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Digital marketing's new 800-pound gorilla

Business Maverick

Business Maverick, Media

Digital marketing’s new 800-pound gorilla

The big trend in advertising, both locally and abroad, is acquisitions of digital talent by traditional agencies wanting to capture growing online and mobile marketing spend. But watch for the push from the other side, as digital agencies scale for growth and seek a bigger slice of the branding action. By MANDY DE WAAL.

In one of the biggest marketing consolidations in the digital industry, Cambrient, Stonewall+ and Brandsh will merge in October and bring Jason Xenopoulos on board as CEO of a new full-service agency called Native.

Xenopoulos’ brainchild, the 120-person agency has big ambitions. The most audacious being evolving Native into a lead strategic advertising agency that owns the client in a landscape where mobile and digital outfits have largely been suppliers to advertising agencies.

A filmmaker trained at New York University, Xenopoulos is no stranger to start-ups. At 24 he co-founded VWV Interactive before moving on to Metropolis Transactive, which was formed, listed, raised R100 million and grew from a team of three to 300 in little more than two months. Like most players in the dot.com era, Metropolis didn’t survive the Internet boom and bust. More important is Xenopoulos’ recent experience at Young & Rubicam where he led the creative effort that helped the agency win MTN and earned him the appointment of creative director.

Xenopoulos says the role of digital agencies as a third-tier service provider has changed abroad and, although the local market is not as mature, is also changing locally. Native is positioning itself ahead of the curve. “South African digital agencies haven’t been ready to assume the mantle of lead agency for two reasons. Firstly, most digital agencies don’t provide a full-service offering, even though they say they do. Some are great in design, but don’t have strong technical skills. Others offer a brilliant web service, but aren’t up to speed when it comes to social media.”

The second problem says Xenopoulos is that digital players arrive late at the brand custodianship table. “Most digital agencies come into the mix later, rather than sooner. By then someone else has developed the strategy and the big idea. This relegates the digital agency to a supplier, a mere implementer rather than a key strategic partner. Digital has always been a poor second cousin in the mix, but the power is changing.”

Xenopoulos says the big problem with local digital agencies is that they offer a strategy born of their own particular strength, rather than an “agnostic strategy” that suits the brand. “What we’re saying is that digital should be represented at the point of strategic conception because it has a more transformative effect on your business. The only communication that really works is one that’s fully integrated.”

Native won’t immediately compete with the likes of Ogilvy or The Jupiter Drawing Room, but won’t shy away from traditional execution like radio and television if this is a requirement. Although the long-term gambit is client ownership, Native will partner with traditional agencies offering a full digital service to “add value to the lead table” says Xenopoulos.

In a fractured digital marketing landscape where agencies or brand owners have to source a number of digital partners from complex disciplines with which they’re not typically au fait, a one-stop-shop like Native makes a lot of sense. The rise and rise of social media and increased sophistication of digital marketing technologies have made customer acquisition, retention and conversion a highly specialised skill.

But digital advertising’s a burgeoning sector with both traditional and online agencies eyeing the rising spend. This is evidenced by Ogilvy’s headhunting online heavyweights Nic Wittenberg and Laurie King, and the agency’s establishment of a digital marketing academy earlier this year under the directorship of the highly respected digital tutor, Dave Duarte.

By contrast, digital agencies are acquiring traditional intellectual property, as seen with Quirk eMarketing which brought on advertising grey beard Mark Sherrington during the latter part of 2009. The former global marketing director of SABMiller, Sherrington started and built international research and communications agency The Added Value Group, which was later acquired by WPP.

If Native’s looking for a competition, they’re going to find it in Quirk. Like Native, Quirk is a full-service digital agency, but one that’s grown organically and already has a budding London office. The 80-person agency beefed up its Johannesburg office by bringing in Internet Solution’s Justin Spratt as a managing partner, and looks to be on a strong growth trajectory. Quirk won Distell in a joint pitch with Stonewall+ earlier this year, and it will be interesting to watch if that account remains split across the two agencies given Stonewall+’s new direction.

Managing a successful integration after the merger is likely to be Native’s toughest challenge. Xenopoulos says the new company structure is a complex one with Cambrient, Stonewall+, Brandsh and himself shareholders of the new company. The merger will see no retrenchments, but could see staff growth.

Stonewall+’s Ben Wagner says the deal took just four months to complete. “We were blown away by how easy it was to do the merger, but a merger is only a merger once the three organisations are working together cohesively as one. We’ll be trading as Native from the 1 October, but there’s some groundwork to be done to ensure the teams are aligned. We have come some way and understand our respective strengths and weaknesses,” said Wagner.

An executive committee member of the recently formed Digital Media and Marketing Association, Wagner says digital’s share of the advertising wallet is shifting rapidly. “Online spend is understated in this country because Google doesn’t report.” The official figure for digital spend, according to Wagner, is some 2.5% of all advertising spend. Including Google, which routes funds through Ireland and Israel, could push that figure to 4.5% or 5%. “South African online advertising spend is set at R600 million and mobile at R250 million,” says Wagner, who is reluctant to give Google’s figure. Industry insiders put Google’s share of the pie at about R600 million which could mean about R1.5 billion for digital media excluding production, creative or strategic fees.

Cambrient’s Jarred Cinman says sales and finance would be the first points of integration for Native. “Finance and sales are our high-priority areas for collaboration. We don’t want to damage any of the three businesses in this merger so we will obviously focus on low-hanging fruit.” Cinman says immediate feedback was that merger had upped the industry stakes. “For existing clients there won’t be an immediate change, but for new clients the opportunity will be to broaden their relationship with us and consolidate their accounts in one place. We currently have work spread across multiple partner agencies with which we have strong relationships, and are careful to say that will go on.”

A big differentiator for Native, according to Angus Robinson of mobile media agency Brandsh, will be campaigns that deliver a direct response opportunity. “In future all advertising will have some direct response mechanism integrated into the campaign. Gone will be the days when beautifully shot, stunning campaigns for R10 million or more deliver only warm and fuzzy feelings. The age of creative blockbuster ads is coming to an end. The future is all about what comes after the ad, the direct response opportunity that engages customers.”

Andy Rice, one of South Africa’s most recognised and well-regarded brand strategists, warns Native not to get overly obsessed with the digital channel. “An agency that wants to be a lead agency shouldn’t be defined by a channel. It should rather be defined by its understanding of the consumer in relation to the brand,” he says, adding that if Native had ambitions to be an agency of record, they’d need to beef up their skills outside of digital. Rice also warns that scaling up could bring a decrease in innovation. “Agencies should only grow critical mass if this offers a huge advantage. Most agencies experience their most creative stages when they are smaller and become increasingly more conservative and risk averse as they get bigger,” Rice says.

Photo: Photo: Jarred Cinman, Cambrient, Ben Wagner, Stonewall+, Jason Xenopoulos, Angus Robinson, Brandsh.

Read more: “Merger sees three key digital agencies combine for scale” by Herman Manson. Visit: Native, Quirk Marketing.


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