Lessons From The Downfall of a Baltimore Ad Giant...

The recent collapse of Baltimore advertising giant Eisner has given advertising executives plenty of reason to take stock of their own business practices. Anyone who has watched a few episodes of “Bewitched” knows how mercurial the advertising industry is, how capricious the clients can be. Agencies grow by going after the bigger accounts, but if they’re not careful they make themselves even more vulnerable to the vagaries of the marketplace. A $20 million account is great to have – until you lose it.

How an agency handles the inevitable downturns in business is a reflection on many things, and often it comes down to whether the decision-makers are able to see reality and heed the counsel of those who can be a little more objective, or whether they allow stubbornness and pride to cloud their vision. The Eisners have admitted that in hindsight, they should have downsized more drastically after losing a huge airline account last year. They bought services, such as advertising space, for which they were not certain they could pay. Recent published reports tell of deliberate attempts to misstate revenues and otherwise mislead partners and customers.

And last week, with bankruptcy and lawsuits looming, they shut the doors and left their clients, vendors and over 50 employees holding the bag. We know what message this action sends the rest of the advertising community, now flooded with resumes from dozens of folks suddenly without a paycheck for holiday spending. But what should the business community at large take away from this scenario?

Eisner’s clients and vendors were treated poorly, and ultimately dishonestly. Understandably, these companies might be hesitant about continuing to work with ad agencies. There were red flags, however, with Eisner, and knowing what they are could help clients and vendors avoid similar predicaments in the future. The loss of the $20 million US Airways account, which was widely publicized, would be a crushing blow for an agency of any size, and in a smaller market like Baltimore difficult to quickly replace. A steady series of senior management defections in recent years was another strong clue to disarray within the organization. One simultaneous group defection to open a competing agency was another clear signal. And finally, the collapse of the potential merger with rival GKV put the message in bold-face caps.

Eisner’s extremely high overhead -- $100,000 per month for office space alone, not to mention a bloated payroll – should have given any client pause. Is this where your want your retainer money going?

We believe it’s entirely appropriate to hold your ad agency’s feet to the fire a little about its financial stability, its client base and the longevity of those relationships; to listen for rumblings on the street about the company’s reputation, and, perhaps most important, to trust your gut about how responsible, honest and fiscally prudent management is. If they spend lavishly on themselves and their workspace, how conscientious are they being with your money?

Chris Stutz
Director of Public Relations
chris@thecyphersagency.com