A battle for billings: B.E. advertising agencies overview.

Black advertising agencies face untold opportunities, but must fight intensely with mainstream agencies determined to own it all

Al Anderson couldn't believe his eyes. It was the first time he had ever seen a black advertising agency rated in Adweek's annual report card survey. "I may be wrong, but I don't think this has ever happened before," says the 56-year-old owner of Anderson Communications, an Atlanta-based agency that's been in business for 27 years.

Anderson is referring to the historic appearances of Burrell Communications Group of Chicago and UniWorld Group of New York in the March 30 issue of the advertising trade publication, in which the top 100 ad agencies (nonconglomerates) in the country were ranked and the top 50 in each region graded. Burrell, ranked 67, received a "B+" grade, while UniWorld, ranked 84, was given a "C." The grades were based on criteria that included billings, account management and growth, creativity and business management.

This landmark event says it's clearly time to revisit the advertising industry and see how black-owned full-service advertising agencies are faring. To help put things into proper perspective, we've reinstated our annual BLACK ENTERPRISE ranking of black ad agencies, which last appeared in our first BE 100s, issue, June 1973. While much has changed for black agencies over the past 25 years, much also is the same. Now, as then, the black agency is being muscled aside by mainstream agencies in the mad race for ethnic market business.

BE's first list of 15 agencies recorded total billings of $31.4 million. Of those advertising pioneers, only Vince Cullers Advertising, UniWorld Group and Burrell Communications (then Burrell McBain) remain today. Anderson Communications (No. 12 on the BE ADVERTISING AGENCIES list), now a full- service agency, started in 1971 as a marketing and public relations firm. Circulation Experti (No. 14 on the BE ADVERTISING AGENCIES list) opened its ad agency in 1979. Similarly, Beach Advertising/ Beach Graphics (No. 20 on the BE ADVERTISING AGENCIES) became a full-service agency in 1974.

Anderson, whose accounts include Pillsbury, Kraft, KFC, Kroger and Sara Lee's meat division, keeps dose tabs on what's happening in the industry. He sums up the state of the business in frank terms. "Only five or six companies are really doing any serious business out there today--particularly UniWorld, Burrell and Don Coleman. Nearly everybody else is struggling, at best."

This view bears out. Our three top-ranked agencies accounted for more than half of the total 1997 billings and revenues recorded by all 20 of the agencies appearing on our current list. "In a sense, the black agency has been the victim of its own success," says industry expert Ken Smikle, president of Target Market News, a market research group in Chicago. "It sold white advertisers on the potential of the African American consumer market, and now these companies are turning to their white agencies to help deliver the goods. Black agencies are fighting for the right to market to the very market they helped create."

An excellent example of this is Miller Brewing Co., which engaged Wieden & Kennedy, a white agency in Portland, Oregon, to create spots for its Miller Genuine Draft brand targeting African Americans and Hispanics.

Oddly, the industry that routinely churns out advertising featuring black attitude, culture, style and music is nearly devoid of diversity as it was over 100 years ago. Back then, media agents such as J. Walter Thompson and N.W. Ayer added creative services to their offerings and started what are considered the first full-service general market ad agencies in the United States.

Heide Gardner is senior manager of diversity and strategic programs for the AAF Foundation, a nonprofit educational affiliation of the American Advertising Federation in Washington, D.C. She reports that fewer than 3% of advertising, marketing and public relations managers are African American, and most of them work for black companies. "Much of this industry's business is happening without significant minority participation," Gardner says. Also, the advertising industry doesn't appear to have embraced the concept of affirmative action, and most agency employees have never undergone any form of diversity training. "It's really questionable whether white agencies would absorb black talent if the African American agencies suddenly folded," she adds.

As former vice president/account supervisor at Grey Advertising, Mark Robinson felt there were subtle attempts to curb his advancement, which prompted him to leave. "Advertising is a relationship business. Many whites don't like you being buddies with their clients, their friends. They often resent black participation in the business," says 41-year-old Robinson. "There's also a prevailing sense of denial that blacks ever create anything of value. Instead, whites may put our work down, Ignore it or co-opt it.

Robinson, who rarer worked at UniWorld for seven years as vice president and group account director before leaving to help Spike Lee manage his new agency, Spike DDB, says that in addition to these barriers, black agencies have an inner conflict to correct. They want business on the basis of "the best person won," but, on the other hand, claim affirmative action as the reason they should be hired. "You can't sell both stories," he says. "Several of our agencies deserve general marker business, but will have to be willing to go up against white agencies to win it." (Robinson left advertising earlier this year to start his own company, MSSR Corp., a direct response apparel and collectibles company.)

Byron Lewis, chairman and CEO of UniWorld, agrees, saying, "It's ironic that we, the pioneers, must compete with upstarts for our survival. But we're survivors. And we're ready for a good fight."

SMOKE AND MIRRORS--OR REAL GROWTH?

By 1990, approximately 27 black agencies were billing a combined total of $247 million, one-third of the $743 million that major national advertisers were spending to reach black consumers (see chart). In the latest numbers available from Target Market News (1996), national advertisers spent an estimated $865 million pushing products and services to the black consumer--roughly a $122 million increase over 1990. The lion's share of those dollars rained on mass market agencies and the top black agencies, often leaving smaller ones high and dry in terms of growth.

"To create growth, black agencies should convince industries that are not currently advertising to black consumers that it's in their best interest to do so, and to use black agencies' expertise," says Smikle. "And they shouldn't spend too much time competing for general market business, where growth rates tend to be flat." Opportunities abound in several areas, including the information technology, retail, finance, luxury automobiles and travel industries.

Any company not seriously looking at the value of minority markets, "particularly the African American market," will not realize its true potential, adds Sam Chisholm of the Chisholm-Mingo Group in New York. "Similarly, if we just look at ourselves as creators of ads and commercials, we're dead. We have to help our clients solve problems as marketing advisors who can help them get at the billions of dollars in the ethnic market."

A SNAPSHOT OF THE BUSINESS

Burrell Communications' (No. 1 on the BE ADVERTISING AGENCIES list) billings jumped 38% last year, thanks to new business that included Bacardi-Martini USA, HBO, Bahamas Tourism and the Chicago Tribune. One of Burrell's best-known spots is "Action Movie," for the Did somebody say McDonald's?" campaign, in which the hero stops to get a hamburger. The agency also received the O'Toole Award for Creative Excellence in Advertising to African Americans from the American Association of Advertising Agencies (4A's), for its 1997 body of work. His "B+" grade from Adweek is an additional source of pride for Chairman and CEO Tom Burrell, who says the recognition "confirms our creativity and also that we are a solid business enterprise."

In Adweek's evaluation of UniWorld (No. 2 on the BE ADVERTISING AGENCIES list), Byron Lewis was advised to "pay more attention to bringing in new business. The agency, whose clients include NationsBank, Burger King and AT&T. scored big last year when it landed M&M/Mars 3 Musketeers, a general market account. The campaign features comic actress Fran Drescher (of The Nanny), three handsome musketeers and the tag line, "Big on chocolate, not on fat." UniWorld, which was voted runner-up in the O'Toole Award competition in the African American category, also was awarded some of Texaco's business after the infamous "black jelly bean" debacle sent shockwaves through corporate America.

Termed the quintessential "agency of the '90s" by peers and industry watchdogs alike, Don Coleman Advertising Inc. of Southfield, Michigan (No. 3 on the BE ADVERTISING AGENCIES list) has nearly doubled its billings over the past four years. Founded 10 years ago, DCA, which posted $111 million in billings and revenues last year, was selected as BE's Agency of the Year (see "A Creative Point of View," this issue).

Sam Chisholm joined the Mingo-Jones-Guilmenot Advertising team in 1979, before cofounder Caroline Jones left to fly solo in the mid-'80s. He kept the agency running, retaining all of the shop's clients, after partner Frank Mingo's death in 1989. Today, Chisholm-Mingo (No. 4 on the BE ADVERTISING AGENCIES list) has a client roster that includes General Motors and the U.S. Army, Last year, the agency, which focuses primarily on growing existing business and is credited with a strong client retention rate, added Denny's, a significant account. Chisholm points to their Ambi Skin Care campaign ("Skin care that's more than skin deep") and its new "Growing Kids USA" institutional campaign for Denny's as proof that their creative has evolved to be in step with today's consumer.

Muse Cordero Chen & Partners of Los Angeles (No. 5 on the BE ADVERTISING AGENCIES list) has among its clients Qwest, a long-distance telephone company that's targeted the Big Three, AT&T, Sprint and MCI, in a new national campaign. Muse Cordero Chen was tapped to produce a multi-ethnic campaign aimed at Hispanic and Asian American consumers, launching spots in five test cities. The 12-year-old agency recently won first place in the Hispanic-American category of the 4A's O'Toole Awards for its work for Nike, Supercuts and other clients.

Edging close to the $50 million mark is Carol H. Williams Advertising in Oakland, California (No. 6 on the BE ADVERTISING AGENCIES list). Founded in 1988, Williams had a late-year increase in billings with the addition of four new clients, including Coors, totaling 323 million in new billings.

After Coors invited her to participate in an agency review, Williams won the account away from UniWorld. "I never go after another black agency's business," she says. "There's enough work around that we don't have to do that. But if a company opens up an opportunity, that's a different story."

Williams, 50, feels that target marketing is much harder to do than mass marketing, evidenced by the fact that so few know how to do it or even understand it. "Also, we often have to make sure our campaigns work in synergy with the client's mass market campaigns while still hitting strategic targets," she says. "We have to maximize similarities while minimizing differences and still come up with a creative winner."

She also observes that many advertisers consider ethnic marketing as "community service advertising and do it only when they chink it will have some community value. "If your client has this thinking, then the account will never grow," says Williams. "You're trying to do business--they're doing a civil rights campaign."

One way mass market agencies have been getting around the dilemma of "owning" African American (i.e., urban) market business they don't quite understand is to form what are called "guerrilla" shops that know the territory. Staid Leo Burnett USA, based in Chicago, recently spun off Vigilante, a funky, street-level creative shop under the direction of Marc Stephenson Strachan, chief marketing and operating officer. "I have no problem with Leo Burnett trying to compete in this fashion," says MSSR Corp.'s Mark Robinson, "but it would have been better, perception wise, if they'd given Strachan 51% ownership."

DDB Needham Worldwide made a similar move with the start-up of Spike DDB (No. 10 on the BE ADVERTISING AGENCIES list)) last year, a full-service agency 51% owned by filmmaker Spike Lee. Spike DDB reported billings last year of $22.5million, with accounts such as the Miami Heat basketball franchise, Soft Sheen Hair Care Products and Fox Sports Net. Soft Sheen is the only special market account; the rest is general market work. Lee, who is president, spends three half-days a week on average giving concentrated attention to his 15-person shop's work. He is involved in every aspect, from finding and landing clients to media buying and, of course, production. Profits are split 51%-49% with DDB Needham Worldwide, which, according to the Standard Director' of Advertising Agency (also known as the Red Book), billed $10 billion last year.

One of the industry's most intriguing stories is that of Caroline R. Jones, who started out in the mid-'60s as "the first trained African American copywriter in the business." After leaving Mingo-Jones-Guilmenot, the creatively hot shop she started with Frank Mingo and Richard Guilmenot in 1977, she formed Caroline Jones Advertising in 1986. Her new shop (No. 12 on the BE ADVERTISING AGENCIES list) ran into difficulty a few years later as the result of a nonpaying client.

As part of her turnaround effort, Jones restructured the company to better reflect the full scope of her services to domestic and international clients, which include the U.S. Postal Service, McDonald's, Anheuser-Busch and newly signed Cendant Corp. Calling her business "vibrant," Jones says, "It was easy for me to tackle the task of turning my agency around due to our creative reputation.

Burrell took some of the joy out of Vince Cullers' 40th anniversary gala last year (celebrated a year late), when the agency walked away with two of Cullers' oldest and biggest name accounts, Sears and Kellogg's. This sent a reminder to all that while there's camaraderie among most of the agency owners (Tom Burrell, an old friend of Cullers, attended the gala after the shift was announced), business is business. According to Jeff Cullers, named president last year, the pioneer agency (No. 15 on the BE ADVERTISING AGENCIES list), which reported billings of $7.6 million, took a 20% hit with the loss. "No one likes to lose business," says Cullers, "but we had Kellogg's for 20 years and Sears for 25. It was time for a change."

Last year the agency overhauled staffing and management to bring the company "into the decade." Now calling itself the "Oldest newest African American ad agency," Cullers plans an aggressive pursuit of new business to add to existing accounts like Amoco, Pizza Hut and Visa. (Jesse J. Lewis & Associates, No. 16 on the BE ADVERTISING AGENCIES list, of Birmingham, Alabama, also claims the title of the first African American advertising agency in the nation, having formed in 1952, four years before Cullers.)

POSTING GAINS FOR THE FUTURE

How can black agencies continue to grow for the future? First, they must not be afraid of head-on competition with white agencies. Carol Williams warns agencies to be prepared to spend at least $30,000-540,000 on strategic agency presentations when going against bigger shops.

Keeping an eye on new developments in the industry will be key. Since 1996, the Red Book has included a new category of advertising agency--the cyberagency. These new-wave talents, which bill themselves as full-service Web presence providers, design Web pages and handle Internet advertising, marketing and promotions Experts suggest that traditional agencies should consider how they might incorporate these new trends into their current services to clients.

Another way agencies can increase revenues is to develop their own media outlets. UniWorld has done this with America's Black Forum; Vince Cullers with Srelluc (Cullers spelled backwards) Productions, which produces The Spirit Awards; and Anderson with Anderson Media Services, which produces the nation's first syndicated radio gospel program, Inspirations Across America.

Agencies looking to establish themselves should open offices where business is. For example, 55% of African Americans live in the Sunbelt, placing Anderson, Jesse J. Lewis and Associates, Visions USA Inc., Images USA, Sykes Communications Inc. and The King Group in a good spot. Expanding industries include supermarkets, drugstores, clothing retailers, financial centers and information technology firms, creating fertile territory for hungry agencies to explore.

And finally, black agencies should think coalition. Says UniWorld's Byron Lewis, "Just as there's been a sea of change in how general market agencies operate--merging, spinning off guerrilla subsidiaries, leveraging economies of scale in media buying, creative and production--we, too, have to learn how to grow and compete, pool our resources and build alliances." When asked if there would ever be a chance the big three black agencies would merge into one giant super agency. Lewis, 66, smiles and says, yes, he would consider doing that--provided he was in charge of it. "After all," he quips. "I'm the oldest."

TARGETING THE BLACK CONSUMER

                AMOUNT SPENT           BILLINGS
               ADVERTISING TO        ALLOCATED TO
YEAR          BLACK CONSUMERS(*)   BLACK AD AGENCIES

1984            $411 million         $140 million

1986             638 million          217 million

1988             694 million          229 million

1990             743 million          247 million

1992             785 million          271 million

1994             834 million          296 million

1996 (est.)      865 million          337 million

(*) Dollars allocated by major national advertisers only.

Source: Target Market News, Chicago, 1998.

RELATED ARTICLE: HOW WE SELECTED THE TOP AGENCIES

We canvassed the Standard Directory of Advertising Agencies, combed industry publications and made inquiries in the field to compile a list of full-service advertising agencies in the U.S. that are 51% black owned. Surveys were sent to there agencies; those that responded and met the criteria were placed into our ranking.

To qualify as a full-service advertising agency, the company has to make media placements--that is, purchase time and/or space for its clients' advertising. Companies that only provide consulting services, or only create or produce advertising or only do media placements do not qualify as full-service agencies.

We elected to list the 20 highest-earning agencies, based on 1997 performance, on the assumption that these firms were most likely to have at least one national account and a minimum $2 million dollars in billings.

An agency's financial status is measured in terms of billings, monies allocated by an advertiser to its agency to buy time on television and/or radio, or space in publications and other print media. These media outlets then pay a commission back to the agency in the form of a discount in the 15%-22% range, which the agency counts as revenue. Other sources of revenue for an agency include production fees that the agency charges the client to produce the advertising, and fees for adjunct services such as public relations, consulting and promotional work.

Our ranking is base on a combined total of actualized billings plus capitalized billings (where commissions have not yet been paid, but the media buys were completed) and other agency fees reported as revenues, an accepted industry practice for reporting earnings status. In most all cases, this accounts for the differences between Red Book figures and agency-reported figures.