IPG Reorganizes Zentropy into McCann-Erickson

It’s been a tough week for i-shops.

The Interpublic Group Thursday continued a trend of reorganization in the online design and marketing space with the announcement that it will roll its online marketing agency Zentropy Partners into its McCann-Erickson unit.

The news follows on the heels of Tuesday’s announcement by Dallas-based Luminant that the e-services firm would reorganize and cut 40 jobs in an effort to achieve profitability. Last week, Silicon Alley’s Razorfish warned of lower-than-expected profits because of a slowdown in European revenues, and this week it said it would cut 20 percent of its workforce.

The move comes as players in the Web integration, online design and Internet marketing business are seeing flagging revenues and drooping stock prices, amid concerns about dot-com spending and the slow pace of decisionmaking by offline businesses. Viant, iXL, and Organic have also been plagued by problems in recent months.

McCann said Zentropy will be integrated into its MRM Worldwide network of CRM shops to enhance MRM’s online capabilities. Spokespeople said Zentropy will benefit from exposure to MRM’s global clientele.

McCann executives put a good face on the restructuring.

“We see a real opportunity now to strengthen, expand and realign Zentropy Partners based on what clients globally are telling us about how they see the Internet fitting into their overall business-building and communications strategies,” said McCann chairman and chief executive officer James Heekin. “With the Internet now absorbed into the overall economy, we want to be ahead of the learning curve in developing the future of the digital marketing business and to do so on a profitable basis.”

IPG launched Zentropy in December 1999 as an independent unit. The company became something of a preferred provider of McCann’s, as the ad agency often tapped it for online work.

Michael Tey, Zentropy’s former chief engagement officer, will assume the head post at Zentropy as president. He succeeds founder and former CEO John Connors, who the company said will be transitioned to IPG’s Internet Ventures Group.

The new MRM “will be applying the industry’s newly embraced profitable growth model to quickly move ahead in developing the next generation of practice in what’s being called customerization,” said Mark Dowley, president of McCann’s marketing communications group, who will oversee MRM.

“They have an advantage going into this together that no other interactive agency or consultant has on its own. Both [Zentropy and MRM] already share a number of blue-chip clients, including Coca-Cola, General Motors, L’Oreal and Microsoft. And together they comprise a talented group of almost 2,000 employees in all regions of the world, with the marketplace power of $1.5 billion in billings.”