Client Demands Spark Web Shops’ Global Expansion

After a yearlong search, aQuantive’s Avenue A/Razorfish last week made its long-awaited move outside the U.S. market, kicking off its international expansion with the purchase of London-based DNA.

By adding the full-service U.K. shop, which handles both media and creative services, Avenue A hopes to jumpstart a rapid expansion through acquisition in Europe and Asia, helped by a stock price that’s tripled in the past year and its $87 million in cash. “We have conversations going on across the globe,” said Clark Kokich, who was named worldwide president of Avenue A in September to lead the growth strategy.

Avenue A’s move highlights one approach U.S. Web shops are taking to satisfy increasing client demands for global reach. “They’re going to want global coverage with their programs,” said Kokich.

But it’s not just clients wanting global reach; they also want to capitalize on the expertise honed in the more advanced U.S. market. “They’re seeing their U.S. programs succeed, and they want to take that success around the globe,” Kokich added.

In some ways, Avenue A is playing a game of catch-up. Omnicom’s Tribal DDB has 33 offices in 21 countries, adding 10 in the last year alone. Isobar’s Carat Fusion (part of Aegis Group) has built a network of shops in 33 countries, recently focusing on emerging markets like Poland and Hungary, said Sarah Fay, U.S. president of Isobar. “We feel really strongly you need local representation in order to be credible and do good work in that market,” she said.

Avenue A’s nascent expansion will allow clients like to consolidate their Web efforts. The diet company is using different interactive agencies in three European markets, while relying on Avenue A in the U.S. and Canada. This makes data-comparison difficult and creates redundancies, said Sean Foster, vp of marketing, who plans to use Avenue A globally. Often, these less-mature Web markets lack the U.S.’s sophistication, he added. “The interactive marketing in many of these countries is in its earliest stages, and there’s not as much local knowledge,” he said. Still, adding top local shops can boost Avenue A’s market-specific media and cultural insight, he noted, which will grow in importance as expands.

While Avenue A plans to mostly buy its way to global scale, smaller agencies are taking an organic expansion route. Interpublic Group’s R/GA has its eyes on opening outposts in Shanghai and Tokyo in 2006, which would join the London office it opened this year. AKQA says it is considering a move to China, to complement its longtime offices in London and Singapore. Yet, CEO Tom Bedecarré hastened to add that AKQA, an independent without the financial wherewithal of a publicly traded company, would concentrate on a regional approach. “We don’t need to be in every country in the world to be able to reach everywhere in the world,” he said.

Similarly, Digitas, which has a London office and a small presence in Frankfurt, Germany, is in no hurry to “put dots on the map,” said CEO David Kenny, despite being publicly traded with $155 million in cash. He thinks the notion of needing a physical presence in every market is a relic of the traditional ad world, where TV and print require it. “The model of having lots of real estate and people around the globe isn’t as necessary in a technology-enabled medium,” he said.