Zenith Media's recent purchase of online shop Moxie Interactive marked at least the third time this summer that a traditional agency has snapped up an online shop. That pattern is likely to continue,
say industry observers.
"Most of the major agencies are aggressively looking at interactive and search agencies," says Tolman Geffs, managing director with investment bank The
Jordan, Edmiston Group, which specializes in media. "Their clients are insisting on it."
Geffs and others say that as marketers shift budgets online, traditional agencies increasingly feel
pressure to offer interactive capabilities. The alternative is to risk losing business--either to independent Web shops or to rival traditional agencies that have a solid interactive presence.
"Clients are demanding that there be an allocation of online to the budget," says Seth Alpert, managing director of media-investment house AdMedia Partners. For agencies, such demands translate into a
mandate to beef up interactive capabilities. "It's not just nice to have it. They have to have it," Alpert says.
In fact, AdMedia in January predicted that, as budgets migrated online, interactive agencies would be courted for
mergers.
So far this year, with at least three major consolidations, it seems that prediction is bearing out. In addition to the Zenith Media/Moxie Interactive deal, other notable recent examples of traditional agencies buying
interactive shops include Omnicom Group's purchase of a majority stake in 6-year-old
EVB, a 50-person Web shop, and WPP Group's Wunderman acquisition of interactive shop
Zaaz. In addition, late last year, WPP's Wunderman unit acquired Bridge Worldwide, a 120-person interactive shop that has done online work for Procter & Gamble.
In some ways, the spate of deals
is reminiscent of the first dot-com boom era, when traditional agencies also picked up Web shops; Omnicom, for instance, bought stakes in a host of interactive agencies, including Agency.com and
Organic. But deal activity slowed down after the crash and has only recently started up again, in the wake of marketing budgets shifting online.
Currently, Geffs says, at least six large
interactive agencies are ripe for acquisition. He added that some of the shops in highest demand work on campaigns for movie studios and TV networks--which both are devoting resources to online media.
One entertainment-oriented shop, Deep Focus--which has created online campaigns for shows including HBO's "Entourage," and movies including Miramax Films' "Kill Bill: Vol. 1 and 2" and MGM's "Be
Cool"--is drawing far more interest now than in the past, says CEO Ian Schafer.
Schafer estimates that he currently receives at least several calls a month from potential suitors, up from about
one a month last year at this time.
"We have been approached, rather informally, by many kinds of entities," Schafer says, adding that venture capitalists as well as large agencies and holding
companies have expressed interest in buying the shop.
"I'm not out there soliciting offers," he adds. "They just happen."