• by Joe Mandese  @mp_joemandese, April 2, 2008

Just before sitting down to pen this letter, I met with Paul Parton. When he's not a writing a monthly column for Media ("The Consumer"), Paul is a partner in The Brooklyn Brothers, a spunky ad agency known for creative campaigns that leverage acute consumer insights.

I gave Paul the last issue of Media. He handed me what looked like a pink paperweight, but turned out to be a Fat Pig, a new line of chocolate that will soon be showing up in high-end coffee shops and other specialty stores. What makes this particular chocolate bar significant, other than the fact that it was quite delicious, is that it is a new Brooklyn Brothers brand - not a brand that the agency created for one of its advertising clients, but a brand that it has created for itself. And that, dear readers, is nothing to snort at.

Agencies, by definition, are entrepreneurial, but a new wave of entrepreneurism is sweeping Madison Avenue. So it shouldn't be surprising that The Brooklyn Brothers market a whole line of its own branded goods - everything from chocolate to a licensing deal with legendary Russian-motorcycle brand Ural.

Product marketing is not new for agencies, but they generally don't boast about it. Years ago, when I was profiling J. Walter Thompson for Adweek magazine, I was surprised to learn that the agency owned companies that manufactured egg cartons and surfboards. And this was in the days before the Web, and agencies really had to rethink their business models. Some shops are developing business models and services that may benefit their clients indirectly, but are also designed to benefit their own shareholders directly.

This trend is most evident in a series of venture units blossoming within agency holding companies, and specifically, within their media units. Over the past couple of years, big agency holding companies have invested in everything from Facebook to Spot Runner. They've said they do this to have a strategic position in businesses that have the potential to alter the way their clients market to their consumers, but agencies don't invest their own cash in businesses unless they expect a capital return as well. And while some of those investments may not necessarily be liquid, they appear to be generating returns. Interpublic's investment in Facebook - believed to be for only a few million dollars - generated a paper return worth some $150 million after Microsoft took a sizable, and very public, stake in the social network.

Agencies have been making far less visible investments - some for cash, and some in exchange for their "intellectual capital." That's been a model favored by Publicis' Denuo unit, which has been taking positions in an array of promising, emerging digital media services companies. Publicis' Starcom MediaVest Group also hinted at a similar entrepreneurial lust when it made an offer to "partner" with Donovan Data Systems to develop a new, state-of-the-art digital media processing system for Madison Avenue. DDS rebuffed that offer, but SMG explored a variety of other scenarios for building and marketing its own system. Its financial goal was to defray the heavy costs associated with licensing data processing systems such as DDS to handle its core business transactions, but the moves reflected some of the entrepreneurism that is spreading through the business.

More recently, Havas's digital unit has quietly created its own online advertising network: a business that leverages its powerful Artemis online data management system, and which is capable of serving ads to more than a third of the world's online user population. The deal reminds me of a similar online venture incubated years ago by another Madison Avenue shop that was eventually spun-off as a dividend for its shareholders. That shop, Bozell and its Poppe Tyson unit, no longer exists. But its spin-off does. It's called DoubleClick.

Now it's hard for me to imagine that The Brooklyn Brothers will generate that same level of return by investing in a new line of "oinkganic" milk chocolate, but if history has a lesson, it's that agencies, on occasion, can be their own best clients.

Joe Mandese
Editor-In-Chief