M&A round-up: The rise of channel marketing and the decline of ‘conventional’ ad agency acquisitions

5th June 2015

As the month of May draws to an end, one thing leapt out at me as I looked back at some of the deals of the past four weeks or so – and that was that of the dozen or so deals done during the month, hardly any were ‘conventional deals’.

When I say ‘conventional’, I mean an ad agency buying out, or acquiring, a majority stake in another agency, or two agencies merging. But this kind of deal has been in decline – if that’s the right word – for a while now.

These days, it’s all about acquiring capabilities – to beef up an offer, perhaps, or to expand into new channels.

Interestingly, most of the deals during May link into the field of channel marketing. We’ve looked at this before in The Drum of course, but as so many deals were done in May I thought it would be appropriate to revisit it.

For those who don’t know, channel marketing is the use of partnership to allow a brand or service to reach a wider audience, rather than just trying to sell one thing in one place. In effect it’s a kind of B2B marketing that has been used for ages by tech companies (eg Microsoft or Sandisk working with vendor or retailer partners) and by the grocery industry (eg Heinz working with the supermarkets) to reach end users or consumers. Another example might be a jeweler selling on QVC rather than via a few specialist jewellers; or selling beer at music festivals and football games rather than just through pubs and shops.

As a channel – or perhaps more accurately, discipline – the lines of what defines channel marketing have become increasingly blurred, and it increasingly overlaps with other forms of B2B marketing, shopper marketing, events, experiential and even performance and affiliate marketing.

One of the longest, but most effective channels, is the impulse/convenience retail chain. In the latter, a manufacturer would typically supply, say, crisps to a wholesaler, who would then supply a corner shop, whose owner/staff would then pass on to the crisps to the consumer. At each stage, marketing is involved: manufacturer to wholesaler; wholesaler to retailer; and finally retailer to consumer.

Sometimes there will be marketing from the manufacturer directly to the consumer – in the form of a TV advertising campaign for instance – but for this (expensive) investment to succeed, everyone in the chain or channel has to have bought in to the idea and to stock and pass on the product: no good advertising something that can’t be bought anywhere.

For channel marketing to be effective, relationships and support networks have to be built. Specialist agencies are often used for this purpose. An example of this would be 3ree, an agency based in Singapore, which was last week acquired by Always Marketing Services, China’s leading field and shopper marketing company (which is majority-owned by WPP network JWT).

Founded in 2010 by Tan Li Li and Isabel Cheong, 3ree offers event management, sourcing and production of marketing premiums, project management for exhibitions and activations, and design and creative services, as well as digital marketing; so it’s a classic channel marketing agency.

Always offers trade marketing, including merchandiser management and retail audit; retail marketing, including promoter management, in-store activation and retail environment designs; as well as shopper marketing, including point of sale design, events and road shows, as well as premium design and production.

The two businesses complement each other very well (and 3ree fits in nicely with WPP’s long-term strategy of making acquisitions in growing territories or channels) and the acquired agency has business in key Asian markets, including Malaysia, Indonesia, Vietnam, India, Japan, Korea and Australia. Clients include Microsoft, Mitsubishi Electronic, Seagate and StarHub.

We’ve written before that the big audit and management consultancies – EY, KPMG, PWC, Deloitte, McKinsey and so on – with their ability to offer strategic insights, represent one of the biggest challenges to the established agency networks, so it was no surprise to see KPMG snapping up Nunwood, an independent consultancy specialising in customer experience management and feedback technology a fortnight ago.

Founded in 1996, Nunwood has offices in Leeds and London. Advising companies across the retail, telecoms, financial and leisure industries, its acquisition enables KPMG to offer a full-service customer management programme to its clients, from mapping the customer journey to measuring ongoing feedback. Nunwood’s ‘Fizz: Experience Management’ technology is used by organisations like British Airways and Nationwide to provide customer information to hundreds of managers, often in real time.

Commenting on the transaction, Richard Fleming, head of advisory at KPMG, told the media: “This deal is strategically very important to KPMG as it will enable us to provide clients with the tools they require to be truly customer-centric. Nunwood’s understanding of the issues driving customer behaviour, and the way they focus on improving customers’ experiences mirrors our approach of putting technology at the heart of everything we do.

“By combining forces we will be able to help clients take action, so that each decision they make is based on real-time customer feedback. At a time when companies are worrying about their market share, the combination of KPMG’s Customer and Growth capability with Nunwood’s expertise in managing the customer experience will create an advisory business ideally placed to help our clients as they grapple with the realities of a fluid customer-base that is increasingly selecting services on the basis of their experiences.”

Again, from those remarks there appears to be an intent to sew up the channel experience. On a smaller scale, another recent channel marketing deal that caught my eye this month was digital agency Stickyeyes’ acquisition of Peterborough and London-based content marketing agency Zazzle Media. Content marketing is a discipline which has an increasingly close relationship, and overlap with, channel marketing.

So it’s another astute buy: the joining of the two companies represents a very good fit of digital and content marketing expertise. Both brands will remain independent, but will work in an integrated fashion: Stickyeyes will continue to provide SEO, paid search, social media, PR and digital consultancy Zazzle the content marketing.

And there have been more – Publicis’ media network ZenithOptimedia’s acquisition of the Czech and Slovak performance marketing agency B2B Group; UK outfit Periscopix being bought by the giant US Merkle group; or Candy Crush tycoon Mel Morris’ investment in Derby-based channel specialist BriefYourMarket.com (which specialises in intelligent, preference-based newsletters and e-mails). As a side note, it’s worth pointing out that BriefYourMarket.com achieved growth of 3,821% in the space of just 12 months, making it one of the UK’s fastest-growing companies.

There was also the April merger between Pink Gorilla Marketing and Hairy Lemon Events in Leeds, creating a company (the somewhat inelegantly named Pink Gorilla Hairy Lemon) that will on fashion shows, bar and restaurant launches, sample sales and corporate events. Given that Leeds is starting to boom again after the recession, and has a comparatively young population, it’s not hard to see PGHL picking up clients pretty quickly.

Even last month’s £190m buyout of price comparison firm uSwitch by property site Zoopla, which looks on the surface to be one internet company buying another, demonstrates the importance of channel marketing in today’s increasingly blurred marketing landscape.