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Holding cos high on digital acquisitions again

08-August-2012
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Holding cos high on digital acquisitions again

“Digital is one of the ways in which you can develop connection with a client. For many cases in fact, digital is the starting point of a relationship,” WPP’s CEO Martin Sorrell had said this in a conversation with exchange4media when the company had announced the acquisition of AKQA in June 2012. AKQA’s announcement had followed in the heels of JWT acquiring a majority stake in Hungama Digital Services.

Globally, WPP and its companies have been busy identifying opportunities to further strengthen WPP’s overall digital offer. The year has been full of similar veined announcements --- Possible Worldwide nabbing UK-based Fortune Cookie, Ogilvy picking up a 33 per cent stake in DTDigital in Australia, WPP Digital acquiring majority stake in Acceleration, JWT’s stake in digital agency Activeark Oy in Finland and Ogilvy’s majority stake in Foster, a digital agency in Brazil amongst others. The year also marked the official India launch of VML Qais.

Another holding company making headlines for its aggression in the digital space is Publicis Groupe, two of which came from India. Publicis’ Leo Burnett India acquired Indigo Consulting in April 2012. Leo Burnett India offers digital services through Arc Worldwide and Indigo Consulting was an interesting addition to that mix.

On August 7, 2012, through Performics that sits with ZenithOptimedia, Publicis Groupe acquired performance marketing agency, Resultrix.

If industry sources are to be believed, Interpublic Group would soon have a digital agency acquisition announcement for India too.

Not that digital had ever become any lesser important for holding companies, or acquisitions lost any of its sheen in the digital expansion strategies. But the last this kind of action was witnessed in digital acquisitions was before the slowdown of 2008. The reasons then were different. Holding companies and their operating units were said to have fallen behind the digital race and the only way to service advertisers in the fast developing digital domain was to acquire digital capabilities.

However, in the last four years, agencies had made digital their central mantra. In the bid to augment their digital offer, companies are training and collaborating with digital media owners to understand the domain better, employees are being Google certified and learning from global best practices is being encouraged in an unprecedented manner. The reasons for eyeing digital capabilities today are hence slightly different.

Bringing the alternative skill set
Arvind Sharma, Chairman, Leo Burnett India explained, “Digital will continue to be a hot area, and part of the reason is that it is evolving. There would always be a digital specialist that would bring in a new perspective and flaunt a new approach to technology. Because, there would be new ways of using the digital space, from an agency point of view, acquiring those skill sets would have value.”

From a media agency head viewpoint however, it is not just acquiring alternate skill sets but acquiring capabilities that can make best use of the ‘big idea’. Ravi Rao, Leader, Mindshare South Asia elaborated, “The leadership in creative agencies may be keen on developing digital talent but as you go lower in the order, it is still the obsession with a great TVC or even a print ad that rules. So creative agencies may be coming up with the insights and the big idea but other specialist agencies, such as digital, run with the same idea and can create magic by adding their digital expertise to the mix. One reason to acquire specialist digital agencies is to address that.”

A slow market, a brand fit or just the talent...
The house is divided on whether a tough market contributes to acquisitions. For some, digital agencies, in India and abroad, are still struggling with liquidity. Rao pointed out that many digital outfits have to still come in the black. He said, “The staff cost to revenue cost is still high enough to effect business, so recession can play a role in driving agencies to sell at a price that may be attractive to the buyers but that is about all the role that it can play.”

The other point that contributes to a digital agency acquisition is whether it is a good fit to the buying company. Colvyn Harris, CEO, JWT India explained, “Digital agencies are very small. They have to first have a differentiating offer to be on the consideration set.”

Srikant Sastri, Country Chair of VivaKi India, is of the opining that the role a digital acquisition plays for a holding company and its operating unit is the deciding factor. He said, “Resultrix is a very strong agency in India, apart from other offices. It has a large presence in the performance marketing aspect of digital and that becomes attractive. But from here, Resultrix would be rebranded as a Performics company, dedicated to ZenithOptimedia. This would mean 100 more digital people to ZO, so it would strengthen ZO.”

Digital is just a word, according to Colvyn Harris, CEO, JWT India. He said, “What you do with the capabilities you acquire is important. The acquisition of Hungama Digital Services is just one of the points in the long term perspective of what JWT is trying to do. Hungama is a digital native but we also need to get our company digital savvy. The acquisition process will continue but it is important to focus on how the acquisition helps us in servicing clients better.”

Acquisitions will continue to play an important role in the building process of any company. The focus on digital reiterates that digital has evolved to a place, where it has strong subsets of its own – each of which, will begin to matter to advertisers and hence to agencies. The move to acquire as much of digital experience and talent wealth is not just catering to present requisites but building for future demands.

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