When an advertising agency loses a major automotive account, it has to regroup. This article looks at one such agency, Doner, which had to rebuild after losing the Mazda account and going through other, unrelated, crises. Part of its recovery has been tied to gaining new work from Chrysler Group.
A well-trafficked basement hallway at the Doner advertising agency office in suburban Detroit is lined with artwork commemorating some of the firm's iconic campaigns -- a veritable marketing hall of fame for creative work that became part of American culture.
The agency's creative work on display includes: Tootsie Roll and its "How many licks does it take to get to the center of a Tootsie Pop?" that hit the airwaves in 1968; Ball Park Franks and its "They plump when you cook 'em" slogan that debuted in 1966; Timex's "Takes a licking and keeps on ticking" from 1954; "What would you do for a Klondike bar?" in the 1980s; the Vlasic stork; and Dow's "Scrubbing Bubbles" in the 1970s.
Also on the wall is the "Zoom-Zoom" campaign that Doner created for Mazda Motor Corp. in 2000.
After the fire
As much as the second-story fire that devastated the agency's headquarters in August 1996 and required a 22-month rebuild, the Mazda account is something of a demarcation point for Doner.
The agency, once the nation's largest independent ad agency until a couple of years ago, lost the $150 million Mazda account in June 2010 to a consortium of WPP Group agencies in California.
Doner had had the work since 1997, and it was about 20 percent of its business. More than 100 jobs were cut atop the layoffs from a string of client losses the year before.
In fact, with internal management issues in 2009, that time may have been the most brutal span in the company's history, which dates to Wilfred "Brod" Doner opening it as W.B. Doner & Co. in Detroit in 1937.
But the tumultuous era appears to have largely passed for what is now known as Doner Partners, and it is growing in some new segments, such as its digital unit.
The revenue lost from Mazda has been more than replaced with money from other clients, including retail dealer campaigns and individual brand work for Chrysler Group, Doner co-CEO David DeMuth said. The agency has hired 40 staffers this year, with plans for more.
"The creative opportunities have grown since adding Chrysler," he said. "Chrysler has helped us get a lot better."
How much Chrysler is spending with Doner wasn't disclosed, but DeMuth said the agency's automotive work generates more revenue than the Mazda account. Chrysler Group spent a total of $1 billion on advertising in 2012, according to estimates from Kantar Media Inc. That's a drop from 2011's $1.2 billion in spending.
The bottom line
Because of client losses and reduced ad spending, Doner has bled revenue in recent years, according to estimates from Automotive News' sibling publication Advertising Age, but DeMuth said revenue is predicted to grow this year.
Ad Age ranked Doner as the nation's 103rd-largest agency by revenue at $90 million in 2012. DeMuth estimated the agency will finish 7 percent ahead of that this year.
In 2011, the trade magazine ranked Doner 82nd with $101 million in revenue, and in 2010 it was 47th with $142 million in revenue.
To bolster the bottom line, DeMuth and co-CEO Rob Strasberg struck a deal last year to sell a minority share of the agency to an advertising holding company. MDC Partners Inc. of Toronto bought a 30 percent ownership stake in Doner in March 2012.
Details of the deal were undisclosed, but according to MDC's 2012 annual report, it has an option to take up to a 70 percent stake in Doner this year and 100 percent ownership in 2017.
Rare minority deal
The New York Times, at the time of the transaction, estimated the 30 percent stake at $15 million to $20 million. MDC reportedly usually takes a majority interest in agencies (total ownership for some), making the Doner deal rare among its roster of about 50 firms.
At $1 billion in global revenue in 2012, MDC is the ninth-largest ad holding company in the world by that metric, according to Advertising Age's annual Agency Report. MDC's domestic revenue last year was $868 million.
Doner's total assets were $220.5 million and total liabilities were $198.4 million on the company's consolidated balance sheet on Dec. 31, 2012, according to MDC's annual filing.
MDC owns a slew of agencies, headlined by Florida's Crispin Porter + Bogusky, one of Ad Age's Agencies of the Decade for the 2000s and noted for its work for Burger King and now Domino's Inc. of Ann Arbor, Mich.
Strasberg came to Doner from Crispin Porter in 2008.
Benefits of MDC ties
Being plugged into MDC's network of agencies gives Doner a better profile within the industry, access to better talent, access to MDC's new business pipeline and — perhaps more importantly — access to capital, DeMuth said.
"A lot of the logic that [deal] was based on is coming to fruition," he said.
For instance, an MDC office in Atlanta was rebranded as a Doner unit.
DeMuth met MDC founder and CEO Miles Nadal in 2011 while walking off a tennis court during a July 4 weekend family vacation in the Bahamas, and they got to talking. That led to the deal.
"We're in a period of rebirth and renaissance here," DeMuth said.
DeMuth, a 24-year Doner veteran, became the agency's president in 2010.
He and Strasberg, along with senior partner Tim Blett, became the majority owners when CEO Alan Kalter announced in December 2009 that he was retiring after 43 years with Doner.
Blett, who spent 25 years at the agency, then sold his 30 percent share of the firm to DeMuth and Strasberg in June 2011.
Kalter's exit came amid legal issues over pension fund problems. He admitted Doner wasn't in compliance with federal disclosure laws and regulations, which prompted longtime executive H. Barry Levine to quit.
Amid that tumult, Doner Vice President John DeCerchio sued the firm in a dispute over the size of his 32 percent equity stake payout for exiting Doner.
DeCerchio said he was owed $55 million over a decade; the agency said he was owed $51.5 million. Litigation has since been settled.
"These weren't easy issues to navigate, but we got through them," DeMuth said.
The agency's rank and file was affected by events, too.
At one point, Doner eliminated about 12 percent of the entire staff, about 100 people. That came after losses that included Expedia.com, Blockbuster, Hotels.com, La-Z-Boy Inc., Outback Steakhouse, Six Flags Inc. and Sylvan Learning Centers.
Today, the agency employs about 600 people, around 500 of them in suburban Detroit. The others are in offices in Cleveland, London, Atlanta and Newport Beach, Calif.
Doner was the nation's largest independent, based on estimated U.S. revenue, as recently as 2008. As part of MDC, the firm is no longer considered an independent shop.
Doner literally rebuilt itself after its headquarters fire in the 1990s.
Today, on the business rebuilding side, DeMuth and Strasberg have positioned the agency to service small local clients to global marketers by employing a strategy of being a one-stop shop.
In addition to traditional creative ad work, Doner has its own media planning and buying unit along with online, mobile and social media capabilities.
Other services include animation and analytics. In the basement, its "The Underground" is a full-service audio and video post-production operation.
The media unit, which has 120 staffers, did $750 million last year in media buying for clients, DeMuth said.
"It's a real differentiator for the agency," he said.
Digital SWAT team
The digital unit — Strasberg calls it a "digital SWAT team — creates apps, games and Web sites for clients.
"It's the fastest-growing part of the agency," DeMuth said. Most of Doner's 40 recent hires were in the digital unit.
Under founder Brod Doner, who died at age 75 in 1990, the agency churned out the famous campaigns that are now history displays on the basement walls. It also eventually grew to 11 offices, several of which subsequently have closed.
Doner shuttered its Baltimore office, which opened in 1955 and grew to become a competitive rival to the Detroit office, in August 2003 as work there dwindled.
The agency moved into its current location in October 1988, and it became the lone headquarters in 1998. That was after the 22-month rebuild from the fire, and the reconstruction included the addition of a third floor.
DeMuth said he looked at possibly moving Doner back to downtown Detroit, but opted to stay in the suburban location.
He renewed the agency's lease in 2010 for another 10 years, and Doner took two floors of a neighboring building. It also took over the basement space and turned it into its digital operation, along with a cafe and outdoor recreational space.
The offices and cubicles are decorated dormlike with the stereotypical creative flair found at most ad agencies, but in addition to the ubiquitous foosball table is a mini tennis court made from tape on the carpet, and a "unicorn sanctuary" cubicle that includes a full-sized mythical horned equine wearing a sombrero.
One cubicle is home to a recliner. Another has a samurai sword on display. Inflatable creatures and objects festoon the place.
"We've tried to make the culture here more fun," DeMuth said.
Doner boasts of adding a slew of clients in the past six months: O'Charley's, Smithfield, Art Van, Tuffy Auto Service Centers, Marie Callender, First Energy Solutions, Minute Maid, Manheim, Hurricane Grill and Wings, Kaplan University and Pet Supplies Plus.
"That represents a lot of incremental revenue," DeMuth said, without disclosing specifics.
In addition to the new clients and the automotive work, major clients on the roster include ADT, AutoTrader.com, Choice Hotels International, Coca-Cola Co., The Coleman Co., Cox Communications, DuPont, Harman, Serta and Sherwin-Williams.
"We think we offer a better experience because of the diversity of our portfolio," DeMuth said.
Doner targets potential clients of all sizes.
Big and little
"It's as competitive as it gets. We're competing with the big multinational agencies, little boutique agencies, guys in their basements," DeMuth said.
The agency is seeking more clients in health and personal care, he said. Its roster now in that sector includes GOJO Industries Inc.'s Purell hand sanitizer, the OhioHealth hospital system in Columbus and Geisinger Health System.
Its past work for Michigan companies has included Little Caesars, La-Z-Boy, Highland Superstores, ABC Warehouse and the Michigan Lottery. Larger former clients include British Petroleum, Arby's, Lowe's Home Improvement and Iams.
"They're absolutely, I'd say in terms of client diversity, the furthest ahead of any advertising agency in Detroit," said Tim Smith, CEO of Detroit's Skidmore Studio.
Skidmore has done contract work for Doner for several decades and provided space for 40 Doner staffers after the fire.
Skidmore's work for Doner usually is on nonautomotive accounts, Smith said, such as for baked beans giant Bush Brothers & Co., which Doner landed in 1997.
And ad industry rivals have noticed Doner's rebuilding efforts, too.
"Doner has always been a different sort of animal. I'm not surprised that they've come out on top; there's a scary and serious nonstop work ethic embedded deep in their DNA," said Toby Barlow, chief creative officer at Team Detroit, the Dearborn agency that handles advertising for Ford Motor Co.
Auto marketing insiders were impressed with Doner's work for Mazda, but were not surprised the automaker switched agencies.
"The 'Zoom-Zoom' tag line was wonderful, but I think they went with a different shop that had more capability beyond the U.S. That wasn't Doner's forte," said Peter DeLorenzo, former longtime auto ad exec and creator and publisher of the autoextremist.com automotive industry blog.
DeLorenzo predicts Doner's subsequent revitalization effort will pay off.
"They had a lot of turmoil. They needed to stabilize themselves internally as a company," he said. "I think they're going to be much better now."