By Laura Rich
Bruce Mason, True North's chairman, has been known to point out that his company's commitment to new media is bigger than everyone else's. Last year, True North held talks with Westport, Conn.-based Modem Media, a leading brand in new media marketing, and ultimately acquired it for $29 million worth of True North stock. Modem Media became a True North company, within the TN Technologies Inc. unit. This solidified True North's dominant role in the new media market.
The purchase followed Omnicom Group's wave-making minority investments in five small new media shops last September. While smaller than the Modem deal, the combined stakes in the five firms are projecting a strong symbol of new media leadership. Razorfish and Red Sky Interactive are both known for leading edge creative work; Interactive Solutions boasts superb technological skills; Think New Ideas offers full-service new media marketing; and Agency.com services clients such as British Airways. Organic Online, Omnicom's sixth investment, made in February, is a leading new media agency on a par with Modem.
What were Omnicom's criteria? According to Felice Kincannon, managing director of the company's new media unit Communicade, it was, 'great creative work, blue-chip client list, sound business management and people you would want to have a beer with at the end of the day.'
WPP Group and Interpublic Group of Cos. have also joined the investment fray. But it's the overall statement the flow of money makes that's more important. Once considered the province of grunged-out geekheads working in a garage, the on-line medium has won the attention of advertising industry leaders. Though it's still unclear what they'll do ultimately with their new baubles, each holding company seems to always be shopping for more. If their own agencies don't rise to the digital fore, maybe one of their 'garage shops' will.
Take the case of the Interpublic Group of Companies, which made the granddaddy of all new media investments in 1995. Then, it acquired a minority stake in CKS Group, the Cupertino, Calif.-based company that has played up its new media features to great Wall Street acclaim. IPG, however, had not pursued any Omnicom-style new media investments in smaller companies. That changed last month with its purchase of minority stakes in new media agency Nicholson NY and college market content provider Tripod. IPG has also been active in new media research.
Although such a diffuse strategy may signal a lack of focus, it may simply reflect the new media forays of many ad agencies, most noteworthy for their constantly changing agendas and the evolving needs of clients. For, instance, at one point in the pre-Communicade days at Omnicom, TBWA Chiat/Day may have been the most active of the group's shops in interactive media. But, it recently disbanded its Southern California new media operation, when client Nissan laid off some 115 people. The agency lost the account to Magnet Interactive Communications.
With such shifts endemic to the agency business, Omnicom's investment plan seems like a pretty safe bet. Its total expenditure for the six shops is valued at around $40 million--about half of what it cost to bring Chiat/Day into the fold--and allows the company to pull out at any time.
The investments in startup shops look like a boon in several ways. The holding companies hedge their bets, while the new media marketing shops have found a new version of the venture capitalists who provide most of the startup cash elsewhere in the digital arena. In fact, Omnicom's round of investments made chief executive John Wren a cyber hero; executives of the new media shops housed in Communicade say he 'gets it,' the highest accolade a T-shirt-wearing Web developer can give. The company's long-term plan will prove whether new media is as important as its actions thus far make it seem.
But the acquisition strategy remains open to debate, even within Onmicom. 'Any strategy being developed for a developing category should be organic and fluid and able to change as the category develops and the understanding of it increases,' says Communicade's Kincannon.
Some might call this willingness to be open to new types of involvement waffling, leaving enough room to vacillate at whim. Kincannon says there are no set plans now to invest in more companies, though, of course, that policy is subject to change. An outright acquisition isn't out of the question, either, she says.
At Omnicom, the investment doesn't end with the check. Communicade shops have been invited to attend workshops conducted by Harvard Business School professors and Kincannon offers support.
IPG and WPP have been a little less nurturing, primarily introducing their new media investments to other agencies and companies in which they've invested. And, IPG is less adamant than WPP and Omnicom that its companies work together. 'We open doors, but (the companies) still have to sell themselves,' says Barry Linsky, senior vice president of planning and business development at IPG.
While the holding companies figure out how to deal with their new charges, the constant observers can expect from their strategies is that they are always subject to change. 'Web development is not the be-all and end-all of the Internet,' said Eric Salama, WPP Group director of strategy about the company's investments in content and technology companies. Salama made the comment upon WPP's investment in a Web developer, Syzygy, in April.
Such statements make it obvious the Internet's appeal lies in the eye of the beholder. The approaches of these companies betray a collective view of digital media as a train moving toward an unknown destination. So far, only True North has bought a full-fare ticket for that last station, even if it's unsure about where that is.
Copyright ASM Communications, Inc. (1997) ALL RIGHTS RESERVED