What killed Lanyon Phillips?

News of a major agency leaving the market came as a shock to many in the advertising industry and left many Vancouverites saddened. On Sept. 20, BBDO Canada announced that it would merge its Vancouver-based agency Lanyon Phillips Communications into the Vancouver offices of DDB Group Canada and TBWA Worldwide, both owned by the Omnicom Group, effective Jan. 1, 2003.

News of a major agency leaving the market came as a shock to many in the advertising industry and left many Vancouverites saddened.

On Sept. 20, BBDO Canada announced that it would merge its Vancouver-based agency Lanyon Phillips Communications into the Vancouver offices of DDB Group Canada and TBWA Worldwide, both owned by the Omnicom Group, effective Jan. 1, 2003.

Some blame the shop closure on the economy. Others feel that merger-induced management problems were a factor, while still others worry that Vancouver no longer has the number of clients it once did.

Gerry Frascione, head of national business with BBDO Canada in Toronto, offers a short, simple answer: ‘I took a look at all of the growth opportunities that we have across the country and felt it would be in the best interest of our clients to focus our business in Toronto and Montreal.

‘It’s been a very, very busy year for us,’ he continues. ‘We’re in good stead, but we’re in the process of reinvigorating BBDO Canada, and part of that overall strategy is to make sure that we focus in the areas that promise the greatest return. I believe there are more growth opportunities right now in Central Canada, and we felt it would be in the best interest of our clients in Western Canada to merge Lanyon Phillips with our two other sister agencies in Vancouver.’

While surely there are many contributing factors in the closure, Frascione delivers the one explanation that Canadian agencies feared most during the merger heyday of the ’80s and ’90s: BBDO Canada ate Lanyon Phillips.

It’s the economy

It is generally agreed upon that ad agencies in the smaller Vancouver market have felt the sting of the slowing economy more than Canada’s eastern ad centres, with Lanyon Phillips feeling it most profoundly. In 2001, the agency had $40 million in bookings with a client list including BC Hydro, Boston Pizza, Investors Group and Telus – premiere clients in Western Canada. This year, the agency had already seen staff shrink from 70 to about 25 before the consolidation was announced.

Chris Staples, founder of Vancouver boutique Rethink, posits, ‘Over the last 15 years, Vancouver as a market has been dealt quite a few serious blows with clients moving advertising out of market or just going under. Ikea moved to Toronto, then out of the country. Canadian Airlines was a huge account before their merger [with Air Canada]. The Woodwards bankruptcy in the early ’90s was a big deal. The cutback in government spending has added to the pressure.’

‘It’s a small and, in many ways, a declining market,’ says Peter Lanyon, a founding partner of Lanyon Phillips and soon to join Palmer Jarvis DDB as a network strategic consultant. ‘Vancouver is just not large enough to support a large number of agencies. This market is, for many companies, a sales district, so there is work in promotional sales support. And the real estate industry means there is a market for design services. But the advertising will, I think, shrink.’

Yet Alvin Wasserman, president of major independent agency Wasserman & Partners, asserts that his agency was able to grow during the last year. ‘The PR here is that it’s about the market not being able to support the agency, but that’s not true because we’ve been growing at the same time. It’s tight, but you can’t blame it on the market,’ he says.

One industry insider puts it in blunter terms: ‘I think Vancouver can support another good agency. It can’t support agencies that aren’t that good.’

What happens to the clients?

An unfortunate effect of consolidation within large networks is that clients get shuffled within that network. By all accounts, Lanyon Phillips’ clients participated fully in the decision and were happy with the agencies they ended up with (see ‘Whistler 2010,’ p. 20), but Joan Fedoruk, president of Vancouver-based Big House Communications, takes the view that this kind of shuffling could have major clients second-guessing the kind of partners they sign up with in the future. Big House already won the Money Mart account from Lanyon Phillips last year.

‘The independent agencies may now look more appealing to advertisers,’ she says. ‘There may be more people interested in a warm relationship that major shops can’t provide.’

Wasserman expects all of the clients to do a review after a few months with their new agencies, citing the example of his own merger with VRH Communications and Wasserman Cozens Dundon in February 1995. In that case, all of the clients reviewed within a year. According to Wasserman, even if the clients are happy where they end up, ‘nobody likes it. It’s like going to your regular restaurant and finding they’ve hired a new chef.’

Lanyon isn’t so sure that clients will be quick to leave the major networks, citing the longstanding BBDO/Pepsi and DDB/Volkswagen relationships.

‘The global networks have been remarkably stable in terms of client retention,’ he points out. ‘Investors have bought into communications companies on the public markets because they have stable earnings and stable growth, and you couldn’t have that without consistent clients.’

So now what?

Whether the office closure was the result of a tough economy or mergers that failed to thrive, what does this mean for the agencies that remain in the market?

Undoubtedly, TBWA’s Bryant, Fulton & Shee and PJDDB will be stronger for the senior talent they are gaining. PJDDB got Lanyon, while BFS earned senior VP and creative director David Martin as their new managing director and chief creative officer. Phillips is presently taking an extended sabbatical.

Fundamentally, the trend is for agencies to get bigger or get smaller. Quite likely, the future will look more like what PJDDB is turning into: a collection of intimate groups headed up by a strong, mobile core team.

‘An aspect of consolidation that a number of independents might not realize is that these agencies are less hierarchical and more mobile,’ Lanyon says. His new role as a network strategic consultant with PJDDB illustrates this point. Lanyon’s new job will be to advise clients at the outset of the various services individual components of the PJDDB network can offer.

‘Companies are restructuring by reducing core staff to a small group that can continue to work throughout downward markets. [There will be] more people in senior capacities who can come in and out of that system and work across it – what I call the ‘intra-preneur.’

In the end, the closure means Canada has lost a major part of its advertising history. Larry Tolpin, creative director of Baker Lovick when it was acquired by BBDO Canada in 1992, and then chief creative officer of BBDO, says, ‘The sad part is that Baker Lovick was the first Western shop to run a national agency and now it now longer has a shop there.’

A long legacy

The story of Lanyon Phillips and BBDO is a long and troubled one

Peter Lanyon was a founding creative director with Cossette in Toronto. After 10 years building the company from five people in a house to 150 people in downtown offices, he left for Vancouver in 1992 where he launched Lanyon Phillips with American transplant Chuck Phillips. In 1998, the founding duo sold the company to Omnicom Canada and merged into BBDO’s Vancouver office. The merger turned some heads at the time. Lanyon Phillips was in a strong position financially, and speculation was that a struggling BBDO Vancouver was looking for some fresh creative blood.

Company cultures clashed too – Chuck Phillips told Strategy in 1998 that combining the two businesses was like ‘coupling the Hare Krishna with the Catholic Church.’ Where Lanyon Phillips believed strongly in individuals, BBDO had a more corporate feel. Nonetheless, the wisdom at the time, as now, was that joining up with a large network was the only way to grow.

‘I believe it was a good idea,’ says Phillips, ‘especially in light of what’s happened in the global economy and the ad business in specific. Being part of a larger network gives you a stability that you might not otherwise have if you’re trying to make it on your own at a time when clients around the world have reduced ad spending.’

But many recall that stability being somewhat mercurial at the time. BBDO’s first acquisition in the area was the longstanding Vancouver-based shop, Baker Lovick Advertising in 1992, quickly followed by the acquisition of McKim Advertising, soon to be known as McKim Baker Lovick/BBDO.

No doubt about it, Baker Lovick had been a success story. Under the creative management of Peter Stringham and Larry Tolpin, the shop swept national and international awards shows from ’91 to ’93, taking home Canada’s first Agency of the Year award from Advertising Age in 1991. After the merger, however, the award-winning duo quickly moved to the Toronto shop. Nine months after the formation of McKim Baker Lovick/BBDO, the shop changed its name to BBDO Vancouver.

‘The two leading agencies in Vancouver got together to make BBDO,’ Alvin Wasserman says, ‘but the merger was oriented back east and was never properly handled out here. Management changed over and over, they lost tons of good people, and in the end they pretty much bankrupted the equity McKim and Baker Lovick had in this region.’

That legacy was still in effect in 1997, just before BBDO Vancouver purchased the independent Lanyon Phillips. That year, three major clients – Dominion Directories, A&W, and B.C. Tel – all awarded work to other agencies and others began major reviews. It was estimated that BBDO’s revenues for 1997 would be less than half of what it started the year with, and much less than the billings of $70 million in 1996. Staff turmoil added to the strife. The company saw three different SVP/creative directors in just 12 months.

Many believe the 1998 Lanyon Phillips purchase was an effort to regain local equity, a notion supported by BBDO’s quick reversion to the name Lanyon Phillips, erasing all traces of the troubled BBDO Vancouver. If that’s the case, then why was Lanyon Phillips so eager to merge? One industry insider claims the problem was a simple case of one partner ‘not delivering the clients it promised.’

But Peter Lanyon is clear on his feelings. The merger was an opportunity to grow his business, and, ‘if I had to do it again, I would do it again.’