Is Wachovia's $150 Million Ad Account Smart Spending?

Wachovia (WB) just awarded its roughly $150 million advertising account to Ogilvy & Mather, a division of UK-based ad giant WPP (WPPGY). Wachovia has been looking for a new agency since the spring, ready to leave a division of Interpublic Group to update its brand.

But now Wachovia is in a period of total flux, and with its debt soaring on WaMu's (WM) failure, the bank is in peril.

So with Wachovia stock plummeting why is now the time for the bank to announce it's shifting its mega ad-spend to a new agency? Sure, Wachovia is under big pressure to inspire confidence in its customers, reassuring them that they should keep their money where it is.

But do investors really want to see that Wachovia is moving forward with its business as usual from last spring? Wachovia must be evaluating its marketing spend, figuring out where it can't afford to skimp, and where it should pull back. It seems it would make more sense for the bank to focus on its reevaluation rather than shifting a $150 million account in this perilous time.

Update--Response From Wachovia: I just got off the phone with a Wachovia representative, who called me to give more context. The news about the company switching its advertising spend to a new account leaked out before it had time to formulate a press release and explain why this move makes sense for the bank at this time. Perhaps most importantly, Wachovia says switching to this new agency will allow it to become more efficient.

Previously it had several agency relationships, working with Mullen for traditional ads, Carat for online ads. Now its entire ad spend will be under a single company, Ogilvy, which will be able to bring in its sister companies for more niche projects. But having everything under a single umbrella should help avoid redundancies. Wachovia's spokesperson also said that though it began the process of finding a new agency back in May, before the current "environment", it thought it important to still move forward, as it hadn't reviewed its agency relationship since 2001. And as I mentioned above, this is of course a key time to define its brand and drive its  business.

What about the key issue of the amount of spending? The bank wouldn't make any official statements, but it did say that given the current environment it would expect its overall advertising spend would decrease next year vs. this year. (For those unfamiliar with the advertising world, most of the ad spending for this year is already locked in.)

The spokesperson said "we're preparing for our future." No kidding. The question is, in 2009, what the banking landscape will look like, and how much the company will have to spend to reassure investors, vs. how much it'll have to save to protect itself.

Comments

[Narlea:]

Wachovia has so many issues at the current moment that I am not concerned about their 150M ad account it is small compared to the big picture at this time.

I have to admit I was more interested looking at you Julia then the article.

2008 Sep 27 04:24 PM

[shyquestor:]

While Julia could be a distraction (love the hair), the ad spend per branch is within reason. What Wachovia and all FIs need to do better is to understand the return on ad spend through various channels.

Traditional media is horribly fragmented and difficult to track results, but is the one area that is important to burnish a bruised brand. Direct mail with solid offers to expand the relationship to current customers, and some online spend to shore up reputation to those customers (who use online), is prudent.

Who knows how good their analytics and tracking of customer contact is, however. I bet that customer communications are siloed by business unit and not at all integrated for a full customer contact view, which can create huge waste in the spend.

2008 Sep 27 04:48 PM

[Dave Mazz:]

I have to assume that the first two commenters, who seem to be more-interested in Julia Boorstin, than in
Wachovia's financial position, do not own any Wachovia common stock. The latest word I heard is that Wachovia may well follow Washington Mutual into bankruptcy, via an action the FDIC calls a "closed bank solution." Near as I can tell, this means common stock shareholders get nothing.

2008 Sep 27 06:13 PM

[Ishortyou:]

Wachovia future depends on its depositors, if they succeed in reassure them that they are ok, no problem, if not they are going to have problems, thats the key.

2008 Sep 27 06:28 PM

[jacobsen:]

Mazz, you haven't heard no such thing. Steele ain't stupid and the toxic paper can be discounted and most is good. The fear tactics folks use to influence folks to unload is quite disturbing and dishonest. Fact is, you haven't any interestt in Wach as a share holder and you just yak the line of wannbe shorts.....most who say they short.............had already gone broke...long............. has many options.........Steele bought 1 million shares last month .13-17....cfo and director followed suit last few weeks..........they know the intentions and uncovered value.

2008 Sep 27 06:39 PM

[jacobsen:]

This article is one of many being publiciced by the leftist socialist writers to do harm to the equity holders. Who is constantly sending this article to the public forum??? Julia is Gore supporter................ should open the eyes of the reader to INTENT! I don't care you got 10 degrees from Princeton...........th... day and time that's saying......I am a brainwashed socialist, abortionist, leftwinged elitist!

2008 Sep 27 06:51 PM

[Pessimistic...:]

Jacobsen,
I believe you to be correct in the thinking tt WB will not go the way of Wa Mu. Steele is a stalwort and will do what is best for the company going forward. I am sure he like many others have been in contact with collesgues and other top notche CEO's to get input of the positive kind. I do own stock in WB and believe that carpe diem will be the mantra on Monday. I may be on the pipe but we will see come Monday.

2008 Sep 28 12:32 AM

[User 265449:]

A typical article from a typical so-called journalist. Get a new job and stop writing about things you know nothing about! You write something before you know all the facts. I cannot wait until the so-called journalist are held accountable for things they write.

2008 Sep 28 01:08 AM

[Ishortyou:]

in regards to Wachovia they are serveral tactics that it can apply to solve its book of business facing the main problem which is the run of the bank phenomena. Most of those run of the banks are from payrolls from small business and depositors of more than 100,000 dollars that are running like chickens without heads. 1. Wachovia is doing a good tactic on reassuring their depositors to install confidence in its business through phone calls, personal visits-contacts, adequate interest on deposits, etc, etc. 2. Now that the goverment is willing to buy bad assets on warrants, they can sell the trouble assets and delever quickly from them and sell part of their equity without stockholder dilution to the government to boost confidence. 3. Make a deal with FDIC of NO intervention as this is done. 4. Keep working on their good loans to boost capital/liability ratio as well as reducing business expenses. With this strategy is likely to succed.

2008 Sep 28 08:31 AM

[Narlea:]

We were asked to comment on the article not on what is going on at Wachovia and the financial mess which I hope will be settled today. Many have posted important and interesting information.

Dave Mazz (3rd post) is correct about his comment: I have to assume that the first two commenters, who seem to be more-interested in Julia Boorstin.

But very wrong on his assumption: than in Wachovia's financial position and do not own any Wachovia common stock.

How about 3K shares and a few hundred K in Cd's and in a security account. Looking at Julia's beautiful face was a nice distraction to the current situation. The article did nothing for me and I am well aware of the possibilities here but don't think we will be following your scenario.

2008 Sep 28 11:39 AM

[hunter:]

If the media mongers would just leave Wachovia alone Wachovia will succeed. No way can you can compare Wachovia to WMU but now that WMU is gone the media wants to try bringing Wachovia down. Bob Steel has a plan and it will succeed. I just wish all those journalist who incorporate sensationalism into their reporting would jump off a cliff never to be seen again. This type of reporting is bad for companies and the overall health of the economy. All the banks are in the mtg mess. Some have mtg losses far greater than Wachovia. The Govt helped create the mtg mess with such laws as the CRA (community reinvestment act) where banks were forced to make mtgs to minorites ect at 100% or greater loan to values knowing they did not qualify for the loans. A lot of the losses are in this type of loan. It has a snowball effect. Declining home values,high fuel prices,loss of jobs all contributed to these mtgs going bad. The CRA act contributed greatly to these mtgs going bad. The Govt helped create this mess so its only right they help the financial institutions over come it by the rescue bill that will be passed by congress and signed into law by the President.

2008 Sep 28 02:28 PM

[USC-Col 200...:]

I believe the amount of bad press attributed to Wachovia is completely fair. Your referring to a company that specifically packaged as mortgage option adjustable rate mortgage and mortgages in which a person can decide when to pay their mortgage. So two things are going to happen, one, their going to run out of money because they can't guarantee income. Two the consumer is screwed because they may not be able to pay when the mortgage actually adjusts, their locked in on a credit report with a company that is known for messing these types of things up. Wachovia is a company with a 100 year history and their screwed completely in a matter of months by bad decision after another as a group. Those certificate of deposits need interest paid on them, and they have to pay those back when they mature and their not doing anything with borrowed money since that's what a CD basically is, a collateralized loan with liquid assets backing it. This an area when banks are starting to fail. No one wants to merge with them and no one wants to take them over so far, and I doubt once that package is pushed that the money will going to a company who has been looked into by federal regulators in the majority of offices. They clearly don't understand how to turn a profit, because according to previous articles they are not writing down their mortgages and take a hit now because they are basically too scared too lose even more money right now. In other words, they may never be able to get back off the ground again.

2008 Sep 28 04:18 PM

[USC-Col 200...:]

The majority of the shares climbed have been attributed to the historic new CEO and his cabinet who is excellent as well...but if you give a almost completely sandwich to a starving person, they can't get completely full off it no matter how hungry they are. However the only reason its trading as high as it now are because of Steel and his personal company who have fantastic jobs at other locales but may not save a lackadaisacal company during the current crisis. If they just lived up to their responsibility in providing consumers with mortgages that meet their needs, earn some returns are made on customer's deposits, and made sure they can guarantee through profitablity that they a trusted, mature, responsible, educated bank then Wachovia shares would return to normal levels but they flatly refuse to hear the cries of the market bells at the end of the day.

2008 Sep 28 04:24 PM

[USC-Col 200...:]

Sep 28 04:24 PMThe majority of the shares climbed have been attributed to the historic new CEO and his cabinet who is excellent as well...but if you give a almost completely eaten sandwich to a starving person, they can't get completely full off it no matter how hungry they are. However the only reason its trading as high as it now are because of Steel and his personal company who have fantastic jobs at other locales but may not save a lackadaisacal company during the current crisis. If they just lived up to their responsibility in providing consumers with mortgages that meet their needs, earn some returns are made on customer's deposits, and made sure they can guarantee through profitablity that they a trusted, mature, responsible, educated bank then Wachovia shares would return to normal levels but they flatly refuse to hear the cries of the market bells at the end of the day.

2008 Sep 28 04:26 PM

[nyka:]

265449--make it "so called JOURNALISTS," not so-called journalist. Obviously, you fail to meet the qualifications of a professional journalist.

2008 Sep 28 08:37 PM

[Just a beginer:]

What happens to the stocks in Wachovia. What is a Bailout: Does that mean the stock price of wachovia goes to 0. I am new to this field, and have some WB stock.

2008 Sep 29 10:32 AM

[Just a beginer:]

What is a Bailing out. I have some stock in WB. Recently I bought them. If CITY Group buy Wachovia, does it takes the staock also....Please help me I don't have much knowledge in this field...

2008 Sep 29 10:35 AM

[USC-Col 200...:]

I believe in the Wachovia situation. Thankfully the company sold off its deposit to Citigroup...thus its no longer, once closing, have any ties to citigroup what soever. The only remains of Wachovia are its brokerage and insurance units essentially. Wiht regards to WB stock, I believe all out of luck. Because since it is know currently a penny stock, it will be extremely regulated. Only certain person, investors, are allowed to make the market in that stock. I belive the WB as a whole let people down. They got too complacent with regards to last year's high and became lackadaiscal when it comes to running their banking operations. The executive staff can do all they can, but it comes essentially down to whether the company as a whole is willing to buckle down and live up to their job responsiblities in making sure that the bank turns a profit, invest deposits wisely, and package mortgages that bring interest and principal to the bank and keep consumer in a steady home loan.

2008 Oct 01 12:22 AM

[USC-Col 200...:]

With regards to liquidation of that stock, speak to your advisor, planner, or broker. Hell we want to keep as many brokerages in business. But that aside, since that stock is so regulated now do to the company situation, their are certain procedure that must be taken to liquidate your stock. I know on Monday, trading was halted completely. I would get with your broker as quick as possible just a beginer, if you're still reading,

2008 Oct 01 12:25 AM