Publicis Groupe is merging Frankel with Leo Burnett’s 17-month-old interactive shop iLeo North America, direct-marketer Semaphore Partners and promo shop Arc (formerly Clarion) to form Arc North America, based in Chicago.
The new agency will have estimated revenues between $100 million and $110 million and as many as 600 staffers in five offices, each handling promotions, direct and interactive. More Publicis-owned shops could be folded in, and U.S. offices could begin working with Arc offices in Europe and Asia as early as this year.
Arc North America keeps the Frankel moniker as a sub-brand, and Frankel’s current president-CEO, Dick Thomas, becomes Arc North America president-CEO. Arc reports to Leo Burnett Chairman-CEO Linda Wolf.
“We endeavor to quickly become best in class with the holy trinity of promotion, direct and interactive marketing,” says Thomas. “Our growth will be vertical and horizontal, with new clients and deeper relationships with current clients.”
Plans call for three Arc offices in Chicago (possibly headquartered in Burnett’s building there), one on the East Coast and one on the West Coast. The agency may move or use current space in San Francisco (Frankel), Greenwich, CT (Arc) or New York City (Semaphore). The separate offices, management of which will be decided in the coming weeks, will function like mini-agencies, each with promotion, direct and interactive staff. However, all locations will share a single P&L.
Separate offices will give Arc national scope and ease client concerns about possible conflicts. For example, three years ago, McDonald’s asked Frankel to bow out of a Starbucks review. Frankel works now on McCafé, in test in North Carolina and San Francisco.
Publicis has gained ground as an international network, fueled in part by its October 2003 win of Allied Domecq’s estimated $450 million global marketing services account. AD chose Publicis in April 2003 to replace financially unstable Cordiant Communications. Several Cordiant execs and staffers in Europe migrated to Publicis, and Cordiant’s promotions marketing network, 141 Worldwide, is being quietly dismantled by new owner WPP Group.
In North America, “we’re trying to grab two brass rings,” Thomas says. “First, we want to be best in class in all three disciplines — and we have the quality and breadth of clients to do that. Second, we want to take the lead. This industry is ready for reinvention. Someone’s going to pop through, and with our depth of talent and a technological bent, we’re in a position to do that.”
Paris-based Publicis was expected to consolidate its marketing service agencies early this year after it re-branded 32 marketing service offices in 19 countries (including Greenwich-based Clarion) under the Arc name in July. Burnett took control when it absorbed D’Arcy Marketing Services Group in the fall. That gave Burnett instant visibility overseas via Arc offices in Europe and Asia. Arc North America will get on its feet before collaborating with siblings abroad. That could begin in 2004.
Most of Publicis’ below-the-line agencies report through an ad agency sibling, to streamline management and offer holistic marketing. But Arc “won’t be a backend Burnett shop working only with Burnett clients,” Thomas says. “We can’t depend on them for our growth.”
Frankel and Burnett work together on McDonald’s Corp. business and jointly pitched Gateway. The agencies joining Arc have no client conflicts; in fact, Semaphore and Arc’s Greenwich office both work on General Motors.
Frankel had an estimated $88 million in 2002 net revenues; the shop ranked No. 16 in the 2003 PROMO 100. In 2003, it won business from Diageo, the U.S. Army, Johnson & Johnson and Coca-Cola Co. Before the merger, Frankel had already narrowed its focus to pitching big accounts, rather than pursuing a wide range of new business.
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