In early 2016, United Airlines needed help. Its stock price was down, CEO Jeff Smisek had resigned over a DoJ investigation into alleged political interference, and United finished last in an industry customer satisfaction survey.
Enter J. Walter Thompson.
Gustavo Martinez, the ad agency’s CEO, muscled his way into a pitch for the company’s global ad business through a connection with United’s new top executive, Oscar Munoz. JWT pitched an idea that United employees made the business run, and showed would-be ads ending with a United logo made up of actual staffers’ signatures. As JWT’s creative team finished their presentation, United executives applauded.
United told the creative team they’d won the pitch but ultimately stuck with its agency of record Mcgarrybowen, because it couldn’t be associated with JWT, knowledgeable sources said. United Airlines did not respond to a request for comment.
The previous month, JWT’s global head of PR, Erin Johnson, sued Martinez and the WPP-owned agency, alleging sexual harassment and discrimination. Days before United’s decision went public, her lawyers released a video of Martinez making a rape joke at a company meeting in 2015.
It was another blow to JWT, which was already on a downward trajectory.
Read more: After slashing costs, ad giant WPP is paying McKinsey to figure out how to shift back into growth mode
In November 2018, WPP merged JWT with digital marketing firm Wunderman to create Wunderman Thompson. Revenue at what was the agency’s largest office in New York is now a fraction of its peak. Later this year, JWT is set to move out of the Midtown Manhattan headquarters it occupied since 1981 and relocate to WPP’s World Trade Center space.
This story is based on interviews with 21 current and former executives at JWT, Wunderman Thompson, and WPP, most of whom requested anonymity to speak candidly. They tell of changing consumer behaviors, leadership decisions, and integration challenges that contributed to the end of a name that defined advertising for more than 150 years.
Some of JWT’s woes are common to the ad industry.
Like other ad agencies, JWT struggled to adapt to the rapid rise of digital platforms like Google and Facebook and the disintegration of a model built on decades of steady revenue from big-budget TV and print ad campaigns, which cut into legacy holding companies’ dominance of the industry.
Across the agency world, traditional one-stop creative agencies like JWT no longer drive the business as clients have driven down the cost, leading agencies to try to make up for the loss with media-buying and data services.
Clients are putting more of their spending toward influencer and e-commerce marketing and using niche agencies to help them. In the pandemic, specialty services such as healthcare marketing have been holding companies’ only sources of growth.
At WPP specifically, a short-term focus on margins to ensure bonuses for top holding company execs also hindered JWT’s transformation.
Finally, the legal scandal made its name toxic to prospective clients and hires alike.
Asked by Business Insider about JWT, WPP CEO Mark Read said: “We have to be aware of the past, but we can’t be nostalgic about it. We should respect our heritage but define an offer for our future.”
JWT was built on a century and a half of timeless ad campaigns
A Kellogg’s ad from 1954 by J. Walter Thompson.
Picture Post/Hulton Archive/Getty Images
“I don’t want to grow up, I’m a Toys ‘R’ Us kid.” “There’s a Ford in your future.” “The few. The proud. The Marines.” Rice Krispies’ “Snap, Crackle, and Pop.”
These were just some of the campaigns that made JWT famous.
The business commonly described as history’s oldest — if not first — ad agency began in 1864 as a brokerage called Carlton & Smith that sold New York City newspaper ads to religious groups. James Walter Thompson joined as a bookkeeper in 1868 before moving into sales, buying the company, and renaming it after himself nine years later.
JWT pioneered the first TV ad, for Libby’s; the first hourlong scripted drama, “Kraft Television Theater,” in 1947, and Ford’s 1999 “Global Anthem,” the first ad that aired in every market around the world. It helped the British government create World War Two-era radio programs railing against Hitler and the Axis powers. Its 118-year relationship with Unilever is the oldest in advertising.
It was among the first agencies to expand internationally in the early 20th century, and former CEO Bob Jeffrey recalled meeting heads of state in India and Saudi Arabia during his tenure.
Jeffrey told Business Insider most people were unimpressed to learn he worked in advertising. “But when I said the name J. Walter Thompson, there was immediate recognition all around the world,” he said.
When Randy Shepard, a longtime strategist at JWT Atlanta who oversaw the Marines account for years, died this fall, four US Marines in full regalia participated in the funeral. Lt. Colonel Christian Devine, who leads PR and marketing for the Marines, served as a pallbearer.
In 1987, then-WPP CEO Martin Sorrell acquired JWT for $556 million. It was his first major purchase in a 30-year effort to turn obscure shopping basket maker Wire and Plastic Products into the world’s biggest advertising business.
For several years, JWT was WPP’s largest and most successful agency. A former executive recalled asking Sorrell what JWT meant to him during its last period of significant growth, to which he responded, “The two Ps: pride and profit.”
Sorrell declined to be interviewed for this story.
Tight financial controls at WPP hindered the agency’s ability to adapt
Martin Sorrell in 2000, 13 years after acquiring JWT.
Reuters
Several former executives said JWT’s fortunes began to slide around 2010 with the abrupt departures of North American president Rosemarie Ryan and chief creative officer Ty Montague and the loss of major clients including Microsoft, JetBlue, and Royal Caribbean.
At the time, JWT’s New York office alone employed 667 people and brought in more than $200 million in revenue. These people said JWT’s last period of global growth was the first quarter of 2016; by the time of the 2018 merger, headcount in New York had dropped by around two-thirds and revenue declined by over 50%. WPP did not provide current financial numbers for Wunderman Thompson and does not break out earnings by agency in its public statements.
Ryan had been hired in 2004 to win new business and help JWT shift to digital media. She and Montague added big-name clients including Microsoft, JetBlue, and Royal Caribbean, but their ambitions ran headfirst into WPP’s finance department.
Sorrell was known as a micromanager who kept a tight watch on spending across the WPP empire; one former JWT leader said his approval was required for almost all raises and new hires. JWT’s longtime CFO Lewis Trencher was nicknamed “Dr. No” for refusing spending requests and described as “the most-feared man in the building.” Some former execs said he effectively ran the agency and that his decisions often came at JWT’s expense.
Trencher, who retired soon after the Wunderman merger, did not respond to an interview request.
Read more: Experts named 9 tech, consulting, and healthcare companies WPP could buy as it gears up to start acquiring again
When Microsoft chose JWT to create a $100 million campaign promoting the 2009 launch of search engine Bing, there was a hiring freeze left over from the 2008 recession, and a former executive said Sorrell and other WPP leaders wouldn’t approve hires for the account. JWT New York had to bring on 25 freelancers to work on the business instead.
After Ryan and Montague resigned, JWT gradually lost the Microsoft business.
The company bought digital agencies to keep up with clients’ evolving needs, but struggled to integrate them with the traditional side of its business.
In the largest such move, JWT acquired agency Digitaria in 2010 and combined it with other digital properties to create the Mirum network, which specialized in data-driven services like web design and search and email marketing.
But two former execs said leaders of JWT’s traditional business saw Mirum as a threat to their turf, and clients ended up confused by the rivalry.
When JWT acquired digital agency iStrategyLabs in 2016, a former JWT leader said both companies expected to gain new business as a result, but digital executives were “kicking and screaming” in resistance to being integrated into JWT out of concern they would be weighed down by the legacy business. Wunderman Thompson shuttered iStrategyLabs last December as part of WPP’s ongoing streamlining efforts.
JWT also hired seven high-profile creative leaders in seven years in an attempt to mimic the success of younger, hipper agencies like Crispin Porter Bogusky, which won the Bing account in 2011. Crispin is part of holding company MDC Partners, which at the time was an up-and-coming WPP rival.
Yet growth from digital ad spending wasn’t making up for the drop in traditional ad revenue, and execs said JWT leadership squeezed digital to fund the TV and print-focused side of the business, putting more money behind a model in decline.
In late 2013, Martin Sorrell decided it was time for a change at the top and named Gustavo Martinez, who had formerly overseen new business efforts at Ogilvy, another major WPP agency, to replace Bob Jeffrey. Sorrell considered Martinez as a potential successor at the time, sources told Business Insider.
A lawsuit alleging racism and sexism grabbed headlines around the world and sparked an internal crisis
Macy’s dropped JWT as a result of a sexual harassment lawsuit against JWT, according to former agency executives.
Yana Paskova/Getty Images
One morning in March 2016, a New York Post headline blared: “Disgusting CEO is the world’s worst boss, lawsuit claims.”
The suit accused Martinez of making demeaning comments about Jews, comparing Black people to monkeys, and joking about rape on more than one occasion.
Martinez denied everything but stepped down one week later.
It was two years before WPP reached a settlement with Erin Johnson in April 2018, and insiders said Sorrell’s unwillingness to settle took a significant toll on JWT.
Meanwhile, execs raced to preserve their existing client relationships.
Read more: Sources say Rolex plans to move millions in advertising away from ad holding company giant WPP and create an in-house ad agency
Two people said Macy’s, which had been with JWT since 2006, decided overnight to cut ties. One said a member of Macy’s board told them, “We have to get rid of JWT. We can’t be involved with an agency in this mess.”
JWT lost a pitch for Macy’s upcoming holiday campaign and never worked with the retail giant again. Macy’s did not respond to a request for comment.
A deep divide had also developed inside the agency. One insider said Sorrell described the lawsuit as “a public assassination,” and many employees continued to support Martinez as he made his exit.
Sorrell chose Tamara Ingram, a longtime WPP executive who had overseen the company’s relationship with Procter & Gamble, to succeed Martinez. Some insiders said a female CEO was necessary, but one exec called the decision “a PR Band-Aid,” and several said Ingram was dropped into a role for which she had not been properly prepared.
When Martinez introduced Ingram at the agency’s New York office in mid-March 2016, some employees openly wept and others applauded the departing CEO. An executive assistant cried out, “We love you, Gustavo!”
Martinez, who led WPP’s operations in Spain before leaving the company just as the 2018 settlement closed, helped launch an agency in his native Argentina this February.
Martinez, Ingram, and Johnson declined to comment.
Wunderman executives came to dominate the merged organization in what many now call a takeover
JWT was already weakened when its name was all but erased, region by region, from late 2018 to mid-2019 as the merger with Wunderman got underway.
Many now debate the importance of an established agency brand. WPP has retired or modified several since 2018, including Burson Marsteller, Young & Rubicam, and Grey.
Some say these changes have destroyed decades of value overnight by making agencies indistinguishable from one another; others say that CMOs don’t care which agencies they work with as long as they get the best talent, though P&G’s Marc Pritchard demanded that WPP keep the Grey name, according to Ad Age.
Read more: WPP is combining two more agencies in another sign of consolidation at the world’s biggest ad holding company
JWT was widely recognized in critical markets like India, but clients there had never heard of Wunderman and didn’t understand what the merger meant for their business, one WPP employee said.
Read, for his part, told Business Insider he believes in individual brands but that WPP, with nine creative networks compared with three or four at rivals like Omnicom and IPG, needed to simplify them to better serve clients.
The decision was made to put Wunderman first to emphasize the focus on digital marketing, followed by “Thompson,” which many employees used as an internal nickname for JWT.
Wunderman Thompson was positioned as a union of equals. But after the merger, JWT’s leaders either moved into WPP corporate roles, stepped down, or were replaced — some within weeks. Global chief creative officer Bas Korsten is the only former JWT leader who still holds an executive position in the network.
As one former executive said, “There’s no bigger signal of a takeover than to quickly remove the entirety of the leadership of 50% of the business.”
Read had been global CEO of Wunderman before running WPP, and some insiders said his familiarity with that agency led him to favor it over JWT.
Wunderman Thompson global CEO Mel Edwards told Business Insider that the merger happened quicker than she would have liked, and in retrospect she would have explained it more clearly to clients and skipped pre-recorded video addresses in favor of live Zoom meetings.
Still, she said Wunderman Thompson is now one of WPP’s two largest networks with just under 18,000 employees, and she pointed to winning Duracell’s global business in early 2019 as evidence of its success.
J. Walter Thompson may not have survived changes in consumer behavior and the rise of digital platforms
Women read newspapers at the Cannes Lions festival in 2016, the year JWT swept the awards.
Jean Christophe Mangenet/AFP via Getty Images
Several people said that J. Walter Thompson might still exist today if the Martinez lawsuit had been resolved quickly and quietly, and many continue to believe he was the right person to turn around the business.
Others see possible models for agency success in Ogilvy, another legacy agency, which hired former Deloitte executive Andy Main as CEO in a pivot to consulting work; and Sorrell’s new company, S4 Capital, which uses a single P&L wherein each employee works as part of a whole rather than operating its businesses separately, like WPP does.
But the rise of digital platforms might have led to the agency’s demise anyway, since creative on its own is no longer a big moneymaker for the holding companies.
Even as people celebrated in 2016 when JWT swept the Cannes Lions festival in the South of France, advertising’s biggest awards show, one former executive said the sense of optimism on the beach that week was misplaced, because awards can’t sustain a business.
Read more: Unilever is shopping for a new agency to handle its growing e-commerce advertising, and it could mean a big loss for ad giant WPP
Ex-JWT Europe CEO Toby Hoare, who runs WPP’s Unilever account, said the most important parts of WPP’s business now are its relationships with big spenders like the packaged goods giant and Google, which draw talent from across the holding company rather than any individual agency brand.
Today, people consume more media — and, by extension, more ads — than ever. But longstanding agencies like J. Walter Thompson no longer monopolize the budgets behind those ads.
“JWT wasn’t just a mismanaged business; the whole industry collapsed,” said former Mirum CEO Dan Khabie.
But he also said JWT never got a proper burial.
“We killed off a piece of American history — that’s the bottom line.”
Got more information about this story or another ad industry tip? Contact Patrick Coffee on Signal at (347) 563-7289, email at pcoffee@businessinsider.com or patrickcoffee@protonmail.com, or via Twitter DM @PatrickCoffee. You can also contact Business Insider securely via SecureDrop.