Fallon Worldwide Business Information, Profile, and History

Company Perspectives:

To be the world's premier company using creativity to drive business growth and success for clients with whom we share the genetic need for excellence.

History of Fallon Worldwide

With 25 years in the business, Minneapolis-based Fallon Worldwide has emerged as one of the world's most creative advertising agencies, with international offices in Brazil, Hong Kong, Japan, London, and Singapore. The agency was a national powerhouse in the 1990s as Fallon McElligott, but changed its name and aspirations after being bought by the Paris-based Publicis Groupe S.A. in 2000. The firm has been named Agency of the Year multiple times by several trade organizations and won numerous awards for its quirky fare, such as the "Cat Herders" (for EDS), "The Hire" short films (for BMW of North America), Citibank's humorous identity theft sketches, and the "But I did spend the night at a Holiday Inn Express last night" promos for Holiday Inn Express. Fallon Worldwide's annual billings swelled from less than $150 million in 1990 to more than $1 billion in 2000, with a growing list of blue-chip clients that has included Amazon.com, British Broadcasting Company (BBC), Dave & Buster's, Dyson Ltd., Foster's Lager, Ikea, Lee Jeans, MTV, Sony Corporation, Starbucks, and United Airlines.

The Beginning: 1981-85

Fallon McElligott & Rice was established in 1981 and named for its three cofounders: Patrick Fallon, Tom McElligott, and Nancy Rice. Fallon and McElligott had first met in the late 1970s when both were moonlighting with a freelance agency called Lunch Hour Ltd. After a year of planning, Fallon, McElligott, Rice, and Irv Fish formed a new, independent agency. Fallon was the agency "suit"--the executive in charge of cultivating and coddling clients. Copywriter McElligott, once crowned the "King of Print," provided the creative genius that would become the agency's hallmark. Rice served as art director, and Fish was brought on board as chief financial officer. The new partners crafted a mission statement that remained essentially unchanged for the next 20-odd years: "To be the premier creative agency in the nation that produces extraordinarily effective work for a short list of blue chip clients."

Fallon McElligott & Rice (FMR) put the art of advertising above practically all else, even a client's comfort level. McElligott once told an Inc. magazine interviewer that his intention was to give clients the kind of advertising that "makes the palms sweat a little" or "makes you a bit nervous." He added, "In my opinion, at least, these are the only ads worth running." The print medium was the agency's particular forte throughout the 1980s. FMR developed a recognizable style during this period, with ads featuring bold headlines. A piece for the Episcopal Church asked, "Whose birthday is it anyway?" above pictures of Jesus Christ and Santa Claus. A trade campaign for Rolling Stone magazine titled "Perception/Reality" juxtaposed images belonging to the magazine's perceived audience--hippies in Earth shoes with psychedelic-painted Volkswagen buses, against its actual readership--yuppies in Nikes with Ford Mustangs, in order to convince high-end advertisers to place ads in the periodical.

FMR exhibited a talent for promoting not only its clients' brands and products, but itself. The agency won numerous regional and national awards and used these credentials to draw media coverage as well as new clients to its midwestern headquarters. Fallon reflected on the group's early success in a 1989 ADWEEK article saying, "Virtually everything we touched worked dramatically in the marketplace." FMR won accounts with Federal Express, Hush Puppies Shoes, Jack Daniels Distillery, the Wall Street Journal, Lee Jeans, and Porsche U.S.A. Critical acclaim came early, too. Just two years after its founding, FMR was named ad agency of the year by Advertising Age magazine. The agency's style set the trend for cutting-edge advertising, especially print, throughout the 1980s. Annual billings mounted from about $24 million in 1984 to more than $110 million by 1987.

In 1985 Nancy Rice left the firm to form her own agency, Rice & Rice, with her husband Nick. That same year, the remaining principals sold a majority interest in their agency to Scali, McCabe & Sloves, itself owned by international advertising powerhouse Ogilvy & Mather, for an estimated $6 million. To reflect the departure of Rice, the company shortened its name to Fallon McElligott (FM).

From its outset, FM cultivated a familial atmosphere with a flat organizational structure, few titles, and a very relaxed corporate culture. Some competitors dubbed it "Camp Fallon," yet the low-key atmosphere fostered a high rate of job satisfaction and low turnover. Although FM, like many other regional and national agencies, had now become part of the global family of Ogilvy & Mather, it strove to maintain this aesthetic paradise.

Controversy and Reversals: 1987-92

Fallon McElligott suffered a self-inflicted black eye in 1987. Dr. Neala Schleuning, director of the Mankato (Minnesota) State University Women's Center, attended a workshop on marketing given by Fallon McElligott employee Charles Anderson in the fall of 1987. Offended by what she perceived as sexist language (such as several references to prostitution and the agency's "Bitch Bitch Bitch" campaign for the Dynasty television series), Schleuning wrote a critical letter to Anderson. Anderson responded by sending her a photo of an East African Dinka tribesman pressing his face to a cow's hindquarters. His accompanying letter suggested Schleuning go to Africa and "put a stop to the Dinka's horrible social practices."

The astonishingly unprofessional behavior did not stop there. When Schleuning reported the incident to Fallon and McElligott, they responded by sending her a pith helmet and offering to pay her way to East Africa--but not back. Schleuning took the correspondence to the Minnesota Women's Consortium, which sent copies to FM's clients and the local news media a week before Christmas 1987. Not surprisingly, what came to be known as "the Dinka incident" launched a firestorm of controversy in the press and among FM's clients. Fallon apologized in writing to Schleuning on New Year's Eve, but the damage had already been done. In the year to come, the agency lost a total of $22 million in billings, including the U.S. WEST, Federal Express, and Wall Street Journal accounts. Morale at "Camp Fallon" soon hit the skids.

FM's troubles continued in 1988, when Tom McElligott resigned over "disagreements with management about the future creative direction" of the firm. McElligott later admitted he had struggled with alcoholism, though all involved stressed this had nothing to do with his departure. He went into a month of treatment and did not return to the advertising business until late 1989. Although the agency had dropped "Rice" from its name when Nancy Rice left in 1985, it retained the celebrated McElligott name.

After McElligott's departure, Pat Burnham, who had served as associate creative director, took over as creative director in 1989. The first of many talented creative people hired by McElligott, Burnham inherited a team little diminished by the loss of its star. FM had begun to recover by 1989, winning accounts with Aveda Corporation, Amoco Oil Company, and an estimated $35 million worth of annual billings from Ralston Purina. In order to manage its growth, the agency limited its clientele to less than 25 accounts at any time.

In 1990 Pat Fallon was called to New York City to turn around parent company Scali, McCabe & Sloves (SMS). SMS had lost its flagship client, Volvo, after pitching a television ad featuring a reinforced Volvo withstanding the weight of a "monster truck." Fallon's presence not only helped inspire confidence among SMS employees, but with its remaining clients as well. After spending two years in the hub of the advertising world, Fallon had secured SMS's future and chose not to stay in the Big Apple but to return to Minneapolis to make his namesake firm "the premier creative agency in the world." Fallon thought he found the stepping stone to global eminence when FM was invited to pitch for the Compaq and MasterCard accounts in 1992. But after investing more than $250,000 and months of nights and weekends, the agency lost both clients to competitor Ammirati & Puris. A major shakeup at FM followed these missed opportunities.

Independent Again: 1993-99

In 1993 Fallon and several other top executives borrowed $14 million to buy the agency back from Scali, McCabe & Sloves (by this time owned by WPP Group PLC). The same year, Fallon asked for and received Creative Director Pat Burnham's resignation. New hires shed light on the agency's redirection: In Burnham's place came Bill Westbrook, a "rainmaker" adept at pitching potential clients, something Burnham had been unwilling or unable to do. To its creative core the agency added an integrated marketing department as well as design, editing, interactive, direct marketing, promotion research and planning, public relations, and account planning services. Westbrook further shook up FM's egalitarian culture by adopting the title president/creative director, and promoting or recruiting several group directors to report to him.

The reorganization worked; by the end of 1996 FM had won accounts with BMW, Prudential, Ameritech, United Airlines (domestic only, international was handled by Young & Rubicam because Fallon supposedly lacked a global presence), Mercury Marine, Holiday Inn, the USA Network, and even McDonald's, which awarded it the Arch Deluxe campaign. The firm capped off the year by winning the $150 million Miller Lite account. Total billings for the year reached an estimated $500 million, and the agency again won Advertising Age's Agency of the Year award. Client turnover, however, plagued the agency for the next several years.

Fallon McElligott had resigned the McDonald's Arch Deluxe account and lost the Prudential campaign by 1997. The agency hoped to make up for the lost billings by winning the $75 million Domino's Pizza account then under review. Later that year, Westbrook announced he would cut back on his day-to-day duties, raising speculation the agency would be hiring yet another creative director in the near future. One element--perhaps the most important--appeared constant, however: Pat Fallon. Having guided his agency through a number of difficulties to acclaim, Fallon still strove to maintain his agency's creative excellence.

By the end of the decade mergers and acquisitions continued to sweep the advertising industry, with European conglomerates gobbling up the top U.S.-based agencies. WPP Group and Interpublic, both based in the United Kingdom, were the world's first and second largest advertising powerhouses. WPP Group owned J. Walter Thompson, Ogilvy & Mather Worldwide, and Young & Rubicam, while Interpublic had McCann-Erickson, Campbell-Ewald, and Lowe Lintas. Third-ranked Omnicom had the acronyms: BBDO, DDB, and TBWA/Chiat Day. The newest power player, however, would have a profound impact on the future of Fallon McElligott, which finished the year with gross billings of $670.4 million.

Publicis Riding Herd: 2000

Publicis Groupe S.A., based in Paris, France, made no secret of its intention to rival WPP Group and Interpublic. Although Maurice Levy, chief executive of Publicis, failed in his takeover bid for Chicago's True North Communications (though he owned 10 percent of the company and was its largest shareholder), he did succeed in buying Chicago's Frankel & Company, the majority of Burrell Communications (49 percent), and New York's DeWitt Company. Levy wooed Pat Fallon, but few believed he would sacrifice his agency's hard-won independence. Levy, however, convinced Fallon that his agency would thrive under the aegis of Publicis, and many industry insiders were shocked when the deal went through. In February 2000, Fallon McElligott became a wholly owned subsidiary of Publicis, just as another stand-alone king, Hal Riney, had capitulated. San Francisco's Hal Riney & Partners, like Nelson, DeWitt, and Frankel, had become a part of Publicis as well. These acquisitions gave Publicis extensive holdings in the United States, covering the East and West Coasts, and especially the Midwest.

The U.K.-based Saatchi & Saatchi was next on Levy's hit list, and was added to the Publicis fold by the fall of 2000. In little more than two short years, Publicis had become a powerhouse owning several of the world's most prominent agencies, placing it in the top five advertising behemoths, behind WPP Group, Interpublic, Omnicom, and Havas Advertising. For FM, little seemed changed about the firm or how it conducted business. In a Chicago Tribune (June 25, 2000) article, Fallon was quoted as saying, "We love [Publicis]. ... They're there when we want them; they coach us, mentor us, guide us and take care of us, but they don't get in our pants."

Fallon McElligott was indeed in good company, as its sibling agencies represented many of the world's blue-chip corporations. Frankel was behind the resurgence of fast-food giant McDonald's; Saatchi served Procter & Gamble and Johnson & Johnson; Publicis itself had Coca-Cola and Nestlé; and Fallon still had United Airlines, along with Citibank and EDS (for whom Fallon created the much-loved "Cat Herders" commercial). In a move befitting its new status, FM shed some of its old image and changed its name to focus on itself as a "brand." Fallon McElligott became Fallon Worldwide (FW), with firm outposts taking on the name of their location, such as Fallon London and Fallon New York (its Publicis siblings followed suit as well--Saatchi & Saatchi Worldwide, Nelson Communications Worldwide, etc.). In addition, FW launched a new entity, Fallon Brand Consulting, to identify and develop new branding strategies.

At the end of 2000 FW and Young & Rubicam were told United Airlines would consolidate its advertising (domestic and international) into one global account, awarded to only one agency. Although FW had handled the bulk of United's advertising, since domestic ads accounted for two-thirds of the airline's nearly $100 million advertising budget, the firm was determined to win the whole enchilada. To help with the endeavor was a new creative director, Bob Moore, renowned in the advertising world. Fallon Worldwide's gross billings for 2000 reached a phenomenal $1.0 billion.

A New Era: 2001-04

In January 2001 FW scored a coup: The agency beat out rival Young & Rubicam for United's domestic and international advertising, due in part to the agency's increased global positioning as part of the Publicis empire. Next came Gateway's $250 million account, followed by FW's five critically acclaimed mini movies for BMW of North America, excerpted on television and shown in their entirety on the Web. Each short film, known under the overall title of "The Hire," featured British actor Clive Owen and a star-studded supporting cast, top-notch directors (Ang Lee, Guy Ritchie), fast shiny cars, and plenty of high-octane driving. The campaign was considered "advertainment," an immensely successful merger of entertainment and genius product placement. Even movie critics applauded the short films, with Elvis Mitchell of the New York Times quoted in Advertising Age (July 23, 2001) as calling the mini thrillers "the marriage of commerce and creativity, straddling the ever-dwindling line between art and merchandising."

In the terrorist attacks in September 2001 FW's New York office was damaged and major client United Airlines was devastated. United was not FW's only client to experience hardship in late 2001 and the company itself was forced to lay off 15 percent of its U.S. workforce, the first time the agency ever let employees go in its 20-year existence. Nevertheless, FW forged ahead, believing international expansion was the key to its growth. Two offices in Asia (Hong Kong, Singapore) and one in Brazil (Sao Paolo) were slated to open in 2002.

As the economy strengthened in 2002, so did FW, with new clients (L'Oréal, SoBe drinks, Dyson vacuums) and new hires for its struggling New York office. Parent company Publicis also had been on the prowl, buying U.S.-based agency Bcom3 Group in the fall. Yet by the end of the year FW had lost its footing again (despite great ads for PBS and more mini film installments for BMW), losing two of its longstanding clients, Timex and Nikon, as well as Creative Director Bob Moore. Fallon rebounded again in 2003 by winning the much desired $350 million Subway account and opening an office in Tokyo, Japan, one of the world's top advertising markets. In addition, FW won several awards at the 2003 International Advertising Festival for its BMW (mini films), Citibank (identity theft voiceovers), and Lee Jeans (the return of Buddy Lee) work. The BMW films, which continued to spur the car manufacturer's sales, also became a popular exhibit at New York's Museum of Modern Art.

The rollercoaster ride continued in 2004 as FW resigned the massive Subway account over creative differences, which forced another round of layoffs. The agency also lost several top executives to rivals, including Executive Creative Director and former President David Lubars. Lubars was replaced with British ad man Paul Silburn, from TBWA London, owned by Omnicom. Despite the negatives, however, FW still created memorable ads for Starbucks, Citibank, and United Airlines. When United was forced to seek bankruptcy protection, FW agreed to reduced fees to keep the account.

Mastering the Game: 2005 and Beyond

By 2005 FW had grown into an international power, long one of founder Pat Fallon's dreams. Fallon continued to believe in his quirky and wholly original agency, which he believed relied mostly on "courage and integrity." Commenting to SHOOT magazine back in 2001, Fallon had summed up Fallon Worldwide's raison d'être, which had remained true in its nearly 25 years of existence: "Obviously creativity is centered around courage. Our clients hire us for the right reasons; nobody accidentally hires this agency, because we're very clear from the first meeting what we are, what we expect, and how we work with our clients. We're not for everyone. The clarity of our kind of self-identity has been a strong tool over the years."

Principal Divisions: Fallon Brand Consulting; Fallon Hong Kong; Fallon Interactive; Fallon London; Fallon Los Angeles; Fallon Minneapolis; Fallon New York; Fallon Sao Paolo; Fallon Singapore; Fallon Tokyo.

Principal Competitors: BBDO Worldwide; Ogilvy & Mather Worldwide; TBWA Worldwide; True North Communications; Young & Rubicam Worldwide.

Chronology

• Key Dates:
• 1981: Fallon McElligott & Rice is founded in Minneapolis.
• 1983: Fallon McElligott & Rice is named Advertising Age's Agency of the Year.
• 1985: "Rice" is dropped from the agency's name after cofounder Nancy Rice leaves to create her own firm.
• 1987: The "Dinka Incident" costs the company $22 million in lost accounts.
• 1988: Tom McElligott leaves, and the firm is sold to Scali, McCabe & Sloves.
• 1990: Scali, McCabe & Sloves loses its flagship client and brings Pat Fallon in to turn the agency around.
• 1992: Fallon returns to Minneapolis, but his agency falters.
• 1993: Fallon and partners raise funds to buy Fallon McElligott back from Scali, McCabe & Sloves.
• 1996: The agency first wins United Airlines' domestic advertising account.
• 2000: The company is bought by the Paris-based Publicis Groupe S.A. and changes its name to Fallon Worldwide.
• 2001: The agency scores big with its mini movies for BMW, run on television and the Web.
• 2002: New offices open in Sao Paolo (Brazil), Hong Kong, and Singapore.
• 2003: Fallon Tokyo opens in Japan, one of the world's top advertising markets.
• 2004: Fallon Worldwide resigns the coveted $350 million Subway account.
• 2005: The agency agrees to reduced fees for the bankrupt United Airlines.