TBWA\Chiat\Day

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TBWA\Chiat\Day

5353 Grosvenor Blvd.
Los Angeles, California 90066-6319
U.S.A.
Telephone: (310) 305-5000
Fax: (310) 305-6000
Web site:http://www.tbwachiat.com

Wholly Owned Subsidiary of Omnicom Group Inc.
Incorporated: 1968 as Chiat/Day Inc. Advertising; 1970 as TBWA International
Employees: 1,200
Gross Billings: $1.8 billion (2000 est.)
NAIC: 54181 Advertising Agencies

The fifteenth largest advertising agency in the United States, TBWA\Chiat\Day is the result of the 1995 merger between Chiat/Day and the North American operations of TBWA Worldwide, an Omnicom Group subsidiary with global billings of $5.7 billion. Daring, controversial, and visionary from its inception, Chiat/Day revolutionized Madison Avenue from its earliest days to its last as an independent agency. When Chiat was acquired by Omnicom Group, the third largest advertising holding company in the world, many thought the smaller agency’s irreverence and in-your-face style would be stifled. They were wrong; the latest incarnation of the gonzo ad agency is still outrageously creative and continues to attract major clients and the industry’s top awards. Although its Omnicom brethren include top-notch rivals DDBO Worldwide and DDB Needham Worldwide, TBWA\Chiat\Day has revitalized Apple Computer, introduced the public to new Nissan cars, brought fame to the Taco Bell chihuahua, taken PlayStation to the top of the electronic gaming industry, and ushered in a new staple of blue jeans-wearing customers for Levi Strauss & Company. Given its history and penchant for guerilla warfare, few would bet against TBWA\Chiat\Day to remain one of the world’s top advertising agencies well into the 21^st century.

Merger of Chiat & Day: 1960s-70s

Chiat/Day was established when two competitors combined their talents to take on the bigger agencies in the Los Angeles area. Jay Chiat & Associates, founded in 1962, had billings of $3 million when Guy Day of Faust/Day Advertising, a $5 million agency, proposed a merger. Chiat agreed with Day to pool their creative and financial resources, and by October 1968 Chiat/Day was in operation. Day, after winning a coin toss, became company president.

From the beginning the agency eschewed standard practices and created its own unique brand of advertising. Chiat/Day was among the first to use the English concept of “account planners, “liaisons between the agency and targeted consumers who traveled the country conducting individual and group interviews. Account planners not only gauged audience response and understanding of ads, but also served as a crucial link between the client and the buying public. A second Chiat/Day innovation was the requirement that clients actively participate in the creative process by attending an initial brainstorming or strategy session, as well as a subsequent planning session. Chiat/Day turned away business when clients refused this interaction. Third, Chiat/Day believed all staff members should be involved in a campaign via a “task force” approach. But Chiat/Day’s greatest innovations were the ad campaigns themselves, work that demonstrated the agency’s relentless pursuit of quality and its unflagging ambition to create the best ads in the industry.

After the merging agencies combined their existing accounts and dropped any conflicts of interest, Chiat/Day was ready to take the advertising world by storm. In 1969, the agency picked up Western Harness Racing as a client by betting its president they could raise attendance 15 percent with their ads. Another account included a public service ad addressing racism for the Los Angeles County Commission on Human Relations. Chiat/Day’s “My Hero, the Pimp” ads of 1970 raised large amounts of money for Direction Sports, an organization involved in helping urban youth. In short, Chiat/Day pushed the public’s buttons as it grew in both recognition and billings.

Jay Chiat’s now classic maxim “Good enough is not enough” emerged as a defining concept for the company and a testament to his vision of advertising. With a pronounced ability to stir things up, according to Day and others, Chiat traditionally drove his creative teams to the “breaking point,” the point where desperation often gave way to sudden inspiration. In 1971, the company hired Lee Clow, a man who came to embody the creative soul of the agency in the years to come. While serving as the architect of many of Chiat/Day’s most memorable campaigns, Clow rose through the ranks to become president and executive creative director worldwide. According to Karen Stabiner in Inventing Desire, the rare chemistry between Jay Chiat and Lee Clow, perhaps as much as anything, propelled Chiat/Day into the limelight.

Throughout the 1970s, Chiat/Day experimented in style and substance, employing psychedelic colors in its ads for Viviane Woodard Cosmetics, scenic wonders for Rancho California, offbeat ads for KNBC and Motel 6, and a series of breakthrough ads for Honda’s new automobiles. In 1975, however, Honda, responsible for half of Chiat/Day’s billings and three-quarters of its income, left for another ad agency. This proved the first of many blows to the fledgling agency, as small accounts would become giants thanks to Chiat/Day’s ads and then abandon the company for bigger, “full-service” agencies.

The following year, Chiat/Day ran a series of trade ads targeting the food, airline, pet, and motorcycle industries. These ads paid off, and Chiat soon landed clients including Yamaha, Midori, Alaska Airlines, and the Olympia Brewing Company. During this time, Guy Day, wishing to spend more time with his family and pursue his interest in writing, sold his agency holdings and left Chiat/Day in his partner’s hands. By the end of the decade, Chiat/Day had opened an office in New York and had purchased an established agency in San Francisco.

Setting the Standard: 1980s

In 1980 the company was named Agency of the Year by Advertising Age magazine, which would again bestow that title on Chiat/Day later in the decade. The next year, as Chiat/Day was hitting its stride and becoming one of the fastest growing privately held agencies in the United States, Guy Day rejoined the company to help steer its course. Also during this time, the foundation for what many consider the greatest ad in history was laid. Chiat/Day was steadily garnering attention for Apple Computer, a client of the agency’s San Francisco office, through a series of popular ads. Then, in 1983, the agency began work on a TV spot introducing the Macintosh, a computer destined to revolutionize the industry, scheduled to air during the third quarter of the January 1984 Super Bowl.

Using an abandoned print ad, staffers worked around the slogan “Why 1984 won’t be like 1984.” Apple liked the idea, and British film director Ridley Scott was hired for the filming. Yet the disturbingly Orwellian commercial, featuring an athletic-looking young woman (symbolizing Macintosh) hurling a sledgehammer at a Big Brother TV screen (IBM), proved too brash a statement even for Apple’s executives. Before air-time on Super Bowl Sunday a reluctant Apple tried to pull the plug, finally insisting Chiat/Day sell the air time. Fortunately, only half of the scheduled time could be sold, and the “1984” ad was run. Chiat/Day held its collective breath and waited for the fallout.

“The commercial changed advertising; the product changed the ad business; the technology changed the world,” wrote Bradley Johnson of Advertising Age in a January 1994 retrospective. “It turned the Super Bowl from a football game into advertising’s Super Event of the year,” Johnson contended, “and it ushered in the era of advertising as news.” Costing a total of $900,000 to produce and air, “1984” resulted in millions for both Apple and Chiat/Day, as the spot was rebroadcast during evening newscasts and on Entertainment Tonight. The “1984” spot not only swept the year’s awards, winning the Grand Effie, the Cannes Gold, the Belding Sweepstakes, and the Clio, but it was later dubbed Advertising Age’s Commercial of the Decade. “This is what happens,” Johnson concluded, “when breakthrough technology is given the benefit of the greatest TV commercial ever made.”

In the wake of this success, Chiat/Day secured many new accounts, including Nike, Porsche, and Pizza Hut. The ads Chiat/Day produced for Pizza Hut spawned a lawsuit from competitor Godfather’s Pizza. Setting an industry precedent, a California state court enjoined Chiat/Day from sharing confidential information learned while bidding previously for the Godfather account. The court also forbade any agency staffers who worked on the Godfather pitch from working on rival Pizza Hut’s account. In November 1984, an appellate court struck down the second part of the ruling, a victory for Chiat/Day and all ad agencies. Yet the remaining injunction seemed a moot point, since agency standards precluded the use of confidential information anyway.

In 1986 and 1987, Chiat/Day continued to prosper, with dynamic media ads for California Coolers, Nike, Teddy Ruxpin, and celebrity spots for Mitsubishi’s 35-inch television by Bob Fosse, Jim Henson, John Huston, and Martin Scorsese. But with the highs came more lows, as both Apple and Nike (like Honda before them) departed for other agencies. According to the Economist: “No other agency has got so big while maintaining such a fine reputation for cutting-edge work. But nor has any been so sharply criticized for putting self-indulgent ‘creativity’ ahead of selling products. That has made for a history of stunning ads—and devastating client defections.” After six years, Guy Day also left the agency again, this time for good.

Company Perspectives:

Our Product Is: Insight and Ideas. We Value: The people who create, support, nurture, enhance and sell them. We Are Enriched By: Our multinational and multicultural heritage. Our Goal Is: To become indispensable to our clients.

Yet 1987’s acquisition of the Nissan Motor account heralded a new era for Chiat/Day. Not only did Nissan consolidate its regional marketing with the agency in 1988 (adding another $90 million in billings), but it helped catapult the agency into the big time. With gross billings of $500 million, Chiat/Day was now ranked among the industry’s top 25 agencies. To handle the influx of new business, Chiat hired almost 200 additional staffers and recapitalized to pay off senior executives and other equity holders by borrowing in excess of $50 million in 1988. By the end of 1988 and throughout 1989, the agency had expanded by acquiring a design firm, two public relations operations, a direct-marketing company, and a sales promotion firm. The pinnacle of Chiat’s growth during the 1980s came with the purchase of Mojo MDA Group Ltd., Australia’s largest advertising agency, with $180 million in billings.

One of Australia’s savviest agencies, Mojo was at its peak when the merger came through in 1989. Renaming the conglomerate Chiat/Day/Mojo, Jay Chiat was intent on building the world’s premier advertising and communications firm, a full-service provider that could become “big” without sacrificing its reputation for innovation. To facilitate the necessary restructuring and eventual management transition, Chiat removed himself from direct involvement with the company and appointed Bob Wolf to take his place. However, amidst internal dissension and severe economic pressures, according to Stabiner in Business Month, Chiat returned to the helm the following year.

Bigger Not Always Better: 1990-94

Chiat/Day/Mojo’s billings hit $1.2 billion in 1991, with Toshiba, Reebok, American Express, and Microsoft all signing on. Next in line was Nissan’s Australian accounts, which Chiat believed would be brought in with ease, given Mojo’s reputation and connections. However, Mojo failed to deliver Nissan or other international accounts, and instead began losing clients. Moreover, Shearson Lehman Brothers ($20 million), Chemical Manufacturers Association ($10 million), and AmEx Green Card ($60 million) all deserted Chiat. The industry was rife with speculation about Chiat/Day’s debt load, wondering how the agency would handle its rising interest payments. With heavy losses and the recession hitting hard, the agency seemed at a dangerous crossroads, readying itself for massive layoffs or even acquisition.

By November 1992, Chiat/Day had unloaded Mojo to rival Foote, Cone & Belding for an undisclosed sum. “It was a mix of cultures that wouldn’t marry,” original Mojo founding partner Alan Morris (the “Mo”of Mojo) told Tony Burrett of Adweek magazine. Jay Chiat, on the other hand, was more circumspect, telling the Wall Street Journal, “The initial reason for being in Australia and New Zealand was to service international accounts. But none of that has been fruitful, and it was time to move on.” Luckily for Chiat/Day, a month before deciding to sell off Mojo, the agency had received some good news: Nissan offered the agency its Infiniti division, worth approximately $90 million in billings. One year later, according to Larry Armstrong of Business Week, Chiat had an estimated $850 million in billings, more than 40 percent of which were due to Nissan alone.

Although the early 1990s had been tumultuous, 1993 proved even more so, as the agency celebrated its 25th anniversary and unprecedented losses struck at its core. National Car Rental Systems and TV Guide defected, and then the agency was unceremoniously bounced from the $80 million Reebok account, which it had won back after a similar dumping three years earlier. With characteristic aplomb and irreverence, Chiat/Day took out full-page ads in both the Los Angeles and New York Times that read “Now we know how Dan felt,” referring to Dan O’Brien, who had been featured in a $30 million Reebok ad campaign with Dave Johnson, his decathlon rival for the upcoming Olympic Games. Unbelievably, O’Brien failed to qualify for the Olympics. Stunned, Chiat/Day averted disaster with a new campaign heralding athletes in general, still featuring O’Brien.

Yet like O’Brien, who went on to shatter a world record, Chiat/Day rallied, snagging Cherry Coke, the consolidation of NYNEX’s media spending (having previously scored with the humorous “human cartoons” yellow pages ads), and Starter Rugged Terrain shoes to its client list. The latter’s full-page ads ended with a teaser, an apt motto for Chiat/Day: “You haven’t heard the last of us, either.” Yet throughout the ups and downs and the Mojo debacle, Chiat/Day still had its integrity and us-versus-them mentality. It took comfort in the backhanded compliments of friends and foes alike, such as Christy Marshall’s comments in Business Month magazine: “One of the few independents left in an industry dominated by mega-agencies, Los Angeles-based Chiat/Day is the personification of its founder and chief executive officer—a place where success breeds arrogance, where enthusiasm borders on fanaticism and where intensity looks suspiciously like neurosis. It is also a bone in the throat of Madison Avenue, which derides its inventive, often riveting ads as irresponsible and ineffective—and then mimics them.”

Key Dates:

1968:: Agency is created through merger of Jay Chiat & Associates and Faust/Day.
1970:: TBWA International is founded by Bill Tragos, Claude Bonnage, Uli Wiesendanger, and Paolo Ajoldi.
1980:: Chiat/Day is named Agency of the Year by Advertising Age magazine.
1984:: Chiat’s Apple Computer “1984” ad debuts during Super Bowl.
1986:: Apple Computer boots Steve Jobs and Chiat/Day.
1988:: Chiat/Day is again named Advertising Age’s Agency of the Year.
1990:: Chiat receives Agency of the Decade title from Advertising Age.
1994:: The agency ushers in the “virtual” workspace.
1995:: Chiat/Day merges with Omnicom subsidiary TBWA Worldwide; under the new name TBWA\Chiat\Day, the maverick agency retains much of its former autonomy.
1997:: Jobs returns to Apple and rehires the agency; “Think Different” ads hit TV and billboards.
2000:: TBWA\Chiat\Day creates successful ads heralding the Summer Olympic Games in Sydney, Australia.

Chiat/Day was also unveiling another revolutionary scheme called Project Chrysalis, which propelled the agency away from its current restraints of time and space and into the industry’s first “virtual” office—a fully portable, organic workplace featuring state-of-the-art technology. In January 1994 the “virtual office” concept was officially implemented; traditional desks and cubicles were replaced by electronic calendars and electronic mail, lockers, laptops, beepers, and cellular phones. The excitement, however, was short-lived; the agency Madison Avenue loved to hate soon found itself in a do-or-die situation once again.

Neither a Whimper Nor a Bang: 1995-98

“The key to this agency,” Jay Chiat had told Business Month years earlier, in 1988, “is the premise that it is very important never to peak, because once you do, you’re down the other side of the mountain.” Had Chiat/Day peaked and begun to slide? By 1995 the agency was deeply in debt; creativity was still king, but he could no longer dress in the manner to which he was accustomed. His raiments lacked luster and his subjects were restless. Furthermore, though the rebels of Chiat/Day wore their independence and the lack of corporate structure as a badge of honor, the agency had followed many predecessors into debt and disillusionment. When TBWA Worldwide (originally founded in 1970 and then bought by Omnicom Group in 1993) showed an acquisitive interest, Chiat/Day became part of one of the industry’s largest “mega-agencies.” Although its name was now TBWA\Chiat\Day, its commitment to ingenuity remained intact.

There were, however, jobs lost in the transition. Jay Chiat stayed on as a consultant for awhile, and defections became an ongoing occurrence over the next several years. Some players still had not adjusted to the virtual office concept, which completely did away with personal space in favor of impersonal, rotating work stations. Chiat/Day’s $20 million Frank Gehry-designed headquarters in Venice Beach, including some $8 million worth of the best and brightest electronic toys, was still a monument to the agency’s inimitable style but more a talisman to its past. Yet under the TBWA umbrella, the agency was reborn in 1996 and took on the electronic gaming marketplace, long dominated by Sega and Nintendo. TBWA\Chiat\Day came up with edgy, rowdy ads for PlayStation (owned by the Sony Corporation), appealing to what it called the “wary and distrustful 17-year-old boy” in every man.

PlayStation consoles and games rocketed in sales and the agency creatives had scored again, only to almost unwittingly upstage themselves with the popularity of their new ads for Taco Bell. In July 1997 four Taco Bells ads were unveiled, one featuring a talking dog who said “Yo quiero Taco Bell.” The charming chihuahua struck a cord with Americans of all ages and Taco Bell experienced a surge in sales. Many new Taco Bell ads featuring the chihuahua and introducing the masses to “Gorditas” followed to great success. Another boon was on the way: Steve Jobs returned to Apple Computer and immediately brought his old ad agency on board. TBWA\Chiat\Day and Apple Computer were back with a vengeance with the debut of the “Think Different” campaign, featuring a parade of freethinkers and innovative heroes including Muhammad Ali, Amelia Earhart, Albert Einstein, Gandhi, Pablo Picasso, and others. The dynamic duo introduced the world to the PowerBook G3, then the phenomenally successful iMac (in five hip colors), followed by the iBook. The Apple collaboration even earned TBWA\Chiat\Day Advertising Age’s U.S. Agency of the Year award for 1997.

In 1998 the burgeoning agency moved to new headquarters, a 120,000-square-foot refurbished loft located in Playa del Ray. Designed by Clive Wilkinson Architects for the company’s 500 employees, the offices were not “virtual,” but still far from conventional, with both public and private meeting areas and a small-town atmosphere referred to as “Chiatown.” The agency continued to win new accounts and satisfy old ones. Ads for TBWA’s longtime client Absolut Vodka were still inventive visions guaranteed to turn heads and induce thirst; hip commercials for Levi’s included one largely addressed to a new demographic, gays and lesbians, and another featured an amorous invisible couple who were embraced by TV audiences. TBWA\Chiat\Day also picked up Kinko’s and the online division of Barnes & Noble, Inc. (www.barnesandnoble.com), and won the “Best of Show” creative excellence award at the 56th annual Obie Awards, sponsored by the Outdoor Advertising Association of America. Year-end numbers further backed up the agency’s fortunes, topping $1.9 billion in billings.

Higher Highs, Lower Lows: 1999 and 2000

Like many years before, 1999 was a rollercoaster ride for TBWA\Chiat\Day. A low point was the loss of New York Life, a client of more than 12 years, followed by an upturn with a new top honor, this time an Effie Award from the American Marketing Association for its Taco Bell ads. Next came a new coveted client, the Summer Olympic Games in Sydney, Australia. Then another downturn arrived when Taco Bell, frustrated by slumping summer sales, dumped the agency. But the proliferation of dot-com companies suggested an entirely new realm of trade for TBWA\Chiat\Day, and these startups accounted for a sizeable chunk of its $600 million in new client revenue. Eager for the challenge of e-commerce advertising as well as a brand new century, TBWA\Chiat\Day ventured into 2000 with the old guard (including Clow, who was chairman and chief creative officer for both TBWA\Chiat\Day and TBWA\Worldwide, and Bob Kuperman, who was president and CEO of TBWA\Chiat\Day North America), and a slew of younger employees poised to make their mark.

Although the agency’s notorious successes often appeared to come easily, everyone at Chiat/Day and its later equivalent, TBWA\Chiat\Day, knew there were never any long-term guarantees. Of course, such has always been the nature of highly competitive, big-name advertising, but with TBWA\Chiat\Day both the rewards and the losses seemed magnified. To paraphrase one industry observer: the list of clients this agency had lost, let alone won over the years was enough to satisfy even the hungriest of its competitors—and equally enough to put most agencies out of business. The secret to the dynamism, staying power, and uniqueness of the company was in part due to the personality and drive of its founder, Jay Chiat; yet long after Chiat left his invention, Lee Clow emerged as the guru who inspired the audacious, edgy, wry advertising for a who’s who of international clients. The past, and the future, were effectively commingled.

Principal Competitors

Bates Worldwide, Inc.; Goldberg Moser O’Neill; Hal Riney & Partners; The Interpublic Group of Companies, Inc.; J. Walter Thompson Co. Worldwide; Leo Burnett Company, Inc.; Saatchi & Saatchi; True North Communications Inc; WPP Group plc; Young & Rubicam Inc.