Cirrus@Austlit

ADVERTISING AGENCIES

The first advertising agencies appeared in Australia just after Federation. Whereas agents had sold newspaper space on commission to advertisers for most of the 19th century, agencies such as Thomas Miller in Sydney and Paton Advertising Service in Melbourne now offered advertisers ‘full service’ by creating advertisements with copy and images as well as placing them in the press. These remain the two classic functions of advertising agencies: ‘creative’ and ‘media-buying’.

By World War I, advertising had its own industry associations and trade press, and advertising’s role in military recruitment helped establish its credentials as a social institution. By 1923, there were an estimated 2000 ‘advertising agents’ in Australia, but the decade saw an increasing concentration of national advertising expenditure going into the hands of the larger agencies in Sydney and Melbourne, including Catts-Patterson and Berry Price. By the end of the decade, they were joined by Goldberg Advertising from New Zealand, and the first international agencies, Samson Clark from the United Kingdom, and Campbell Ewald and J. Walter Thompson (JWT) from the United States.

Despite the Great Depression, the industry became consolidated in important ways: at the instigation of the press, a standard commission and accreditation system was introduced, while the advertisers set up a board to audit newspaper circulation. These developments meant the press could determine which agencies could be paid commission, and how much, while the advertisers were able to check on the newspapers’ claims to circulation.

The 1930s was also the decade in which radio became a viable commercial medium, and with it came radio audience measurement, as well as public opinion research. A key figure here was W.A. McNair, who worked for JWT and later was to found a major ratings measurement company. JWT was a great influence in propagating commercialised social science, including an empirical approach to market as well as media research.

JWT also brought a new business model for commercialising radio, in which agencies assumed the role of program producers on behalf of advertisers as sponsors. Embraced by Lintas from the United Kingdom as well as the larger Australian agencies, this sponsorship model was to endure until the television era. Especially after 1941, as the advertising industry joined the war effort, the Colgate-Palmolive Radio Production Unit, the radio production division of the largest Australian agency, George Patterson, distinguished itself by producing popular patriotic radio programs to sell war bonds, while JWT made propaganda films for the government. However, the agencies’ experience at the hands of government during the war led to the formation of the Australian Association of Advertising Agencies (4As) in 1946.

Advertising agencies thrived in the post-war boom and in the lead-up to the introduction of television in 1956, but the advent of the new medium brought with it an unprecedented internationalisation of the business. Television had proven its commercial potential in the United States, so Australian agencies were receptive to the incursion of US agencies; this began in 1959, when McCann Erickson arrived to buy out Hansen Rubensohn in Sydney. As well as the US agencies’ experience with television, Australian agencies were well disposed to mergers because the newcomers brought their big clients with them. Indeed, some US agencies came to Australia in order to keep the business of clients they served in America, or even to capture those clients back from Australian agencies. This was the case when Ted Bates bought a majority share in George Patterson in 1964. Later in the 1960s, Ogilvy & Mather and Young & Rubicam opened up wholly owned offices in Australia, while BBDO made a more subtle entry by taking up a minority share in Melbourne-based John Clemenger in 1972. British agencies also joined the influx, notably with Masius Wynne-Williams acquiring Goldberg Advertising in Sydney and Paton Advertising in Melbourne. Not all Australian agencies welcomed this transformation. An Australian-owned Advertising Agencies Council (Austac) was formed in 1972, in opposition to the international agencies’ dominance of the 4As, but within a few years the division was largely healed by the creation of a new peak body, the Advertising Federation of Australia. There were larger changes to come, as the internationalisation of the 1960s and 1970s gave way to the globalisation of the 1980s.

This was characterised by two main developments in the ownership and management of advertising agencies. First, certain UK, US and French agencies achieved an immense increase in the capital they had for expansion by floating themselves on the stock exchange—traditionally, agencies had been owned by their principals. Second, this capital enabled huge buyouts of agencies on a global scale, and a fundamental reorganisation of how they were managed. Notably, there was the formation of global ‘mega-groups’ of agencies. The British agency Saatchi & Saatchi set the pace in these changes, and when it bought the US-based international agency network Ted Bates in 1986, George Patterson and The Campaign Palace were brought into the Saatchi & Saatchi stable.

Accompanying this process, and becoming consolidated into the deregulated and less profitable era of the 1990s, was the organisational division of agency functions into those that offered creative and related services, and those that specialised in media-buying and planning alone. There had been Australian agencies that had anticipated this trend in the 1970s—Dennis Merchant’s in Sydney and Harold Mitchell’s in Melbourne—but it was established on a global scale by the British and French-based mega-groups. Similarly, there were some distinguished creative ‘hot-shops’ in Australia prior to the era of globalisation that had achieved a strong resonance with Australian popular culture, notably SPASM (Singleton, Palmer, Strauss and McAllan) and Mojo in Sydney and MDA in Melbourne; however, like The Campaign Palace, these ultimately were absorbed by one or the other of the global groups.

Such incorporation of Australian-owned agencies into the global holding companies is the principal effect of globalisation in the advertising agency business, but it is important to appreciate how much the process is driven by the globalisation of the advertisers. In particular, it is the global advertisers’ strong preference for ‘global alignment’—that is, having the same agency act for them in all the markets where they do business—and their equally powerful resolve not to deal with any agency that handles a competitor’s account that largely determine the pattern of local–global relations in the advertising industry. While a host of smaller agencies can survive with their small- to medium-enterprise clients, the larger agencies are constantly transforming themselves to attract and hold the high-profile accounts of the global brands. By the end of 2010, with the sale of Mitchell & Partners to the global media-buying group Aegis Media, and the majority buyout of Clemenger by BBDO (Om- nicom Group), the last two enduring bastions of participation by Australian principals and staff at the upper end of the advertising agency business had surrendered.

We can expect that small agencies will continue to emerge, however—both in response to such consolidation, and in order to take advantage of the new specialisations and more fluid marketing practices being opened up by the digital age. Significantly, the agencies’ peak body, the Advertising Federation of Australia, renamed itself the Communications Council in 2009 to better reflect the absorption of advertising into the broad range of integrated marketing communications.

REFs: K. Cousins, ‘What Lured Them to Australia?’, in Advertising News (1978); R. Crawford, But Wait, There’s More ... (2008); J. Sinclair, Images Incorporated (1987).

JOHN SINCLAIR