Young & Rubicam Inc. Business Information, Profile, and History

History of Young & Rubicam Inc.

The fourth-largest advertising company in the world, Young & Rubicam Inc. specializes in advertising, public relations, direct marketing, corporate and product identity consulting, and health-care communications. Young & Rubicam operated more than 300 agency offices in 64 countries, and counted American Express, Colgate-Palmolive, Miller Brewing, the U.S. Postal Service, and Viacom among its largest clients.

The history of 20th-century advertising is populated by a handful of men. Stanley Resor, Claude Hopkins, Albert Lasker, Marion Harper, Bill Bernbach, Leo Burnett, and David Ogilvy are the names that come quickly to mind. Also included within this group would be Raymond Rubicam, the man cited by David Ogilvy as the single most important influence in his advertising career. Said Ogilvy, "He taught me that advertising can sell without being dishonest." He was only the second living person ever elected to the American Advertising Federation Hall of Fame.

Born in Philadelphia in 1882 to a family that had prospered in the import-export business, Rubicam seemed destined to lead an easy and comfortable life. However, when young Raymond's grandfather died the estate fell to his wife's side of the family instead of to Rubicam's father, who was a writer for a trade journal. The situation worsened when Raymond's father died of tuberculosis. The young boy was then shuttled from relative to relative because his widowed mother could not care for him. Due in large part to his unconventional and lonely childhood, Rubicam was a poor and unruly student. He left school in his early teens to work as a grocery clerk in Denver and never attended school again. Later, he returned to his native Philadelphia hoping to become a short story writer, but he became an advertising man instead.

His first position was as a copywriter for the Armstrong Advertising Company in Philadelphia. The owner, F. Wallis Armstrong, was generally regarded as an autocratic tyrant who harassed his employees on a regular basis, and Rubicam more regularly than most. When offered a more lucrative position at the larger and more renowned N.W. Ayer Company, Rubicam accepted with gratitude. While at Ayer he wrote two advertisements which made him a reputation within the industry. The first was for Steinway pianos. Steinway had traditionally been averse to advertising. The owners of the company did not regard it as an estimable craft and consequently did as little of it as possible. To satisfy this particularly skeptical client Rubicam produced the famous "Instrument of the Immortals" ad. It not only caused a stir in the 1920s when it first appeared (Steinway sales rose by 70 percent), but has stood the test of time. It is still considered one of the most effective advertisements ever written. The other Rubicam creation of note was the "Priceless Ingredient" slogan developed for Squibb over-the-counter drugs.

Rubicam would have stayed indefinitely at the Ayer agency had the elder Ayer not died and left the business to his son-in-law. Rubicam was hoping to be made copy chief but was passed over in favor of an older man. Because of this unpromising situation, Rubicam decided to quit Ayer in 1923. Along with another dissatisfied Ayer employee, account executive John Orr Young, he started his own advertising agency in New York. The new Young & Rubicam firm had nothing but enthusiasm to offer prospective clients, but that proved enough to persuade General Foods to give it the struggling Postum beverage account. Postum was then followed by other General Foods accounts. Young & Rubicam did the advertising for products such as Grape-Nuts, Sanka Coffee, Jell-O, and Calumet baking powder.

The office atmosphere at the Young & Rubicam agency was different from that at any other ad firm. It was markedly loose, lively, and informal; it had the imprint of its founder Raymond Rubicam. Nearly all agency directors, both in the past and in the present, have emerged from the accounting rather than from the creative department. Rubicam was different. He was the creative man par excellence, and he ran his agency accordingly. What the office lacked in structure and standard operating procedure (no one made it to work before 9:30 in the morning) it more than made up for in talent and vitality. An example would be what were called "gang ups" at the agency. When work on a new campaign was initiated, all copywriters, artists, photographers, and copy chiefs involved in the project would lock themselves in a room to labor over the details. These "gang ups" usually lasted well into the night and were very exhausting. Only a rare breed of person could produce effectively in that kind of environment--but Rubicam always found such people. He hired his staff on the basis of their writing and artistic skill, and their willingness to work long and odd hours. He cared little about the typical qualifications of educational background and work experience. He wanted people with innovative ideas rather than impressive résumés.

The agency grew steadily throughout the 1920s and 1930s. Even the Depression did not hinder its ability to gain new clients and increase revenues. It may have been a loosely organized advertising company, but more often than not the ad campaigns were of exceptional quality. Billings went from $6 million in 1927 to $12 million in 1935, and then jumped to $22 million in 1937. During this period Young & Rubicam gained such lucrative accounts as Travelers Insurance, Bristol-Myers, Gulf Oil, and Packard automobiles. However, it also voluntarily resigned the extremely large Pall Mall account from the American Tobacco Company. The owner of American Tobacco, George Washington Hill, was notorious for badgering those who were unfortunate enough to do his advertising. The relationship between George Hill and Young & Rubicam grew so strained that Rubicam decided it would be in the best interest of the agency to forfeit the $3 million account. Rarely has the news of a large business loss met with such a sigh of relief at an advertising firm. The $3 million loss was well worth the boost in morale.

In 1934 John Orr Young retired. He had lost interest in the business and was allowing others to slowly take over his duties. Despite the great amount of money he was making, he wanted an early retirement. His position as head of new business was filled by Sigurd Larmon, who was to become an important influence at the agency for decades. Rubicam, who had been progressively exerting more and more influence at the firm, now had majority interest in the business. In the next 10 years Rubicam led an ascending firm through the advertising industry's first "creative revolution." The agency was successful because Rubicam, while always encouraging his creative department to be original and take chances, was nonetheless careful with the gifted but fragile personalities who surrounded him. Although it is a cliché to say a business is its people, the maxim holds particularly true in advertising; an ad agency has no other form of inventory. The agency's staff was pushed but also nurtured, and resignations were rare. In the words of former copy supervisor George Gribbin, "One of the great assets of this agency is that a man here feels he can express himself as a writer."

Post-World War II Global Expansion

When Raymond Rubicam retired to Arizona in 1944, Young & Rubicam was the second largest advertising company in the world. Only the J. Walter Thompson agency did more business. The void left by a man such as Raymond Rubicam could have caused confusion at the agency and left it without direction, but that scenario did not happen. Rubicam had trained his successors well, especially George Gribben. Gribben had long been one of the most influential men at the firm and, upon Rubicam's retirement, was named creative director in charge of all advertising production. He was instrumental in bringing Young & Rubicam into the second advertising "revolution" which took place in the late 1950s and 1960s. In 1951 the agency reached the $100 million mark in total billings and by 1960 that figure had more than doubled to $212 million.

In the 1960s advertising grew as an industry. Firms such as Ogilvy and Mather, Doyle Dane Bernbach, and Leo Burnett initiated a period of innovation that broke all previous advertising rules and conventions. They helped re-establish advertising as an artistic craft. Though overshadowed by these smaller, more "visible" ad agencies, the larger companies like Young & Rubicam and J. Walter Thompson also benefited from the renaissance.

More money than ever was being spent by companies on advertising. The growth in business was paralleled by staff increases and subsidiary acquisitions within particular agencies. This internal growth, however, proved to be problematic. In 1971 the worldwide economic recession brought the rapid rise in advertising expenditures by manufacturers to a quick halt. Nearly all advertising companies suffered billings losses, and many of the smaller "creative" shops were forced out of business altogether. Young & Rubicam itself was in trouble. Its payroll and other expenses were too high, and the agency was not growing. A "changing of the guard" took place among the company's management. Ed Ney became chairman and chief executive officer, Alex Kroll became creative director, and Alexander Brody was placed in charge of international operations. These men were to lead the agency into a period of unprecedented growth.

Ney's first action was to reduce the staff at the New York office by one-third and relinquish some of the losing accounts that were draining the agency. One of those to go was the Bristol-Myers account; they had been a client for over 25 years. Then he set out to reorganize and increase the company's financial resources in order to renew its ability to purchase subsidiaries and broaden its range of services. Rather than sell shares to the public to raise capital, Ney instead manipulated retirement benefits and agency-held stock to generate the funds he needed. These maneuvers allowed him greater flexibility and privacy when it came time to decide when and where to use the money. For instance, in 1973 Ney supervised the acquisition of Sudler & Hennessey (a health care ad firm) and Wunderman, Ricotta & Kline (a direct marketing company). These two agencies added $62 million to the firm's balance sheet and pushed it past J. Walter Thompson to become number one in domestic billings. In a little over five years Ney had taken Young & Rubicam from third to first in the industry. Ney, however, was not yet satisfied. In addition to purchasing a number of small Midwestern and Southwestern ad shops, he also arranged in 1979 for Young & Rubicam to merge with the Marsteller agency, which had long been among the leaders in the public relations business. Not only did Marsteller's $306 million in billings help Young & Rubicam stay ahead of J. Walter Thompson, it also gave the agency the strong public relations department it needed.

While Ed Ney was building Young & Rubicam on the domestic front, Alexander Brody was increasing the company's presence abroad. The firm successfully broke through cultural and political barriers by linking up with Hungary's leading advertising agency (Mahir), illustrating that the Eastern Bloc countries should no longer be considered "non-markets." More importantly, Brody was instrumental in orchestrating the agency's most important joint venture to date, the 1981 merger of Young & Rubicam's Tokyo office with Dentsu's Tokyo office. Never before had the number one and number two advertising companies in the world joined together on a business venture such as this one. The new subsidiary, called DYR, gave Dentsu a firmer foothold outside Japan and strengthened Young & Rubicam's position in Tokyo.

In 1985 Ed Ney announced that he was resigning as chairman and chief executive officer of Young & Rubicam. He named as his successor Alex Kroll, the former head of Young & Rubicam U.S.A. and the man responsible for resurrecting the agency from its creative doldrums. Under his leadership the firm reasserted itself as an "idea" shop. During a seven-month period in 1977 the agency procured $77 million in new business. Accounts included Pabst beer, Oil of Olay skin cream, and Kentucky Fried Chicken. When Young & Rubicam lost the Chrysler account in 1979, Kroll's persistence helped to win the very prestigious Lincoln-Mercury account, worth $65 million. Kroll was also the man who hired comedian and television personality Bill Cosby to do Jell-O Pudding commercials.

Following in the footsteps of Ney, one of the most effective administrators in the advertising industry, was no easy task. Kroll insisted he would try to emulate Ney's methods and patterns of success. Remaining the number one world agency required a commitment to growth and diversification. Kroll was prepared to take the necessary steps to secure Young & Rubicam's position at the top of the advertising industry, but not at the expense of the company's reputation for creativity.

Changes During the 1990s

As chairman and chief executive officer, Kroll enjoyed considerable success during his first half-decade at the helm of Young & Rubicam. The agency reigned as an industry power during the latter half of the 1980s, as it had during the first half of the decade. Young & Rubicam was praised by industry observers for its global might and the quality of its advertising, demonstrating a rare ability to be both creative and large, but by the end of the 1980s conditions in the U.S. advertising industry began to change swiftly. An industry-wide slump in 1990 called a quick end to the expansion years of the 1980s, when the prevailing trend among the larger advertising companies was to open agency after agency in a global race for domination. Further, an era of corporate cutbacks began, as a nationwide economic recession settled in during the early 1990s, which forced advertising companies not only to develop creative advertising ideas, but to convince cost-conscious clients that advertising spending should be spared from budget cuts.

At Young & Rubicam, the momentum built up during the 1980s was quickly lost. As economic conditions soured, the agency lost its edge, and those who once applauded the company's ability to meld creativity and worldwide clout were describing the early 1990s version of Young & Rubicam as "stodgy and musclebound." By 1993, the company's situation had become dire. Employee layoffs were imminent and several large clients such as Johnson & Johnson, Warner-Lambert, and AT&T took their business elsewhere, underscoring the need for dramatic changes.

Young & Rubicam's turning point occurred in late 1993, when a new generation of management took control and began to reshape the company. Kroll relinquished his command in December 1993 and passed the baton to Peter Georgescu, the Romanian-born son of an executive of Standard Oil of New Jersey. In describing Young & Rubicam's state before he took command, Georgescu said, "We were big, intellectual, conservative, and introspective," qualities that had led to uninspired advertising presentations and bred apathy among the company's employees. Georgescu was determined to change this. A strategy he conceived in 1990 was being implemented as he took charge in late 1993, one that was supposed to transform Young & Rubicam from a company with a geographical orientation to a company focused on client services. The years of establishing fiefdom after fiefdom throughout the world by opening new agency offices were over. As this was underway, Georgescu recruited a new team of senior executives who had made their mark in the advertising business at smaller, flexible, and innovative agencies. The addition of these new executives was intended to breathe new life into Young & Rubicam and spark a new era of advertising creativity.

New life was shown shortly after Georgescu began making wholesale changes, particularly in 1995 when Young & Rubicam picked up $500 million in new business in the United States alone. Young & Rubicam won Viacom's Showtime Networks account, prevailed in presentations for 7Up, Dimetapp, and Keycorp, and in early 1996 the company gained the $100 million Blockbuster Video account. Young & Rubicam increased its Sears business and reestablished its relationship with AT&T by developing a new corporate image campaign for the telecommunications giant. After several years of being described as stodgy and musclebound, "confused and staid," Young & Rubicam entered the mid-1990s with a refurbished corporate personality. Under Georgescu, the company's leadership was described as "warm," its creativity "passionate," and its presentations "fun." The turnaround had worked, and Young & Rubicam was once again recognized as a powerful, creative force in the advertising industry.

By 1997, Georgescu's influence on Young & Rubicam's financial stature was readily discernible. Between 1994 and 1997, advertising billings nearly doubled, reaching $7.3 billion, making Young & Rubicam the fourth-largest advertising agency in the world. As the company plotted its course for the 21st century, it promised to be a worldwide leader in the advertising industry, having learned a valuable lesson from the past to create widespread optimism for the future.

Principal Subsidiaries: Burson-Marsteller; Black, Kelly, Scruggs; Healy; Bravo Group.