On Madison Avenue, A Digital Wake-Up Call

Firms Take Notice As Nike Demands More Web Savvy

By SUZANNE VRANICA
March 26, 2007; Page B4

In recent years Oregon independent Wieden + Kennedy has been the firm to beat in the ad world, its creative smarts and agility helping it capture clients as powerful as Procter & Gamble and Coke. So this month's decision by Nike, Wieden's longtime star client, to look for a new agency to handle part of its business sent ripples across the industry.

The reaction wasn't so much because Wieden has been Nike's lead agency since 1982, a connection cemented by a close relationship between Nike Chairman Philip H. Knight and Wieden principal Dan Wieden. What really unnerved Madison Avenue was that one of the main reasons for Nike's move was dissatisfaction with the agency's digital expertise, according to people close to the account. Despite its top-notch ability in every other department, Wieden has been slow to adapt to the Internet -- an important arena for a marketer as focused on the youth audience as Nike.

Up for review is Nike's running-shoe account, say people familiar with the situation. "We are looking for expertise in different mediums, different creative directions for various areas of U.S. business," a Nike spokesman said when the review was disclosed earlier this month. Wieden will continue to handle the bulk of Nike's ad account, including its basketball, men's training and women's fitness businesses.

Industry executives say the move was a wake-up call to Madison Avenue. The message is clear: No matter how talented an agency's creative team or how well the client's management likes the firm's executives, the agency is of limited value unless it embraces digital media.

"We have to be thinking about ideas in all the channels and not just the [traditional] advertising channels," says David Murphy, former president of the Los Angeles office of Publicis Groupe's Saatchi & Saatchi who recently left to open his own shop.

Many traditional ad agencies, with roots in television and print, have been slow to grasp the impact of the Internet. In the past couple of years, as consumers and advertisers have begun shifting to the Internet, some agencies have responded by beefing up digital talent through both hiring and acquisition. But many firms don't have enough digital talent to meet client demand, and those that do often have kept the digital department separate from the rest of the firm.

Wieden had hired some digital thinkers, but they were scattered through its offices around the globe. It wasn't until earlier this year, when it hired Renny Gleeson, a digital expert who had a top job at Aegis Group's Carat Fusion, that the shop began to take digital more seriously and teach digital know-how to the rest of its troops.

Even so, Wieden could be doing more, people at the firm admit. Digital has long been "an afterthought here," says a person at the agency. "We do it but haven't done it to the level we need to."

A spokeswoman for Wieden referred calls to Nike, which declined to comment beyond the statement it issued earlier this month. Mr. Wieden, through the spokeswoman, declined to comment.

About two years ago, Mr. Wieden passed on what may have been a golden opportunity to digitally remake his firm. Prominent digital ad firm AKQA proposed to Mr. Wieden that the two agencies create an informal alliance to pitch business and work collaboratively on shared accounts, according to several people familiar with the matter.

On paper, the two made a good fit. Both are at the top of their respective areas, and they share major clients such as Coca-Cola and Nike. But after several meetings to discuss the idea, Mr. Wieden couldn't be persuaded. People familiar with his thinking say the executive has long been fearful of tying up with other firms for fear of spoiling Wieden's culture. Instead, he believes in broadening the agency's skill set by hiring people with different types of expertise -- as he did with Mr. Gleeson.

Mr. Wieden may now wish he had made a bigger move. AKQA has gone from strength to strength; last month a private-equity firm bought a majority stake in the firm, giving it the resources to expand further.

Meanwhile Nike, which has long used several digital specialist firms such as AKQA and Interpublic Group's R/GA in addition to Wieden, has been sending signals that it wanted a different approach. "Gone are the days of one shoe, one advertising campaign. Now you've got to engage consumers on every level," Trevor Edwards, Nike's vice president of global brand and category management, told The Wall Street Journal last summer.

Nike's marketing campaigns have reflected a shift in emphasis towards the Web. Last year it worked with Google to create joga.com, a successful online community for soccer fans tied to the World Cup. The attraction of the site for Nike is that people who check out joga.com -- because of its subject matter -- are guaranteed to be exactly the kind of consumer Nike wants to speak to, which isn't the case when the company buys TV or print ads. "We get right to the center of the consumer," Mr. Edwards said last summer.

Nike now believes digital thinking should be at the heart of ad strategy, according to people familiar with the marketer's thinking. To make digital more central, it needs its main ad agency to be better skilled at digital techniques because the agency is developing ad strategy at the very early stages of a marketing campaign.

Ad executives say more mainstream ad firms could lose business unless they figure out how to better integrate digital media. "If people aren't embracing digital they will get left behind; clients are already there and they are gravitating to agencies who get it," adds Mr. Murphy.

Some agencies have tried to foster better collaboration between traditional and digital advertising. WPP Group's Ogilvy & Mather in 2005 named Jan Leth, executive creative director of the North American operations of its digital arm, OgilvyInteractive, to the additional post of co-chief creative officer for Ogilvy's New York office.

Publicis Groupe, similarly, is considering merging Modem Media, a digital firm that it acquired as part of its recent $1.6 billion purchase of Digitas, into its Publicis ad agency, according to people familiar with the matter.

Still, even with the best intentions, collaboration can be difficult to pull off, ad executives say.

"The thing is all these things look good on paper but so did communism," says Matt Freeman, chief executive officer of Tribal DDB, the digital arm of Omnicom Group's DDB Worldwide. "At the end of the day it's all about who is in charge. ... Traditional ad people are in favor of integration as long as they are in control. It still comes down to who reports to who and egos."