Marketing Madison Avenue

One of the few big U.S. industries in which the general public has never had a real chance to invest is the $12 billion-a-year advertising business. Last week admen from coast to coast were chattering over the news that a Manhattan agency had broken the pattern by asking the

SEC for permission to sell stock to the public. The pioneer was not one of Madison Avenue's Goliaths but Papert, Koenig, Lois, Inc., a fast-rising newcomer that in four years of existence has boosted its annual billings from $69,000 to $5,900,000 on accounts ranging from Exquisite Form bras to Wolfschmidt vodka.

Options & Swaps. If the SEC agrees, eight senior executives who now own all of Papert, Koenig, Lois' stock intend to sell to the public 100,000 shares--or 20% of their holdings. After the sale, the agency's three top officers--Chairman Frederic Papert, 35, President Julian Koenig, 40, and First Vice President George Lois, 30--will still own 105,691 shares each. Though par value of the stock will be only 30-c- a share, Madison Avenue speculation is that the shares sold to the public may be offered for as much as $10 apiece. That would make paper millionaires of Messrs. Papert, Koenig and Lois.

Establishing a public market for the agency's shares should also help Papert, Koenig, Lois recruit new executives by offering them stock options (which, for tax reasons, are more appealing to high-bracket executives than a straight salary boost). This is a vital consideration on Madison Avenue, where personnel changes are frequent because the only commodity an advertising agency really has to sell is talent. And at least potentially, a public stock offering has other attractions for advertising firms: it could help raise expansion capital and make it easier for an agency to merge into bigness through stock swaps.

Questions & Gyrations. Despite these obvious advantages, most admen are still skeptical of public ownership. Their big fear is that it might undermine the confidential relationship between an agency and its clients. "I wouldn't want to be part of an agency that owed its primary obligation to stockholders," says Fairfax Cone, executive committee chairman of Chicago's Foote, Cone & Belding. Adds Ernest Jones, president of Detroit's MacManus, John & Adams: "If there were outside stockholders, they would have the right to ask such questions as 'What is the contemplated Pontiac budget for next year?' Well, that happens to be between us and Pontiac." Papert, Koenig, Lois intends to avoid some of these risks by retaining 80% of its shares in the hands of its officers. Even so, argues President Robert Lusk of Benton & Bowles, "an adman would be less inclined to take risks on his clients' behalf if he had to face a stockholders' meeting every year." Still other advertising executives fear that ad-agency shares would be dangerously volatile, gyrating wildly every time an agency won or lost a big account.

Apart from Papert, Koenig and Lois, in fact, only one well-known adman took an openly enthusiastic view of public ownership last week. Sighed David Ogilvy, British-reared chairman of Manhattan's Ogilvy, Benson & Mather: "We here at Ogilvy own our stock at book value only.

If it were offered to the general public, it could be 15 times book value."

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