Why Holding Companies Are Snapping Up Influencer Agencies

Influencers are nothing new in marketing and advertising, but the rise of social media has expanded what an influencer is to marketers. Influencer agencies have been on the rise to corral the mass amount of influencers on the scene and better utilize them for brands. As those influencer agencies continue to gain a foothold as a way to vet, promote and utilize influencers—and lately this applies to a new wave of creators—major holding companies and networks are looking to snap up these agencies that have more and more sway in the marketing ecosystem. With the creator economy growing exponentially, as more people claim to be creators and influencers, this trend appears to be answering requests by brands for more influencer validation. In 2022, Forbes noted that the creator economy was worth upward of $100 billion. And a study last year from Adobe found the creator economy had grown by more than 165 million people globally in the last two years—an increase of 119%. "The influencer marketing space is the wild wild west. There [are] so many different ways to approach it and different types of influencer marketing companies, agencies, whatever you want to call them," said Ryan Harwood, CEO at VaynerX's Gallery Media Group. Adweek talked with leaders at large agencies as well as still-independent influencer agencies about the rise of the influencer in the creatorverse and what's driving M&A decisions. Those shaking it up One recent acquisition that turned heads was McKinney’s purchase of established influencer agency August United. The move gives McKinney, which is part of the Cheil Worldwide network of agencies, a solid foothold in the growing micro and mid-tier influencer space. “There’s more trust, from a consumer standpoint, for a micro or mid-tier versus a big celebrity influencer,” said Joe Maglio, CEO of McKinney. It was a win for August United as well, which saw a chance to scale up its offering by being part of a larger agency, and the agency played a role in helping McKinney win the Popeyes business. WPP is making moves on the M&A front, as well as building out influencer teams internally. The Ogilvy network has built up an internal influencer department of more than 230 experts in 40 markets. In the M&A space, WPP bought Village Marketing in 2022 and placed it within Wunderman Thompson. In 2023 so far, it has purchased influencer agency Obviously and put it with VMLY&R. Goat will join GroupM and merge with its current influencer marketing offer INCA and as part of the media performance organization Nexus. “Modern marketing campaigns work with influence. It's hard to imagine a successful campaign that isn't either using or embraced by influencers,” said Mark Read, CEO of WPP, adding that he doesn’t see the current wave of influencer agency acquisitions as an arms race to buy. “It's just really a reflection of its importance to clients.” Rob Reilly, WPP’s global chief creative officer, said having creators and influencers on tap is another great asset for the company. “Everything that's coming, whether it's AI or the growth of the influencer and creator economy, how do we be the first to it, and the best prepared to take advantage of it?” asked Reilly. There’s more trust, from a consumer standpoint, for a micro or mid-tier versus a big celebrity influencer.Joe Maglio, CEO, McKinney Read said that the reason WPP has made acquisitions is to scale its expertise, bringing depth and breadth of relationships across the creator economy. The influencer shops help manage influencers, find the right audiences for the right influencer, scale the campaigns accordingly, and track the effectiveness of the campaigns. On the media side, “being able to put immediate money behind influencer campaigns really enables clients to have a big impact,” he said. A couple examples Read and Reilly gave were the #DistanceDance campaign with TikTok phenom Charli D’Amelio during the Covid-19 pandemic, and Ogilvy Brazil and Magazine Luiza’s virtual influencer “Lu From Magalu,” that won both a gold Lion at Cannes and a Grand Clio at the Clio Awards. Examples like that help show brands that influencer marketing can work and is worth the spend. “Goat did some work looking at YouTube pre-roll and found that if an influencer was in the pre-roll before the ad, you had a 50% uplift in effectiveness. If a client is spending $5 million on YouTube, we can create $2.5 million of value,” said Read. When McKinney Sought to Buy an Influencer Agency, Here’s How It Landed on August United SaaS and subscriptions There are several influencer agency flavors on the market, leaving acquiring agencies with a plethora of options and strategic avenues. "Some influencer marketing practitioners start with a tool. They start with a software, and they feed influencer marketing right into an algorithm that spits out influencer partner recommendations," said Amy Shoenthal, an svp at integrated communications agency M Booth. Other influencer agencies focus less on tech, with business models hinged on industry connections. Effectiveness, Shoenthal asserted, requires balancing both tech and relationship-based approaches. M Booth's employees rely on partner tools and technology platforms like Tagger to achieve that balance. Many agencies take a similar approach. It illuminates why influencer technology acquisitions are attractive options: The acquirer benefits financially from licensing the product to their competitors. The acquisition creates a new revenue stream for acquirers, much in the same way that a data acquisition like Epsilon's, helps Publicis rake in data licensing money industrywide. "I'm sure there's a lot of white-labeling of software going on across the industry—not even just acquiring a software company—but using a software," Shoenthal said. Buy or build This influencer marketing technology and increasing degrees of automation may render some of the manual influencer marketing strategies rote, said Forrester principal analyst Jay Pattisall. When considering their acquisition options, agencies must determine whether to acquire tech resources or build tools themselves. "It could be that some of the larger companies ... purchase ad tech or an 'agency' that has built some of this functionality and just buy their way into it," the analyst said. Of course, there are many more agencies building and partnering (or some combination of the two) than acquiring. M Booth has 18 employees solely focused on influencer marketing, and upward of 50 with knowledge of the practice. Scaling an internal department helps M Booth establish a fuller, more integrated offering as it continues its decadelong journey to go beyond traditional communications. "It's hard to get a leg up on the technology side these days, the way that the APIs are working with each of the platforms. You can really just build your own fairly easily," said Harwood. A hybrid approach, like building a tool and supplementing it with other tech partnerships, could be another alternative for agencies that don't want to commit to M&A, he added. Horizon Media, the largest independent media agency in the U.S., executes influencer marketing from its Blue Hour Studios department. While it's focused on building internal capabilities, the agency's keeping an eye out for attractive acquisition targets. "We are certainly actively evaluating acquisition opportunities, but also investing in our own resources and capabilities simultaneously," said Sarah Bachman, an evp at Blue Hour Studios, adding that the right target would bring data chops and operational enhancements to Blue Hour. "If we can find a partner that can help us alleviate some of those friction points, that's certainly another compelling opportunity to us," Bachman said. Staying independent Not all influencer agencies are looking to be a part of a larger network. Team Epiphany is one that has stayed independent since its founding in 2004. Its founder, Coltrane Curtis, built what is widely considered to be the first influencer shop—original tagline: “We influence the influencers”—before social media took hold. This meant the influencers had impact on the culture beyond just social followings and had to build trust, a concept that the agency remains true to today. The current wave of influencer marketing, often based on social following, creates “zero to little engagement, consideration or loyalty,” Curtis said. “Influencer marketing is word-of-mouth 2.0 if you will, which is all based in trust. Trust can’t be accelerated, trust can’t be engineered by a social media algorithmic tool and it can’t be paid for—it needs to be earned.” He sees holding companies that buy influencer shops being late to the game and beholden to profit and loss rather than answering directly to the consumer and being a part of culture. “If you’re paying for it, you’re actually creating distrust,” Curtis said of the social influencer trend in the agency world. Curtis has been approached by agencies and holding companies often, but Team Epiphany has stayed independent, answering only to brands and to culture and not being a “carbon copy.” Influence marketing lives best within an integrated agency structure. The truth is, it's both art and science.Adrianna Bevilaqua, chief creative officer, M Booth On the creator side, Clutch is a rising star platform. Madison Long, co-founder and CEO, said the company is focused on empowering and supporting creators who make authentic, engaging content but are also are looking to do it on behalf of a brand. Long stated that, as more brands go DIY in their marketing efforts, they are picking and choosing what things they want to invest in from a marketing strategy, and creators can be a way to bring in new creative energy at an affordable price. That price is fairly settled by Clutch, which helps creators negotiate prices and pays the creators weekly. Clutch has not been approached by a network or holding company, though the company is still in its relative infancy. “At this stage, we're really focused on making sure that we can provide the highest quality service and the highest quality pairings through our platform,” said Long, adding that the company wants to be able to grow and operate at scale and keep the independence and authenticity of the creators. Integration catalysts? The sheer scale of influencer marketing solutions and service offerings on the market raises questions about where acquiring agencies—or even those agencies currently building their own influencer marketing offering—should integrate the influencer practice within their broader organization. "You're looking at media companies and creative companies all coming after these influencer agencies, because they're just a beautiful blend of both media and creative capabilities. That's an interesting area for different companies to start cross-selling services," said Bachman. Adrianna Bevilaqua, M Booth's chief creative officer, also wondered about influencer marketing's potential to spur more integrated agency offerings. "Influence marketing lives best within an integrated agency structure," she said. "The truth is, it's both art and science." How agencies manage integration already differs. Horizon Media's Blue Hour Studios runs more like a department than a separate business, for example. VaynerX houses influencer marketing expertise within its Gallery Media Group subsidiary, which the holding group formed after acquiring PureWow in 2017. Gallery sits apart from the VaynerMedia group most clients are familiar with, positioned as a fully separate entity that manages influencer business for the rest of the holding company. Time will tell if recent acquisitions will give the acquirers a competitive edge in either technological or strategic prowess. "They bought credible companies that have reputations, and that helps automatically accreditate the brand and the purchaser," Pattisall said. "That's one of the variables that has to be thought of. But, in the long run, building it is likely a cheaper proposition for the agencies." This story is part of Adweek’s The Creatorverse digital features package, which spotlights the creator economy: the people who make up the industry’s new content royalty, and the marketers and agencies that collaborate with them to drive next-level engagement for their brands.

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Kyle O’Brien

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