WHY THE HOT AGENCIES ARE WAY OUT OF TOWN

By Adam Zagorin/Washington

"It's true, as you get older, the knees are the first thing to go" reads the tagline above a picture of a toddler in jeans ripped halfway up the leg.

The award-winning ad touts a pair of reinforced rompers by Healthtex, a leading purveyor of juvenile apparel. But the folks who dreamed up the campaign work neither on Madison Avenue nor in the giant agencies of Los Angeles or Chicago. Instead they labor in, of all places, Richmond, Va. Situated among tobacco warehouses and antiques stores, the Martin Agency was once known for regional work, such as its "Virginia is for lovers" campaign. But recently Martin snagged a $55 million account for Saab cars away from a New York City agency; Coca-Cola is another client. Billings are up 25%, to $355 million. Drawls Mike Hughes, the agency's soft-spoken creative director: "Maybe we're just more wide-eyed and in touch with Middle America right here in Richmond."

Martin has helped make Richmond one of the hot spots cropping up in erstwhile advertising backwaters from Portland, Ore., to Winston-Salem, N.C., and Minneapolis, Minn. Periodically, breakaway boutiques emerge from big-city agencies, get hot, then are reabsorbed when they start bagging big accounts. Now, the quest for an advertising edge has sent brands like ESPN and McDonald's scurrying way off Madison.

Among the most widely recognized is Portland's Wieden & Kennedy (1996 billings: $525 million). Its gritty, muscular spots for Nike featuring Tiger Woods and Michael Jordan have helped the athletic-shoe maker uphold its market leadership; other clients include Microsoft, Coca-Cola and Miller Genuine Draft. President Dan Wieden counts acid-dropping Merry Prankster Ken Kesey, author of One Flew over the Cuckoo's Nest, as a friend, which might give some hint as to the agency's creative mind-set.

In Minneapolis, Fallon McElligott (1996 billings: $355 million) has become one of the hottest agencies in the country. Fallon takes risks most agencies wouldn't dare. The agency grabbed the faltering Miller Lite account from Leo Burnett and created a campaign that outraged many within the industry. Miller Lite's new TV spots viciously attack advertising standbys--machismo, sex, telemarketing--with spots "approved" by "Dick," a faux "creative superstar." Sample: an older couple necking on a couch. The campaign, designed to reach the crucial twentysomething age bracket, has helped lift the brand's supermarket sales 12% since January. Says Scott Donaton, executive editor of Advertising Age: "Fallon likes to take the status quo and just shake the hell out of it." But being risky doesn't necessarily mean being effective. Fallon's work for McDonald's Arch Deluxe featured kids frowning at the prospect of an "adult" hamburger. So too did the grownups. The burger bombed. McDonald's parted company with the upstart and picked a new agency: Leo Burnett, big, conventional and in downtown Chicago.

--By Adam Zagorin/Washington