These are boom times for digital agencies—particularly those that have stayed in stride with the latest hot trend. Where search was the discipline clients craved five years ago—thanks, Google—social and branded content have become the predominant forms of digital messaging over the last 18 months. Those shops that have successfully developed their full-service muscles while keeping their search functions strong for clients are winning—and continuing to hire and grow. But it’s no easy feat.
Just ask iCrossing.
In an era when brands are publishers and when everyone wants an Oreo moment or a Claude Van Damme stunt video, digital agencies like Razorfish, SapientNitro, 360i and AKQA are hiring hundreds of folks due to an explosion of content marketing. Hearst-owned iCrossing, it seems, has followed a far less stellar trajectory. The New York agency has suffered considerable upheaval among its upper-level creative talent, experiencing an exodus that raises eyebrows even in the revolving-door world of advertising.
Just last week, iCrossing’s head of social, Amanda Peters, exited the company for another opportunity, Adweek has learned. Shoshana Winter, svp of strategy and planning, parted ways at the start of 2014. But departures also plagued the shop throughout 2013. Don Scales abruptly stepped down as CEO in June. Late last year, chief client officer Colin Turney and evp of global development Marlin Jackson quietly left their posts. Svp of marketing David Deal left in July, and Ashmi Elizabeth Dang (associate director of social media) and Jessica Burdman (svp client operations) took off in August, while svp of market research Lisa Ponte Fazio left around the same time. COO and evp of corporate development Rod Lenniger departed in October, senior accounts director Stewart Campbell left in May, and Rachel Pasqua (vp of mobile) and Tarah Feinberg (head of iCrossing’s content division, The Studio) left in April. In January 2013, vp of strategy Rob Garner—interestingly, the author of a book called Search and Social: The Definitive Guide to Real-Time Content Marketing—moved on, as did vp and executive creative director Paul Beddoe-Stephens.
The agency wouldn’t specify who has been replaced, but says it plans to fill Peters’ and Turney’s spots and is advertising to hire more staff. Oddly, the words “social” and “content” rarely appear in the job descriptions. Most openings are for search-centric gigs. That implies that social has been put on the back burner in favor of performance-based search, compared to a couple of years ago at iCrossing.
What happened? Why the exodus?
“I felt, quite frankly, we had a senior level that was heavy for an agency of our size and had to take a hard look,” explains Brian Powley, who replaced Scales as iCrossing’s global head six months ago. “The CEO leaves, someone else takes over, and the company goes through a period of transition. With that transition, people decide to leave the company.”
But is it merely a transition? Or is iCrossing an example of a prosperous search agency that is struggling to expand outside the realm of its cash cow? Hearst Magazines CEO David Carey argues that iCrossing “is a solidly profitable business,” but adds, “for a period of time [it] hired aggressively against the revenue curve.”
At last check, according to a source close to the situation, iCrossing as of November counted seven fewer employees than it did at the same juncture the year before, hovering around the 900 mark. (Hearst is a private company, so specifics are hard to come by.) While this is clearly more of a flat line than a free fall, by contrast the generous hiring sprees of its digital competitors invite questions about iCrossing. Razorfish grew its staff by more than 800 in 2013 to 3,000 total; SapientNitro spiked to more than 7,000 employees from 5,900; AKQA says it jumped from 1,200 to 1,500 staffers; and 360i grew from 500 to 625. (To be fair, per sources close to the situation, iCrossing has grown its social team from 14 to 36 in the last year, and apparently doubled its social revenue.)
Asked to make sense of all the numbers above, Russel Wohlwerth, principal at the advertising consultancy External View Consulting Group in Culver City, Calif., wonders what iCrossing’s sales projections were when it hired the people who are now gone. “They doubled revenues [in social] and had layoffs?” Wohlwerth asks. “What were their goals—to triple revenues? No one expects that. Something doesn’t smell right here.”
From the outside looking in, iCrossing seems stuck in search. Yet to Powley’s thinking, search represents only 42 percent of the agency’s business, while 22 percent lies in social and content (including a surging video practice). In terms of boots on the ground, competitor 360i—which launched in 1998, the same year as iCrossing—says it has well over 100 community managers alone working on clients’ social media accounts, not including its real-time marketing practitioners and social-focused creatives. That’s triple the size of iCrossing’s entire social team. It’s worth noting that 360i hasn’t been nearly as prolific at search marketing, but comparative staff numbers indicate that iCrossing has a long way to go in growing its social practice.
“You just look at the evidence, and there’s one agency shedding a lot of staffers while everyone else is hiring a ton of people,” says Wohlwerth. “It makes me nervous, seeing everyone running for the exits. You wonder what’s going on there. It is one thing if they are replacing people with great new talent, but it sounds simply like more people are leaving than coming in. That doesn’t bode well for the future.”
Adds one director who left iCrossing last year: “Search is still very much the bread and butter—and that’s not bad at all. They might be Google’s top customer. But other things haven’t gone according to plan.”
Several former staffers spoke with Adweek under condition of anonymity—either because they signed nondisclosure agreements or to avoid burning industry bridges. It’s worth noting that most of them went out of their way to mention how iCrossing could be an “incredible,” “wonderful” or “fantastic” (among other positive adjectives) full-service agency with the right level of commitment. But in the opinion of nearly everyone Adweek spoke to, Scales was shown the door last year because Hearst wanted a more profitable bottom line—and brought in Powley to achieve that. Many had expected Scales might leave at the end of 2013 , but not in June.
“Building a state-of-the-art social media practice, a creative practice, takes a long-term commitment to talent,” says another former iCrossing lead. “You cannot do that if you are overly focused on the profitability all of the time. [iCrossing] is trying to become something it’s never been, and that’s a full-service agency.”
Indeed, the picture painted by former staffers was more about the bottom line than the creative process behind paid or earned social media. They believe iCrossing wanted profit margins in social and content similar to those it enjoyed in its sweet spot of search. (There are few media options out there with profit margins that come close to search, where creative can be automated; in fact, search and social are very different disciplines.) According to multiple former staffers, the goal was north of 60 percent profit.
“I found, time and time again, the reason why we were not getting new business was because the margins were outrageously high,” says one former staffer. “We would stay up all night in a hotel getting ready for a pitch only to find out it was all for nothing because of the cost [to the client]. No matter how great the work, the margins were so high—there was no way we were going to win it. That’s actually pretty common at agencies from what I’ve seen,” but the source believes it was worse at iCrossing.
Powley bristles at any suggestion the agency’s moves have hurt the business, noting that the agency grew revenue 10 percent in 2013 over 2012, of which one-third derived from social business, according to agency reps. (eMarketer stats show that social ad buying grew a far more robust 43 percent in the same period, whereas search spending rose 14 percent.) He suggests that he whipped the business into shape after a less profitable first half of last year. And he characterizes his company’s social return on investment as “good.”
“The second half [of 2013] was phenomenal in terms of revenue growth, new business potential, in profits, in realignment of people, in general sentiment of the people,” he adds.
That said, iCrossing lost digital accounts such as HSN and Mazda, the latter forcing it to shutter its Santa Monica, Calif., office dedicated to serving the automaker. It also closed a Salt Lake City location during last year’s reorganizations. (That said, the shop just became digital agency of record for Speedo, is lining up two other financial clients, and plans to add a key social staffer.)
Multiple former staffers place blame for the company’s turbulence last year on Core Audience, the data-management platform formerly called Red Aril that iCrossing purchased in late 2011 under Scales’ leadership. One former lead who worked on Core Audience described it as “an empty shell.” Per a number of staff members, the unexpected costs associated with fleshing out Core Audience’s capabilities scooped cash off the ledgers for other teams’ initiatives. (The shop also purchased Latin American agency Wallaby around the same time.) The commitment to Core Audience led some to believe iCrossing saw more growth potential in data-driven paid advertising than the less measurable social media channels. The agency hired display advertising vet Christine Bensen last May to bolster that side of the business.
Core Audience “was a good acquisition,” Powley explains. “It took us a little bit longer to get that plugged into the system how we wanted it. [But] it’s a huge part of our go-forth strategy.”
At any rate, 2014 should be interesting in terms of seeing which iCrossing storyline emerges: the one described by brass as a trimmed-down, full-service, butt-kicker agency; or the one characterized by the ex-pats as a search shop that failed to find its way outside its comfort zone and struggled with internal battles.
In the meantime, for pure branding purposes, a spotlight moment like 360i enjoyed with Oreo wouldn’t hurt. Hearst’s Carey suggests that his digital shop already had a similar effort to be proud of in late 2012 when it created millions of social and video impressions to raise the profile of Cosmopolitan’s newly appointed editor Joanna Coles.
The shop has “been a valuable [asset]” for all Hearst properties, says Carey. (Hearst bought iCrossing for a reported $325 million in 2010.) “That was true the first month, and it’s true today.”
But with so much high-level talent gone, can iCrossing find the same mojo its peers exhibit? Clearly there’s some strong debate around that question.
“I think [iCrossing] is a sinking ship,” insists one former director, who chose to leave the agency to take a brand gig. “It’s not sustainable.” Another former director calls out the agency’s talent drain of 2013. “Those are big losses,” the creative stresses. “You don’t just replace those kinds of people easily. And them not being around anymore is going to have an impact.”
Powley counters by stating his hiring stats are “in line with benchmarks,” while search clients like PNC Bank, Beam and Toyota are starting to expand their business with iCrossing beyond just search. “Most of our growth in the second half of [last] year came organically,” he says. “[Search] serves as great foundation to bring in broader work.”
Clark Fredricksen, an eMarketer vp, suggests any search agency doubling down on its core practice certainly isn’t chasing fool’s gold. “Search is a monster format, and it’s not going away as consumers shift to mobile devices,” says Fredricksen. “But that said, social advertising is a much faster-growing category at this point.”
So regardless of whether iCrossing is a sinking ship, perhaps the fairer question to ask is, is it missing the boat?