Grand Illusion

The Baltimore Sun

In a muggy hotel banquet room two years ago, Steve Eisner stood at a podium clutching the validation of 30 years of toil: a golden statuette in the shape of four letter A's.

It was an O'Toole, given by the American Association of Advertising Agencies, to the most creative, mid-size firm in America. Whatever those in the audience believed, Eisner took the award as the realization of his dream to transform a prominent but entirely local advertising agency into a powerhouse capable of competing with Madison Avenue.

It had been an audacious ambition, one that many thought impossible for a company with a ZIP code outside New York or Los Angeles.

But Steve Eisner had always believed that the reputations of many New York firms were burnished by style and hype as much as talent and know-how. If he could deliver the goods, he was sure Eisner Communications could land the coveted jobs that usually went to the glamorous firms. In that way, his firm would be exactly as one of his clients once described it to him, "Madison Avenue without the hokum."

That one-pound statuette showed how right he had been. Steve Eisner could swim with the sharks.

But the euphoria of those moments in Bermuda didn't last even two weeks.

Twelve days after his return home, the news broke that America West was moving to acquire US Airways, by far Eisner Communications' most prestigious account. A merged company wouldn't need two advertising firms, and sure enough, Eisner Communications soon lost an account worth $20 million a year.

Losing US Airways began the unraveling of the homegrown company, a process that would take less than two years, ending finally in November when Eisner Communications abruptly closed its doors. Fifty people were put out of work and debtors lined up to collect on at least $3 million worth of unpaid bills.

The merger triggered the collapse, but it also exposed a company that was never as grand as its image. Such contrivance is the stock and trade of the advertising business, which often ballyhoos clients beyond their actual worth or capabilities. But few outsiders suspected that the reality of Eisner Communications was itself so much less than its owner's representations, that in its disappearing act, it would prove itself full of sliding doors and false bottoms and overinflated claims. No one understood how much Steve Eisner's spin had been directed at his company.

"At some point," said one of his former employees, who like some others did not want to be identified for fear of antagonizing future employers, "the spin went too far."

In the end, said Jonathan Helfman, a former employee who did speak on the record, Steve Eisner's company proved as much artifice as he had perceived in New York firms. "In reality," Helfman said, "it became hokum without the Madison Avenue."

Modest beginnings

In 1968, Henry W. Eisner, Steve's father, bought S.A. Levyne Co., a small advertising firm for which he had worked the previous 22 years.

Henry was a concentration camp survivor, and, according to press clippings as well as those who knew him, a soft-spoken man little given to braggadocio. He worked hard, but his goals were modest - to compete successfully in the Baltimore area.

Steve followed Henry into the business, but not before an apprenticeship in New York with a high-profile company, Doyle Dane Bernbach. Still in his 20's, he returned to Baltimore in 1978 to take his place at what was then called Eisner & Associates.

His time in New York equipped him with grand aspirations for the firm, then housed in a four-story townhouse in Mount Vernon. He wanted to retain the homespun character of a local firm, but to compete on a national playing field.

"I represented a much broader vision for the company," Eisner, now 51, said in a recent interview.

Steve Eisner became president of the agency in 1983 and later bought it from his father. His wife, Sara, whom he met in college, worked alongside him. In 1992, he named her a vice president.

Under Eisner, the company expanded from 12 employees to 120 at its peak in the 1990s. He added new divisions, including a public relations arm and a subsidiary specializing in Internet advertising. He bought out a small company and formed Underground Eisner as a separate division, and he created Beverly & Eisner Communications to target African-Americans, Hispanics and other ethnic groups.

By the mid-1990s, Eisner Communications was one of Baltimore's largest advertising agencies. But it didn't realize Eisner's main aspiration until 1996 when he won the company's first national network television account, which was to create commercials for the National Association of RV Parks and Campgrounds.

The campaign promoted the idea of vacationing by recreational vehicle and slogans invented by Eisner - "Go RVing - Life's a Trip" and "Wherever You Go Life's at Home" - earned the firm attention and praise. By the late 1990s, Eisner Communications began receiving brief mentions in The New York Times.

More successes followed. In 2001, Eisner won a $10 million account with AMF Bowling Worldwide, a national chain of bowling alleys. In 2003, the firm reeled in an account with Dansk, a tableware company that had eschewed advertising for 10 years.

Eisner was also a strong presence in Baltimore, winning accounts with Provident Bank, the Maryland Lottery and the National Aquarium. The firm developed a reputation for its creativity, for which it won the O'Toole in 2005. It was also routinely a top winner in the annual local ADDY contest.

The biggest coup of all, though, came in 2002 when the company landed US Airways over several larger firms, including the incumbent, McCann Erickson. It was an enormous triumph for Eisner Communications, eclipsing its other national accounts.

Even so, the agency was still not seen as the major, national player Eisner wanted it to be.

"Throughout their lifespan they had a few national clients, but they were more of a regional player than anything else," said Matthew Creamer, editor-at-large of trade publication Advertising Age.

Overstated billings

But if Eisner Communications was not truly a national firm, neither was it a healthy local one. In 2005, after Eisner was replaced by Jeremy Clarke as company president, Clarke said that he found that billings were millions of dollars lower than Eisner had reported to trade magazines. Instead of the $327 million in billings Eisner reported to trade publications, Clarke said, they were actually below $100 million.

In a recent interview, Clarke said he discovered that Eisner underbid in order to win contracts, which meant that the firm did not bring in enough money to cover its expenses.

"The problem was there was such a large gap between what we were and what we said we were," said Clarke, a British advertising veteran.

Interviewed separately, Eisner said he overstated billings to try to impress potential clients, which he claimed was a common practice in advertising. He repeated what he said he once heard a famous adman say: "One day we'll catch up to our billings," meaning that someday Eisner would have as much business as it claimed to have.

But the billings were only part of the problem. Overspending was another. In 1999, Eisner sold the Mount Vernon building and moved the company to swanky new quarters on Exeter Street in Harbor East. Rent was $82,000 a month. Eisner later admitted that the firm couldn't afford the rent, but he thought a fancy building would boost the company's image, help win new contracts and provide a creative environment.

"A creative business should have a certain kind of environment," Eisner said. "But was it the most practical space? Absolutely not. ... It was a symbol of what we had become."

Some now say that Eisner was unrealistic in his ambitions, trying to compete for too many national contracts when the company was so much of an underdog. It failed to land lucrative accounts with Subaru of America Inc. and L.L. Bean in 2004. Bigger, better-known firms won those contracts.

It wasn't that Eisner Communications couldn't handle accounts for large clients - it had proved it could - but the process of competing for accounts entails enormous expenses, from flying teams of employees to a prospective client's headquarters to creating dazzling presentations. With its resources dwindling, some agency employees thought Eisner needed to be more selective about which accounts to pursue.

"I think we were a long shot in certain things when we could have better put our resources in more likely opportunities," said a former employee.

By 2003, Eisner was contemplating expanding the firm through the acquisition of other companies or selling out to a larger company. To help assess the options, he hired Chris Clarke (no relation to Jeremy Clarke), a veteran advertising consultant from England who had guided advertising companies around the world in mergers and acquisitions.

As soon as Clarke opened the books he said he found evidence of bloated spending habits, such as unfettered cell phone use and paying for 186 parking spaces when only 98 were in use.

Clarke and advertising experts said that extravagance is not unusual in the advertising world, particularly as agencies woo new accounts.

"In the ad industry, there are companies in general that do spend extravagantly and boost their image some to keep business coming in," said Robb Hecht, a New York-based media and marketing consultant. "The image of an ad company is that important."

Even so, Clarke said he was struck by how little grasp Steve Eisner had of the company's financial situation.

"He was stuck in the wrong business frankly," Clarke said. "Steve was a creative guy. It's the sad thing you never tend to get good corporate guys that are good creative guys."

Still, Eisner might have avoided collapse if not for the loss of the US Airways account in September 2005.

Even before the merger announcement, Eisner had held meetings through the summer trying to figure out how to drum up new business, an effort that became more urgent when the company lost US Airways.

"Any claim that they could make to be a national agency went out the door with US Airways." said Creamer of Advertising Age.

The efforts to attract new business bore fruit, but not enough.

The firm managed to sign Sprint Airlines, symbolically replacing the US Airways account but at a quarter its size. Eisner also picked up a new $3 million account with Provident Bank.

There was a short-lived partnership with an online gambling company called Fortune Lounge Group, an account some former employees saw as an act of desperation. Fortune backed out of the $20 million contract before the campaign got off the ground.

At the same time came significant changes in Eisner Communications' top ranks. In April of 2005, Eisner fired executive creative director Steve Etzine, for years his right hand man. Eisner told employees and the media that Etzine had to go to breathe new life into the firm.

Still, he continued to portray Eisner Communications as an up-and-comer. "It is our absolute interest and drive to move ourselves to the front of the list of the nation's top 10 independent agencies," he told the trade publication Adweek at the time.

But a sign of the company's true desperation came at Christmas that year when Eisner relinquished control to Jeremy Clarke. At the time Eisner said in interviews that he wanted to bring in new blood to take the company to the next level. Stepping down would enable him to focus on bringing in new business and mentor younger employees, he said.

"I had been running the agency for 23 years," Eisner said via e-mail recently. "I felt that Jeremy with an international advertising perspective coupled with [his wife] Sara Eisner who knew all about our culture would make a good team."

He gave no indication at the time that the company was struggling financially. "I've never felt more bullish about the company," he told The Sun then.

In reality, Clarke, a former executive at Saatchi & Saatchi, said he was brought in to clean up the company's finances and to quickly attract new clients. Eisner's wife, who had worked in various positions at the company, also took over some of her husband's day-to-day duties.

Clarke immediately made structural changes, combined three profitable subsidiaries under one Eisner banner and eliminated many senior positions.

Morale was low and the future uncertain. Eisner still came to the office, but had no clear role. "Steve was in a funny place," said one former employee. "He was still there, but he wasn't doing his usual job."

Clarke said in an interview that he learned right away that the company didn't have anywhere near the business it claimed.

Trade publication Advertising Age would later report that Eisner revenues dropped 40 percent to $18.3 million in 2005, the year the firm lost the US Airways account.

Looking back, Eisner said he should have laid off employees and cut expenses more deeply after losing the US Airways account. He also made an admission: "I think that operating and financial management, while I worked to keep my eye on that, my strong suit they were not."

He insists, though, that the firm never took money one client paid to cover other contracts.

Unpaid bills

Under Clarke, the company tried to sublease part of its building last May, but found no takers, said Robert A. Manekin of Staubach Co., a commercial real estate firm.

Eisner stopped paying many of its bills early last year, according to court documents and interviews with bill collectors and company vendors. In March, the company stopped paying its rent of $81,325 a month, according to a lawsuit recently filed by Bagby Development LLC, which owned the building. It also stopped paying on a loan related to the property that was costing Eisner $1,368.84 a month.

By the summer, vendors began calling about unpaid bills, according to former workers and lawsuits.

"I knew things were getting worse when the vendors stopped calling and instead I was hearing from their lawyers," said one former employee who worked in the accounts department.

Szabo Associates Inc., a national media collection firm, began getting calls in June from its 25 newspaper and broadcast clients complaining that Eisner hadn't paid them for advertising. Szabo said its clients are owed $1.7 million dollars by Eisner.

"Sometimes there might be some slowness with some firms," said company President Robin Szabo. "This [case with Eisner] is a more severe situation."

The company dropped to about 50 employees. Rumors about the company's health were rampant throughout the industry. Top executives left for other firms.

Eisner was losing contracts faster than it was winning them. In March, three partners who had run Eisner Underground, one of the divisions Clarke eliminated when he took over, left to start their own company, Exit 10. In a mistake that came back to haunt the company, Eisner never signed a non-compete clause with the employees, who took three major contracts with them worth more than $1 million.

In a final gambit, in late October, Eisner approached a competitor, GKV Communications, about merging, but nothing came of those talks.

The next week was tense for Eisner employees, who had heard rumors about the merger with GKV and also speculation that the company might close. People found it hard to work.

The week of Nov. 10, Steve and Sara Eisner sent out a staff e-mail assuring that none of the gossip was true. The company was in good health and an announcement would be made soon, it said.

A few days later, on a Thursday evening, the Eisners sent out a second e-mail, this one announcing an important 10 a.m. staff meeting .

The next morning the Eisners stood on the steps inside the building looking at the small group of employees that had gathered below. Steve Eisner talked about his father's legacy. He talked about the creative talent that had streamed through the agency over the years. He talked about everything but the real reason everyone was there.

The agency was shutting down, the Eisners finally managed to tell their employees.

The company was so behind in paying its bills that its financial institution, Carrollton Bank, put a lien on all its assets. Eisner Communications was penniless. There wasn't even money to pay final salaries. Some employees cried; others loudly berated the Eisners. Many said they felt that the Eisners had been untruthful about the condition of the company.

Somber employees began packing their belongings into boxes. The normally lively office was quiet. Many of the offices were soon emptied of everything but furniture, magazine clippings and pictures left behind.

This became the fate of Steve Eisner's dream.

While Eisner doesn't directly say that he'll start another business, he talks as if he still has a future in advertising.

But Eisner also seems saddened by the loss of the family business. During a recent interview he seem to fight back tears as he grasped a cup of coffee. He said losing his business was akin to death, but admits his mistakes.

"We were able to dream big," Eisner said. "But there were distractions connected to finances that may not have allowed us to reach our potential. If I could do it again, I'd have somebody else handle the finances."

andrea.walker@baltsun.com

The past

Executives who guided ad agency through its existence

Name: Sydney A. Levyne

Firm: Founded S.A. Levyne Co. advertising agency in 1939. It would become Eisner Communications.

Sold the firm to Henry W. Eisner in 1968.

Levyne died in 1973.

Name: Henry W. Eisner

Firm: Changed the agency?s name to Eisner & Associates in 1974. He ran a modest firm of 12 people from a Mount Vernon rowhouse. He retired and turned the business over to his son Steve in 1983.

Henry Eisner died in 2004

Name: Steve Eisner

Age: 51

Firm: Ran Eisner & Associates, which he later renamed Eisner Communications, until the company ran out of money and was forced to close late last year. Eisner built the company to 120 people at its height and brought national recognition to the agency.

Changes over time 1939

Sidney A. Levyne opens the S.A. Levyne Co. advertising agency in Baltimore. 1968

Levyne sells the company to Henry W. Eisner, a concentration camp survivor.

1979

Steve Eisner joins his father's firm after a stint at Doyle Dane Bernbach in Manhattan.

1983

Henry Eisner goes into semi-retirement and Steve Eisner takes over the company.

1999

The agency leaves its modest Mount Vernon office for a swanky building in Baltimore's Harbor East.

2002

Eisner Communications lands a $20 million contract with US Airways, its biggest and most prestigious client at the time.

May 2005

Eisner Communications wins a national industry award for most creative mid-size agency.

May 2005

US Airways merges with America West and picks a different advertising agency. Eisner Communications loses its contract.

Dec. 2005

Steve Eisner relinquishes his position as CEO and chairman of Eisner Communications as the agency struggles to win new clients.

Nov. 10, 2006

Eisner Communications abruptly goes out of business after running out of money.

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