot-com revolution are advertising agencies, which have taken in billions from well-funded startups looking to create an instant brand identity. And while most Los Angeles agencies have been enjoying the ride, none have benefited as much as the area’s advertising powerhouse: TBWA Chiat/Day Inc.

From virtually zero in dot-com billings in 1998, the Playa del Rey agency took in about $300 million in Internet billings last year.

The agency accomplished this feat through a highly unusual company-wide education program actually going so far as to close down the entire agency for a week to train all employees about the ins and outs of the Internet. Its dot-com TV campaigns have been some of the most well-received in the industry, already nominated for numerous Clios, Golden Lions and other industry awards.

Yet like all agencies handling Internet clients, TBWA Chiat/Day is taking its share of criticism as well. Analysts and marketing experts say dot-com commercials are cute and get attention, but leave the viewer with no idea what product is being sold, and no memory of the Web address being pitched.

About a year ago, some of the more prescient folks at TBWA Chiat/Day realized they were missing the boat on the dot-com revolution.

Insiders could see that the huge, traditional advertising agency had to fight to maintain and acquire the new dot-com accounts, which they knew would soon take over the landscape of advertising. Most of these accounts at the time were going to younger, hungrier agencies.

“We were receiving calls in droves from a new breed of clients and getting questions like, ‘How much do I need to spend on offline media to drive 2.5 million unique visitors a month?'” said Laurie Coots, chief marketing officer for Chiat/Day. “And we would look at each other and say, ‘What does that have to do with anything?’ We realized we needed to be able to understand what kind of tools we were going to need. We were feeling like we weren’t quite as prepared as we needed to be.”

Coots’ response was to gather up everybody at the company who was involved in Internet activities, a group known as the “Digeratis” even though they didn’t belong to any coherent department, and call them together for meetings every Friday at 8 a.m. an hour when most people at the agency are still trying to decide what to wear.

Within months, the team grew from less than a handful to 30 members. But simply having a group of well-informed people wasn’t enough. So Chiat/Day did something no ad agency has ever done before: It shut down for an entire week last October and held a series of training sessions and presentations to teach the entire staff about the Internet.

Intensive training

“We had an influx of Internet companies that needed advertising,” said Jason Kuperman, senior director of convergence and another founder of the Digerati. “We were also confused by clients who were looking for us to do one thing and others to do others. So we said, ‘Why don’t we have an expo?’ In the end we decided to close down for a week to educate the entire agency to give them the Digerati spirit.”

More than 850 people from the company’s offices in L.A., San Francisco and New York attended the agency’s “Reboot Expo.” The event led a charge that has changed the way the company works, and has resulted in a huge influx of dot-com business for the agency.

Last year, the company picked up big accounts like Homestore.com, BizRate.com, IExchange, Pets.com, Kinkos.com, and Apple.com.

The reinvigoration of the company hasn’t escaped notice.

“Now, when people get Chiat, they get the combination of the edgy modern feel that a dot-com needs, but grounded in great strategy and professionalism,” said Maureen Crow, who heads the L.A. office of P.R. agency Carl Byoir & Associates. “We are often asked to recommend ad agencies for our dot-com clients. They are always a first referral for us.”

Adds Gene Cameron, vice president of marketing for client Bizrate.com: “We did talk to a number of ad agencies. With Chiat, they recognized a combination of respect for the creative product and a willingness to work on a startup dot-com.”

Voices of discontent

Yet while clients speak glowingly of Chiat/Day and its work, investors and analysts are less impressed. Dot-coms have burned through hundreds of millions in venture capital and Wall Street money in the mad rush to create a marketing presence, yet few have succeeded in building recognizable brand names.

“We’re being totally entertained by the ads and then we forget who it was for,” said Mike Agate, chairman of Select Resources International, an advertising consultancy. “It’s the dot-coms’ fault and the agencies’ (fault). The clients are coming in and saying, ‘We’ve now invested all this money in this Web site business and we’ve got to create awareness and bring people to the site.’ But brand-building doesn’t take place that fast. No one is going to remember the client’s service or brand.”

Many dot-com advertisers have been heavily criticized for running ads that attract attention and amuse the viewer, but don’t say much of anything about the product.

“Bill Bernbach was one of the advertising icons of the 20th century. I know I’m going to get this quote wrong, but he always said, ‘Don’t hang a man upside down in an ad unless you’re selling pants with zippered pockets.’ The point being gratuitous humor doesn’t pay off,” said Elaine Palmer, principal with marketing consultancy E.commerce Media Communications. “Another important principle is, the agency’s brilliance should never eclipse the client’s needs. The main purpose of advertising is to sell the client’s product.”

TBWA Chiat/Day has taken its share of criticism for such advertising in the past; though the agency swept up dozens of industry awards in 1997 for its “Enjoy the Ride” campaign on behalf of Nissan Motor Co. Ltd., the car maker’s sales continued to plummet. Amid a chorus of criticism from dealers, the award-winning campaign was later scrapped.

While critics generally give the agency’s dot-com campaigns high marks for creativity, there are a few signs of trouble. Its high-profile campaign for Pets.com featuring a talking sock puppet (an account handled out of TBWA Chiat/Day’s San Francisco office) has done little to stop the bleeding at Pets.com.

Pets.com went public on Feb. 11, and its shares closed at $11 that day. It hit an all-time low of $2.12 on April 17, then climbed back to $3.38 on April 20.

Coots wouldn’t comment on the Pets.com account, or on whether the company would continue its advertising campaign with Chiat/Day.

Coots said the agency won’t accept dot-com clients that don’t want to work on an intelligent, brand-building campaign.

“Ads that are noisy and yell at you and are cryptic are not good ones, and we try to avoid it,” she said. “There’s big confusion between building a brand and name recognition with some of them. The ones that really have something to say, and the ones that are really interested in building a company and a brand, don’t have a problem playing by the book. Advertising can’t make up for the lack of a business model.”