S4 Capital Shows Q1 Growth, Announces Merger With Brazil's Raccoon, Hints at Rebrand

S4 Capital announced it will merge with Brazilian digital performance agency Raccoon Group and reported like-for-like revenue growth of 35% to $169.3 million in the first quarter, while gross profit rose 33% to $144.4 million.The merger will see MightyHive, the London-based group’s digital media business, link up with Raccoon to expand its data and digital media offer in Latin America. Raccoon Group was founded in 2013 by André Palis and Marco Túlio Kehdi after their departure from Google, offering digital paid media, inbound marketing and IT/Business Intelligence. Its clients include Natura, Nubank, Carrefour, Gympass, iFood, Leroy Merlin, Ydugs, Unilever and Google. Other recent agency mergers have included Datalicious, Jam3, Decoded, MetricTheory and Tomorrow. "Brazil has sadly suffered more than most as a result of Covid and we send our best wishes and support to our colleagues, new and old, their families and everyone there," Sir Martin Sorrell, S4 Capital's executive chairman, said in a statement. "It is a crucial market for us at S4 Capital and one we have a history in and love to work in, so we are delighted to welcome André, Tulio and their colleagues to expand our existing capabilities. We look forward to working closely with them to disrupt the age-old status quo in the market."Raccoon also employs around 450 digital media specialists, engineers, mathematicians, statisticians and programmers. Content and Digital growth S4 Capital’s first-quarter results was helped by the surge in data and digital media, which saw an increase of 100% in reported revenue. It's Content services contributed 76% of total revenue for the business, with reported revenue of $127.9 million. Geographically, all regions saw growth in the Americas, seeing an increase of 63% of reported gross profit, the Europe, Middle East and Africa region was up 97%, while Asia-Pacific posted growth of 95% year-on-year. During the first quarter, the business saw new commissions from its larger clients such as Netflix, AB Inbev, Mondelēz, P&G, Amazon, Facebook and Google. New business wins also included projects from Diesel, N26, McLaren, Allianz, Crocs, Instacart, Shopify and Xero. The business is also expecting to bring in three new "whoppers" this year [defined by the business as being clients spending over £20 million a year each], which Sorrell said would likely come from existing client relationships. S4 Capital's Q1 client base The company's client data plans Speaking on the impact on the death of the cookie and data moves from Google and Apple within the trading statement, Sorrell said the pandemic had accelerated digital transformation, which had increased demand for its expertise and grown resonance with the mantra "faster, better, cheaper" as clients sought agility. During a trading update call, Sorrell was asked about third-party data changes. He said he saw a lot of "constructive concern" among clients as they considered what to do with their first-party data sources. The business had been speaking to two packaged goods companies recently as they "were trying to consolidate their resources as fast as they can,” Sorrell said. In the face of Publicis' ownership of Epsilon and WPP's creation of its own data offer with Choreograph last month, Pete Kim, CEO of Mightyhive, said on the same call that instead of focusing on building an external data reliance, S4 planned to "help our advertisers and clients with their relationships with consumers." He said the focus would be on developing "a conversation between the advertiser and the consumer that doesn’t leave the consumer wondering how you knew that about me," and that they would "focus more on the advertiser’s data rather than their own." A new S4 Capital structure and name Sorrell also said the rumored rebrand of S4 Capital was continuing and his preference for a new name was "Mighty Monks," but that didn't look likely. He didn't respond when asked if the full group might be renamed to Media Monks. "It is actually a very flexible system, if you look very carefully at what is out there from us, you'll see it coming out," he did explain. Victor Knaap, CEO of content production agency MediaMonks, which is leading the project internally, declined to talk too openly about the rebrand and integration progress outside of admitting "it's happening and it will be good." He did explain that the company would be "moving into one set of tooling" and that it would hold "one operating model based on the most modern SAAS products," such as Slack and Salesforce. "The unitary structure is one P&L philosophy and one set of tooling so everyone can work together," he said. Sorrell added: "It's a very flexible framework and the way that it works is that people can introduce their own individual adjustments and refinements. We have implemented it cautiously because we don't want to get involved in any internal or client fracas as others have experienced when they have tried to slam things together." `Major structural shifts' Of the current surge in new business pitches, Sorrel said the pandemic exacerbated client's "unhappy" feelings toward their "existing arrangements" with their agencies, a mood that S4 Capital hoped to take advantage of. "You’re seeing major structural shifts around agility, response and understanding the platforms," he said, adding that it had also generated traction for the company's mantra of "Faster, better, cheaper." A bond was also announced to give the company a "war chest" to spend on continuing its acquisition spree later this year. Exclusive: S4 Capital Acquires 2 Agencies, Signals More to Come in 2021

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S4 Capital Shows Q1 Growth, Announces Merger With Brazil's Raccoon, Hints at Rebrand

The UK ad agency says like-for-like reported revenue soared 35% to $169.4 million

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