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AKQA Acquires App Agency Potato

The deal brings WPP closer to 'frenemies' like Google

Potato's relationship with Google made it an attractive acquisition. Sources: Potato London, WPP

Recent merger and acquisition activity has mainly taken one of two forms.

On one hand, consulting and technology firms seeking CMO dollars have gobbled up ad shops. Examples include Deloitte's acquisition of Heat last week and IBM's January absorption of Resource/Ammirati, one of several deals the tech giant has made.

Conversely, traditional advertising companies have made buys in an effort to broaden their appeal and become more competitive.

Monday's sale of London-based digital shop Potato to WPP's AKQA in San Francisco falls into the latter category.

Potato, which employs 100 people in the U.K. and U.S., specializes in building Web apps. The agency claimed about $10 million in revenue last year.

"There is a huge opportunity in the space where marketing meets technology and engineering," said Mark Cox, director of mergers and acquisitions firm Results International. "It's a fast growing area that WPP is following very closely. And increasingly, there is a talent war to secure the people and the businesses that speak both languages. Potato ticks each of those boxes."

Google's presence on Potato's roster likely sweetened the deal, much as it was a factor in the holding company's acquisition of Essence Digital in November. "[WPP CEO] Sir Martin Sorrell is wisely keeping his 'frenemies' close at hand, and this acquisition is another means of WPP staying close to powerful Internet giants," Cox said. In addition to Google, Potato's clients also include Skype and PayPal.

WPP has said it wants to derive up to 45 percent of its revenue from digital in the next five years. Currently, its digital revenue amounts to 37 percent, or $7 billion.

In January, the holding company's Grey operation—Adweek's reigning global agency of the yearsnapped up ArcTouch, a mobile-app development company.

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