JWT Group Inc.

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JWT Group Inc.

466 Lexington Avenue
New York, New York 10017
U.S.A.
(212) 210-7000

Public Company
Incorporated: 1980
Employees: 10,440
Billings: $4.3 billion worldwide
Market value: $354 million
Stock Index: New York

The J. Walter Thompson advertising company is the oldest among the industry’s top ten agencies. Established in 1878, the company was instrumental in bringing advertising into the 20th century and making it a respectable and respected business. For six consecutive decades, from 1910 to 1970, JWT surpassed all agencies in U.S. billings. And even today, in the wake of the corporate trend, it still ranks among the leaders in advertising sales.

J. Walter Thompson was born in 1847 near Pittsfield, Massachusetts and raised in Ohio. After the Civil War Thompson travelled to New York City where he joined an advertising firm operated by a Mr. William J. Carlton. While at Carlton, Thompson became aware of the growing popularity of magazines and the sparse amount of advertising they contained. He felt magazines could be a potentially profitable medium for advertising. After he bought out Mr. Carlton in 1878 for $1300 and renamed the agency after himself, Thompson began contracting advertising space in such periodicals as Scribner’s, Atlantic, Harper’s, and the North American Review.

By capitalizing so quickly on magazine advertising J. Walter Thompson created a business sphere all to himself, a virtual monopoly. The agency prospered to such a degree that it developed a financial base large enough to absorb occasional loss-making accounts. The first advertising explosion of the new century was taking place, and JWT was leading it. With the agency’s help companies such as Pabst Beer, Mennen toiletries, Eastman-Kodak, and Prudential Insurance became nationally known. J. Walter Thompson succeeded in making magazines commercial and magazine advertising big business.

This prosperity, however, brought complications. Administering many separate accounts was too much for a man or group of men who were also responsible for writing the ads, pursuing new clients, and keeping the books. To handle the task of supervising campaigns of specific customers, J. Walter Thompson created the “account executive”.

Nonetheless, by the end of World War I J. Walter Thompson had lost touch with his agency and the industry he had helped to build. Fortunately for the company, Thompson was smart enough to hire a young man named Stanley Resor who, with his wife Helen, was to preside over the company for over 35 years.

Stanley Resor graduated from Yale in 1901 and then joined Procter & Collier advertising of Cincinnati in 1904 as a salesman. In 1908 Resor was hired by J. Walter Thompson to supervise its new office in Cincinnati. While at the new branch, Resor offered a copywriting job to a young woman he remembered from Procter & Collier named Helen Landsdowne. Miss Landsdowne worked at the Cincinnati office for a short time and was then transferred to headquarters in New York where she was an immediate success. She offered something unique to the agency—she was female. Most JWT clients made products that were to be bought by women, but most agency copywriters were men. Helen Landsdowne avoided this problem with talent, audacity, and the encouragement of her future husband Stanley Resor. She was the first accomplished female copywriter in the history of advertising.

By 1916 Stanley Resor was in New York running the firm’s headquarters. J. Walter Thompson, by this time an old man, had lost interest in the business and sold the agency to Resor for $500,000. Upon receiving title to the company, Resor did three things. First, he hired copywriter James Webb Young whose skill matched and complemented Helen Landsdowne’s. Second, he reduced the client list from over 300 to 75. Third, he redirected JWT away from small local accounts toward large national ones, an orientation that continues at the agency to this day.

In 1917 Stanley Resor and Helen Landsdowne were married. Their partnership was productive both personally and professionally. As the leaders of the largest ad agency in the United States, they established between them a working division of labor. Stanley Resor was not a talented writer nor was he an artist. More than just a capable administrator, however, he was a man who possessed a very good understanding of human behavior. He used research and the help of social scientists to accurately predict public reaction to particular products. This was his gift and trade. Helen Resor, on the other hand, possessed the imagination and love for words necessary to be a successful writer. She relied more on her intuition than on research. Her ads were effective because they appeared to have been written from experience rather than from a formula.

The advertising industry experienced unprecedented growth in the 1920’s, and JWT was at the forefront of this expansion. A magazine publisher, Cyrus H.K. Curtis, had taken the commerical periodical to new heights with the immensely popular Ladies Home Journal and Saturday Evening Post. These magazines were found on coffee tables all across the country, and they were Helen Resor’s favorite advertising medium. J. Walter Thompson pioneered “testimonial” advertising and used it with large degree of success in Curtis’ magazines. The Pond’s Cold Cream ads, for instance, featured on different occasions the Queen of Rumania, Mrs. Reginald Vanderbilt, and the Duchesse de Richelieu each praising Pond’s for keeping her skin young. J. Walter Thompson also became one of the first agencies to use photography in their ads. Helen Resor contracted the well known photographer Edward Steichen to work on a 1923 Jergen’s lotion campaign for which he received $1000 per photograph.

By the end of the 1920’s JWT had billings in excess of $37.5 million and had put more distance between itself and the N.W. Ayer Company, the number two advertising firm in the country. Accounts for such products as Libby’s canned goods, Fleischmann’s yeast, Kraft cheese, Yuban coffee (Resor named the brand), and Lux toilet soap kept the firm at the top.

When the Depression occurred, the advertising industry was deeply affected. Business failures became commonplace, and companies fighting for survival resorted to radical cost-cutting measures. These included, among others, a reduction in “frivolous” advertising expenditures. Total annual volume of advertising dropped from $3.4 billion in 1929 to $2.3 billion in 1931. The J. Walter Thompson agency, however, was large enough by this time to sustain itself until the economy regained its health. JWT and advertising in general weathered the Depression due in part to the advent of a new commercial medium, broadcast radio. In the 1930’s J. Walter was producing radio ads for 18 clients. Performers such as Groucho Marx, Al Jolson, W.C. Fields, and Charlie McCarthy were introduced to the airwaves with JWT’s help.

During this period few American advertising agencies ventured beyond the United States. Only a handful of the larger firms had offices in Europe, and they were located almost entirely in England where language posed no barrier. It was felt that what played in Peoria would not play in Paris. J. Walter Thompson, on the other hand, made a point of becoming an international company. It had opened a foreign office in Great Britain as early as 1899. In the 1920’s and 1930’s the company established 23 offices throughout Europe, Latin America, Asia, New Zealand, India, and Africa. This initial head start overseas afforded JWT a strong international presence. By 1960 the company had $120 million in billings abroad.

During World War II Stanley Resor and JWT gained the business of Pan American Airlines and Ford Motors, two accounts which were to help propel the company into the new age of advertising, the era of the corporate agency. In 1947 J. Walter Thompson became the first agency to surpass the $100 million mark in total billings. However, the transition to “modern” advertising was not an easy one for the Resors. They had not accurately forecast the impact of television. Following the ad style of its own copywriter, James Webb Young, the agency had traditionally produced conventional “product benefit” campaigns. Television, with its emphasis on imagery rather than words, changed the advertising terrain and forced JWT to alter its approach.

Moreover, the personnel at the agency was distinctively “old guard” and not suited to advertising’s new wave of innovation. Stanley Resor had always revered the well-educated man, the social scientist, and the market researcher. As an alumnus of Yale he had a penchant for hiring fellow Ivy Leaguers; he often boasted about the number of Ph.D.’s he had on his staff. The “creative revolution” of the 1950’s and 1960’s was not produced by such people. Rather it was Jewish copywriters, Italian artists, and free-thinking women who led the industry through this most interesting period. The agency believed the creative fad would pass quickly and tended to ignore the fanfare attached to “artistic” and “humorous” advertising. During the 1960’s the public spotlight was focused on firms such as Doyle Dane Bernbach and Ogilvy & Mather. JWT, while not exactly pushed to the background, was nonetheless overshadowed by its smaller, more innovative competitors.

In 1960 J. Walter Thompson lost the Shell Oil account (a client for 30 years) to Ogilvy & Mather. This resignation indicated a need for change. In that same year Stanley Resor, unchallenged head of the agency for nearly four decades, stepped down from his post. He was replaced as president by Norman Strouse, who instituted a reorganization of the company. The agency had in the past favored a “free-form” management structure. It was the Resor style to downplay hierarchies, divisions and departments, and definitive guidelines. Under Strouse and Dan Seymour, (who became president in 1964) J. Walter Thompson began to operate more as a corporate business; and in 1969 the agency took the final logical step in this direction by listing itself as a public company on the New York Stock Exchange.

Despite being considered the “old lady” of the advertising industry, and despite its not receiving recognition as a “creative” agency, JWT continued to expand in the 1960’s. By 1970 the firm was doing $773 million in billings. However, the new decade brought additional problems to the company. 1972 was a particularly bad year. The agency lost the accounts for Ford’s Pinto, Mustang, and Maverick automobiles ($17 million); Pan American Airlines ($13 million); Firestone ($8 million); and Singer sewing machines ($12 million). With these losses, the firm suffered its first billings decline since World War II.

In the early 1970’s J. Walter Thompson received some publicity that temporarily damaged its public image. The Watergate break-in investigation revealed that five Nixon “operatives” were past employees of J. Walter Thompson. White House chief of staff H.R. Haldeman, press secretary Ron Ziegler, and appointment secretary Dwight Chapin were all former admen trained at Thompson. It was later discovered that the agency was indirectly connected to a public relations company that was a front for the CIA. The public relations firm named in this accusation was the Washington D.C. based Robert R. Mullen & Company. Sam Meek, who had long been the organizational head of JWT’s international operations, was a principle supporter of the Mullen “agency.” Even two years after the news was first reported, J. Walter Thompson remained subject to rumors linking it with the CIA. Not until the present company president, Don Johnston, issued a press release stating that the agency did not, nor will in the future, have any relationship with the CIA or any other government agency was the case finally closed.

Paralleling these scandals were a number of top management personnel changes at the firm. In October of 1974, Don Johnston became the third JWT president in a year. He succeeded Edward B. Wilson, who had very recently replaced Henry Schachte. According to Business Week magazine, these were the “dog-days” at JWT, and it was up to Johnston to end them. The price for a single share of company stock had fallen from $38 in 1969 to $7 in 1974. To stop the slide Johnston instituted cost-cutting measures, trimmed the payroll of its “excess talent,” and set the company on a hunt for new business. In 1976 J. Walter Thompson staged a stunning recovery. It achieved a $60 million billings increase in the first nine months of the year, $30 million of which came from the newly acquired Burger King account. The company was again producing profitable advertising.

1980 was an important year for the agency. First, it incorporated as the JWT Group, thus allowing itself a way to service competing accounts by delegating them to autonomous subsidiaries. And second, it merged with the world’s largest public relations firm, Hill & Knowlton, and made it part of the holding company. The acquisition of Hill & Knowlton enabled JWT to provide its customers with public relations services without having to build its own public relations department. Hill & Knowlton’s clients include Texaco, Du Pont, Prudential, and Campbell Soup.

No sooner had the JWT Group showed its strength and determination in “the battle of the mega-agencies” than it was hit by another scandal. This one involved neither Watergate nor the CIA but rather fraudulent billing practices. The damage done to the company’s reputation was considerable. JWT operated a television syndication service wherein spot television time on local stations would be sold to company clients. Between 1978 and 1981 the television syndication division of the company, managed by a Ms. Marie Luisi, reported tremendous profits. The figures, however, were found to be five or six times higher than their real value. Ms. Luisi had charged clients for advertising time they never received or used. The fictitious entries amounted to over $22,800,000 and affected such clients as Lever Brothers, and Burger King. The “Luisi Affair” affected company morale to such a degree that major policy changes were instituted. Salary priorities were restructured so that financial rewards could be given to staff members without their having to advance quickly through the corporate ranks. This measure was meant to curb the sort of ambitiousness that led Ms. Luisi to commit such improprieties. In addition, Johnston hired a permanent financial consultant to see that billing irregularities were, if not prevented altogether, at least discovered before becoming irrevocable.

The agency recovered from the Luisi scandal. In the first two quarters of 1983 net income at the JWT Group was the second highest in its history. This trend continued into the first quarter of 1984. Following a 17% revenue increase, net income was 254% higher than it was for the same period the year before. In 1985 J. Walter Thompson had a gross income of $450.9 million and total worldwide billings in excess of $3 billion, making it the fifth largest advertising firm in the United States.

Beginning in 1986, J. Walter Thompson encountered difficulty winning new accounts, resulting in a substantial weakening in its financial position, which in turn led to serious dissention among board members, two of whom were forced to resign after failed attempts to relieve Don Johnston of control of the company. As the financial situation continued to deteriorate, the JWT Group became identified as a target for a hostile takeover. Johnston asserted on several occasions that the JWT Group would not consider any takeover bids and would resist any hostile attempts by other companies to acquire JWT.

In late May of 1987, however, an unknown bidder began to purchase shares of the firm’s stock. On June 10 a small British marketing services company called the WPP Group plc announced that it had acquired a 4.8% share of the JWT Group and intended to purchase the remaining shares for $45 each. The JWT Group rejected the offer, which was subsequently raised to $50.50 per share. Offiicials of the two companies entered into negotiations, and on June 26 reached agreement for WPP to acquire the JWT Group for $55.50 per share, or $566 million.

The takeover agreement pledged to retain Don Johnston (who later resigned) and merge the JWT Group with a unit of WPP called the Owl Group (the Owl is the unofficial symbol of JWT). The takeover raised concern that WPP, headed by former Saatchi & Saatchi financial director Martin Sorrell, would later come under the control of Saatchi and Saatchi, which at the time owned 7% of WPP. Sorrell denied any such intention.

The JWT Group, which is 18 times larger than WPP, was expected to benefit greatly from the financial expertise and good reputation of Mr. Sorrell. In the weeks following the takeover, however, JWT lost a number of very important accounts, including Goodyear and Ford.

Principal Subsidiaries

J. Walter Thompson Co.; Simmons Market Research Bureau, Inc.; Lord, Geller, Federico, Einstein, Inc.; Hill and Knowlton, Inc. The company also lists more than 35 international subsidiaries.