• by Mark Simon , April 16, 2007

Last week was acquisition week for new-media firms. The Interpublic Group bought Reprise on Wednesday. Friday night, Google announced plans to buy DoubleClick for $3.1 billion, nearly doubling the $1.6 billion it paid for YouTube and setting the stage for the largest buy in Google history. But while this past week was unquestionably a landmark one, the trend of larger firms acquiring smaller new-media shops has been gaining steam for quite some time.

For a few more examples, check out the recent MediaDailyNews article that notes: "aQuantive, holding company for Avenue A|Razorfish, snapped up Go Toast in 2003. DoubleClick has Performics. Omnicom owns Resolution Media, and Aegis Group snapped up iProspect." Another example would be Inceptor, which Verizon Superpages bought last year to form a core part of Idearc. If you're a new-media firm -- and especially if you're in the search business -- the name of the game seems to be acquisition by someone larger.

But if there's a trend at play here, is the trend really good for the industry? In the short term, I'd have to say the answer is no -- even though, taking the long view, there's a lot to say in its favor. I say this because, whatever the benefits, the acquisition trend is terrible for employee retention.

As anyone who works in this industry knows, employee turnover is astronomically quick at new-media agencies. For anecdotal evidence, check out a few new-media trade shows like last week's SES New York. You'll see more or less the same people at every show; but pay attention to how many of those people switch booths from one show to the next. The numbers are pretty high.

The acquisition frenzy is unequivocally a key factor in employee churn, because it turns the job scene into a buyers' market. Like the frenzy of new media IPOs in the '90s, the push towards acquisition drives companies to focus on reaching a finish line -- in this case, that of being acquired by a larger entity. What evolves is a seemingly endless cycle of start-up, expand, get acquired, repeat; that cycle gives employees an ever-growing pick of new employment opportunities. Meanwhile, the companies who are racing toward the finish line are also competing over a limited talent pool, which makes for a good deal of poaching. All of this makes new media a great place to work these days -- but it also makes it very hard to hang on to your workforce.

So how do you get employees to stay with you through an acquisition frenzy? The key lies in providing them with the right education. If you offer employees the training they need to advance their careers -- an investment that might take years for them to reap fully -- they'll stick with you longer. That's because they'll understand that you're grooming them to be a marketer who stands head-and-shoulders above the rest of the job pool, and so every additional year with you means an advance in their earning potential.

To offer the kind of education I'm describing, companies need to offer both formal training and hands-on experience on a level that goes beyond just learning to do the task at hand. It also requires guidance from managers, who need to be there to help employees figure out where they'd like to take their careers next, and who need to let employees explore different career paths within the framework of the company. If new-media companies constantly train employees with the next five years in mind, employees will respond in kind by staying for more years.

For many companies, this is a very different approach to workforce management. But in our world of exorbitantly high turnover, we new-media companies can't afford to take any other approach. And as the new-media acquisition frenzy grows, education will become a key divider between the companies that win -- and those that simply lose their workforce to their competitors.