Op-Ed: Memo to Ad Agency Holding Companies - You Blew It!
I was reading through Adweek magazine recently and came across an article titled "Hunt Grows Desperate as Digital Pool Shrinks" (Adweek, Sept. 3, 2007). The gist of the article was that there is a quickly diminishing number of independent digital shops to be purchased by the major holding companies -- WPP, OmniCom Inc., Publicis, Interpublic Group (IPG) -- in their rush to offer clients a true suite of digital marketing services in an increasingly Internet-focused world.
And the article is correct. Digitas, AKQA, aQuantive, 24/7 Real Media, DoubleClick and many smaller shops all have been purchased in the last year. Interestingly, the focus of most of these shops is either Web site design and display advertising or ad-serving technology. (Sure, they might talk a broader game, but facts are facts).
A question quickly came to mind as I finished the article: Where were you guys when all the top e-mail marketing companies were getting purchased by the big database companies?
Little noticed in the wider advertising community was the buying frenzy that occurred between 2003 and 2005, when many of the top players in the e-mail marketing space were acquired by big database marketing companies. It started with the purchase of Yesmail by infoUSA in 2003. Digital Impact then was purchased by Acxiom in early 2004, quickly followed by Experian's purchase of CheetahMail. Later that year, Harte-Hanks acquired Postfuture. And not to be left out, Epsilon then bought Bigfoot Interactive in late 2005. Because Digital Impact had purchased Marketleap, a leading search marketing company in 2003, Acxiom actually found itself in the e-mail and search marketing business following its acquisition.
What was behind this buying frenzy? Certainly there was a degree of "follow the leader" and not wanting to be at a competitive disadvantage. All of these database marketing companies go head to head against one another. But there also was sound strategic thinking behind these acquisitions because the data collected and managed by the e-mail marketing companies is a major component of any client's marketing database. In addition, many of the products and services provided by the database marketing companies, like appends and real-time customer recognition, were of immediate value to the clients of the e-mail marketing companies.
In many cases, we dealt with the same people on the client side as our new owners. The hoped-for synergies actually existed - surprise! - and clients benefited from the acquisitions: fewer vendors, better pricing, more stability and increased capabilities.
So how could Martin Sorrell, CEO of WPP, John Wren, president/CEO of Omnicom and the others miss the boat? My guess is that they looked at e-mail marketing providers as technology platforms, and they focused much of their interest on digital companies that, in many ways, merely did in the digital world what WPP and Omnicom and IPG already were doing offline -- advertising. The agencies that make up the major holding companies traditionally have focused their efforts and business models on non-addressable media such as radio, television, etc., and they see online display advertising as non-addressable, whereas e-mail is an addressable media. And so they didn't pay enough attention to the massive changes occurring right before their eyes in technology, the Internet and consumer behavior.
On the other hand, the big database marketing companies looked at the e-mail marketing providers and saw marketing services companies with unique expertise in database marketing across Web channels and devices. In acquiring Bigfoot, Yesmail, Digital Impact and the others, database companies like Epsilon, InfoUSA and Acxiom gained new expertise in digital strategy, creative and technology that already was present in these leading e-mail service providers. Because, believe it or not, these companies were and remain marketing agencies to one degree or another. (Acxiom Digital, formerly Digital Impact, is listed as a Top 25 interactive agency by both Adweek and Advertising Age.)
And because these e-mail providers also came from a world where the timing, content, offer and frequency of messaging is based on data, they were and are way ahead of most digital shops in approaching digital marketing from a fully integrated perspective - from search to segmented e-mail to landing pages to dynamic site content to all variations of targeted display advertising.
It will be very interesting to watch what happens when banners become addressable and when new addressable media - like mobile - gain greater adoption by marketers. As time goes by, more and more digital media will be addressable, leading to an intriguing set of strategic decisions for both the major agencies and the direct marketing services companies operating as part of the holding companies. It's clear to me that some of the companies they really should acquire are long gone.
Sorry holding companies, but you really did blow it.
Chris Marriott is vice president and general manager, eastern region, for Acxiom Digital, the Foster City, Calif.-based integrated digital marketing solutions division of Acxiom Corp. Reach him at firstname.lastname@example.org