10th October 2016
Last week we at Green Square advised on a deal (featured in The Drum) which saw the acquisition of London-based search agency 4Ps by the French giant Netbooster.
We and the 4Ps team were delighted with the result as you might imagine, particularly as it flies in the face of Brexit fears, and the deal got me thinking about a number of things, specifically search and performance marketing.
It’s a discipline which has changed massively over the past few years – and as clients start demanding ever-better, ever more measurable returns on their marketing investments, I’m sure it’s one that will grow in importance.
One of the first great print advertisers, soap baron Lord Leverhume, famously said: “I know half my advertising isn’t working, I just don’t know which half.”
Were he around today, he might be a bit more certain where his money was going, and which of his campaigns were actually making an impact. Indeed, he probably wouldn’t believe his eyes in terms of how the advertising industry has changed. As we all know, the online activities of the vast majority of us are being tracked constantly – someone, somewhere, will probably be aware that you’re reading this piece, where you’re reading it from, what on, and how long you’re dwelling on it. If you click through any links, they’ll know about that too.
Contrast this with the days of print, which would have been the dominant marcomms channel when Leverhulme was alive.
As we all know, when purchasing an ad in a magazine with a big circulation (or a TV spot in a top-rating show), a brand owner must pay for that large audience – but many readers or viewers may still never notice the ad – or even actively avoid it, by going out to make a cuppa, channel-hopping or fast forwarding watching on their DVR.
The fact that a lot of ITV ad breaks currently feature no paid ads at all proves most advertisers now prefer a more measurable alternative. Whilst print, broadcast and outdoor continue to be effective, performance marketing (along with associated disciplines like affiliate marketing) is a medium created for, by, and unique to, the mobile/digital channel.
You can see why advertisers love it – they only pay for what’s seen or acted upon and can determine when and to who ads are served up. Of course, it’s not that simple – the system can be manipulated and results may be bogus. Plus, because much of the industry is automated, ads can be placed in inappropriate places. In the last few days Facebook has admitted to significantly inflating viewing metrics and this week apologised for accidentally listing guns, drugs and hedgehogs in its marketplace advertising section!
But on the whole, search, performance and affiliate marketing are disciplines with a big, big future, particularly when they’re married to creative data analysis and it’s possible to work out what the numbers are telling us and create relatable, actionable stories out of them.
While many of the big, established agency networks do performance marketing and data analysis perfectly well, I get the feeling that smaller, niche agencies that have been purposely built around the notion of search and performance are very attractive. 4Ps Marketing has a very impressive client list including Selfridges, Audi and Experian, but even more attractive to its suitors was the strength and creativity of its people and its focus.
Often doing just one thing, and doing it very well, is more profitable than engaging in a wide range of activities. Looking back at business history, in the 1970s and 80s the world was full of big, sprawling conglomerates (Hanson and Heron would be good examples). They fell out of favour a long time back, and nowadays we regularly see companies divesting themselves of non-core businesses rather than expanding into unrelated areas.
4Ps Marketing is that kind of focussed business. It was built from the ground up for purpose, rather than bolting on search on an existing business. This meant that potential buyers were reassured that the talent they were buying really knew what it was doing – and therein is a lesson.
Coming back to where we started, the fact that a French listed company wants to buy an entrepreneurial British one, is a very positive sign, especially given the concerns of the marcomms industry post-Brexit.
Although the pound has tanked against both the euro and the dollar, it does mean that our hard-pressed manufacturers will find it easier to export goods abroad; the UK becomes a more attractive place to visit (witness the huge surge in Chinese tourism over the past few weeks); and most pertinently here, British firms look like credible, and cheaper, purchases for foreign investors.
Whether this state of affairs will continue once Article 50 is triggered and we begin the two-year countdown and negotiations for our exit remains to be seen. However, I remain optimistic about the future of the creative and marcomms industries in this country for two reasons. One is our language. English is still – and will remain – the lingua franca of both business and communications, However, we should note that agencies residing in the other key English speaking creative hubs of Amsterdam, Berlin and Stockholm will probably see more acquirer interest than in the past due to their current on-going EU membership.
The other reason for my optimism is the sheer amount of creative and entrepreneurial talent we have here – not just in London, but also in the big regional cities. Green Square currently has clients in Leeds, Manchester, Newcastle and Birmingham – all of which are steeped in exceptional talent.
The quality of work coming out of our agencies is among the very best in the world, many of our tech businesses are “best in class” and entrepreneurialism, that desire to put an idea into action and start something new, thrives in the UK. Indeed, whenever we see an agency being acquired by a larger, more established company, I’m always struck by how quickly a new shop springs up, and how the supply of talent coming out of schools, universities and businesses seems almost inexhaustible.
Given that the creative sector is one of the engines of the economy – our creative industries are worth a whopping £84bn a year to our economy – I think that is good reason to remain optimistic.