AGENCY.COM - interactive marketing agency's activity

Brandweek, Feb 12, 2001 by Karl Greenberg

By sticking to its core philosophy and eschewing one-off projects, the handwriting really is on the walls at Agency.com.

Now that interactive agencies are starting to resemble sled dogs in a Jack London Klondike novel, where only the fit and the long-in-tooth survive, Agency.com might be the White Fang of the bunch. The company knows the lay of the land; has a corporate culture that keeps it nimble and alert to what's coming; and has kept its bearings by sticking with the same essential business principles--and principals--it's had since day one.

Like large, traditional agencies, Agency has aimed for agency-of-record or long-term service deals with non-dot-coin Fortune 1000 companies. "Call it 'nontraditional' (for dot-corns,]," says Kyle Shannon, co-founder, former chief creative officer, now chief people officer at Agency.com.

"If anyone has a shot at surviving long-term, it's Agency," says Christine Overby, an analyst with Forrester Research, Cambridge, Mass. "They've got good leadership and a strong culture."

That "strong culture" is evident in Agency's headquarters. If a company's face, like a person's, describes the owner's disposition, Agency's main office in New York's financial district is effusive about how much it wants ideas batted among all its employees, regardless of job descriptions. In fact, anyone can scribble on almost anything at Agency. The walls are chalkboards or white-boards. Open workstation and conference room arrangements are designed to thwart "silo thinking," and "smart boards" are everywhere, so someone in New York can illustrate his or her point to someone in Singapore. All of it infuses an ethos that the company is not segmented by skills, but by projects.

The company now has 1,600 employees in seven offices in the United States, with outposts in Amsterdam, Copenhagen, London and Paris, and a list of blue-chip clients. When the company was founded by Shannon and CEO Chan Suh in 1995, it was considered preposterous by some for an Internet startup to even consider winning long-term contracts with traditional Fortune 500 or 1000 clients, but that's what Agency.com did.

Suh claims that only about 6 percent of Agency.com's current business is with dot-corns, and more than 93 percent--or about 75 of Agency's clients--are Fortune 1000 businesses, including current clients British Airways (for wireless), Colgate-Palmolive, Pfizer, Bank of America, Texaco and Compaq. Suh explains that a potential client's size and age don't benefit Agency much if the relationship lacks longevity. That, he says, is why the company targets a 60 percent return business within its client list.

"The advantage of repeat business is well known. In every business loyal customers get rewarded, in part because the cost of sale, which is significant in our business, is not there," says Suh. With repeat business, interactive agencies don't have to mount the same cost of sale again and again. Also, a portfolio of work for dead or unknown companies packs less punch than a client list of globally recognized power hitters.

Agency's focus on avoiding short-term one-off type deals is evinced in its work for Compaq's interactive business, for whom Agency.com has executed several projects. "We have worked with Agency for a long time in helping us define our user-experience strategy, information architecture and online brand experience," says Seth Romanow, worldwide director of e-marketing and user experience at Compaq's eBusiness Systems division. "They came to us with the complete package."

Romanow adds that Agency was able to tackle a particular challenge inherent in the development of the Compaq.com user experience strategy: visitors to Compaq.com fall into categories that range from typical consumers shopping for desktop PCs to techies seeking servers. "Our customers run the gamut," says Romanow. "But Agency understands our products-- everything from MP3 players to servers."

While many i-shops went public over the past couple of years, not all of them have fared so well following the dot-coin bust last year. Suh, however, believes that interactive shops are too often unfairly lumped together when things go bad.

"At this point," says Suh, "I think everyone's being painted with the same brush." But he adds that in some ways the share-price fall is also a windfall for the company, since investors will likely pay more attention to company fundamentals instead of predictions and buzz, further separating the wheat from the chaff. "I think there will be two or three companies in the major leagues [building full-service Internet commerce sites for major companies] and others who either specialize or commoditize. Our goal is to be one of the top two or three,"

Stock price notwithstanding, Agency's books reflected--if not astonishing success--at least some resiliency. Suh claims that Agency's numbers improved with each quarter last year, with increasing profits in quarters two, three and four. According to Agency's quarterly reports, the company made $38.5 million in the first quarter last year, up more than 82 percent over pro forma first quarter 1999, with 93 percent of its business with brick-and-mortar companies. The company's second quarter revenues were $50.2 million, up 30 percent the first quarter, with operating loss for the second narrowed to $2.1 million. For the third quarter, Agency reported $57.3 million in revenue, a $8.1 million profit, or seven cents a share, up from a $3.5 million loss the year before, and up 14 percent from second quarter, though the company posted a $5.6 million loss during the period. According to Shannon, 98 percent of third quarter revenue came from non-dot-corn clients.