GroupM, the media investment arm of the world’s largest advertising agency holding group WPP, confirmed on Wednesday that it had acquired a majority stake in independent London-based digital media agency Essence Digital.
The financial terms of the deal were not disclosed (London Stock Exchange rules dictate that companies do not have to disclose the price of an acquisition if it is not material to the business, in this case, WPP.) Essence is a 10-year-old agency that employs more than 500 people, managing more than $US700 million of digital media spend for clients including Google, HP, and The Financial Times.
We caught up with GroupM chief digital officer Rob Norman to find out why the deal came about and what value it will add to GroupM, the largest buyer of media in the world.
The process of buying Essence was like “being mugged by a tortoise”
Norman told Essence has been an object of desire for GroupM for “years,” but it was not willing to sell. The company had gained fame by being the ad agency that utilises Google’s ad products better than Google does, and through the creation of its own internal content management suite Olive.
He described the process as like being “mugged by a tortoise.” He retells a joke of a tortoise crawling into a police station, battered and bruised. The tortoise laboriously makes his way through the door and takes ages to get inside before he slowly taps on the window. He asked what on earth happened to him, and he goes on to say that he was attacked by three other tortoises. “Can you give me a description of who did this to you?” the police officer asks. And the tortoise responds: “No, it all happened so quickly.” (Norman admits the long, stand-up version of the joke is better.)
“I’m sure everyone had a look at Essence,” Norman said, although he declined to say which other companies were competing to buy the agency. Business Insider understands Dentsu Aegis also held talks with Essence, although a Dentsu spokesperson said the company had a policy to decline comment on rumours.
Norman says the process was less of a bidding war, and more that the company’s shareholders and employees went where they felt there was a cultural fit — although he admits price probably played a part.
Essence CEO Christian Juhl met with GroupM’s executives in Cannes back in June 2014. But it was at CES this year, when he met with GroupM CEO Dominic Proctor that conversations about a potential acquisition really accelerated.
Essence helps WPP become a more friendly “frenemy” with Google
WPP CEO Sir Martin Sorrell has long described Google as the “frenemy.” Google is WPP’s biggest media partner — GroupM spent $US2.9 billion, or 4% of its media bookings with the tech giant last year — yet Google also carves off huge chunks of WPP’s potential revenue through its ad tech business.
As Google’s digital media agency, Essence gets first-mover advantage and is allowed access to alpha and beta testing of its new tools. Will that remain now Essence is no longer an independent agency? Will it be more willing to fraternize with the frenemy? Norman thinks so.
He said that Google’s view is that if Essence’s work gets visibility within GroupM, then that’s a good thing. Hopefully that will mean the desire to use Google’s products will probably go up in the minds of the big media buyers within GroupM. (It’s worth noting that Essence isn’t the only outside agency Google works with. OMD Worldwide, owned by Omnicom Group, works with Google on traditional media buying, for example.)
And Google is “very happy” that Essence CEO Juhl is on the GroupM executive committee, Norman added.
Essence will give GroupM access to a huge new pool of talent
Founded just 10 years ago, Essence is an agency that was born without the shackles of a legacy business. Its employees are all digital natives — some of which are so young, Norman jokes that he was seen as the “grandfather” when he visited Essence’s San Francisco office.
While he was there, he asked them all two questions: “Where were you before Essence, and what school did you go to?”
The answers ranged from IT company, agency, to start-ups. When it came to schools, three people in a row said Princeton.
“That was really interesting to me. No offence to our business, but we don’t have a huge queue of new starters to join us from Princeton, I feel very encouraged by that,” Norman said.
He added that people often refer to the “war for talent” within the advertising agency world. But he feels he has “won a significant battle” by acquiring 500 people in one go — including an impressive CEO who has now become the youngest person on GroupM’s executive committee, representing the smallest agency company on the committee.
GroupM plans to let Essence stay autonomous — for as long as it wants to
While GroupM is acquiring the majority of Essence, it will continue to operate as an independent brand. The Olive system won’t just be retro-fitted to GroupM’s network, for example, and it will continue to compete for new business independent of the other agencies in the group — although it will collaborate with them on some work.
Norman said: “If we decide to change the Essence culture, we will lose its people. The senior people have lots of chops in the game, so if we make it culturally difficult, they will leave.”
But he adds that there’s some “reverse psychology” at play: “The more you tell someone ‘you can stay independent,’ the more curious they will get about the opportunities you can give them.”
GroupM’s other agencies include Mindshare, MEC, MediaCom, and Maxus.
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