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.
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.
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.
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
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.