As announced yesterday, LBi and Bigmouthmedia merged to create 'Europe's largest digital agency' in a deal worth £100m.
I've been speaking to LBi's Ewen Sturgeon, CEO UK & EMEA, to find some more details about the merger, and ask about trends in the sector in the coming year...
We’ve been working on this strategy for a while. From the beginning of 2008, we looked at what we needed to do, to offer the full range of online marketing and creative services to our clients, and Bigmouthmedia is important for that strategy.
Clients are increasingly wanting an integrated media and search offering, and we are able to offer this more broadly now, and our offering covers search, social media, content creation, campaign creative, measurement and more.
In addition, the merger with Bigmouthmedia gives us greater critical mass and greater coverage in European territories.
How much of this deal is related to the market conditions?
None specifically, except that our shareholders are very impressed with the way we have traded in the last 12 months. It’s also about the continuing transition of marketing budgets to digital, and the trends towards consolidation of search, media, etc.
The valuation attached to Bigmouthmedia is different than it would have been 12 months ago, something the shareholders will be pleased about.
Which side instigated the merger? LBi, Bigmouthmedia or the investors?
The LBi management instigated it, off the back of the strategy I mentioned earlier, of creating an end-to-end full service digital offering.
Thanks to this deal, we will have hubs in the major markets; Asia, Europe and North America, enabling us to be where our clients are.
We looked around at what was available and found that Bigmouthmedia fits well with our growth strategy.
It's essentially a reverse takeover of Bigmouthmedia, right?
The deal is complicated – it’s an all paper merger, with no cash involved, and it’s backed with the additional investment. Technically it’s a merger, and if you look at the relative staff sizes – LBi has 1,600 – 1,700 staff compared to around 200 for Bigmouthmedia, you can see that LBi is the senior partner. The LBi name will be retained, and our management team will remain intact.
Are there other gaps in the LBi offering now that you have search covered?
Yeah, there are still some gaps, and there are additional acquisitions we would like to make – we could add more CRM skills for instance, and our intention is to have more content creation and content origination capability.
There are also some territories we would like to have more of a presence in, the Asian market being one.
Can we expect to see more acquisitions this year?
Definitely, we’ve been given the funding to make these acquisitions, and have already been in dialogue about this. It’s in everybody’s interests to identify acquisition targets and move quickly.
How much demand are you seeing for one-stop shop agencies, combining creative, execution and measurement? What kind of clients require such a joined up approach?
A lot of major clients are now demanding this kind of service. For example, we have been appointed the agency for Barilla, and will be providing the full range of online marketing services for them.
This kind of one-stop-shop approach, which integrates search, creative and measurement is already popular in the US and UK, and is becoming more so in the European markets, Holland, Germany and Scandinavia.
Do you expect more market consolidation to occur this year?
Yeah, we’ve seen some deals recently, such as the acquisition of Razorfish by Publicis, and this is something that has to be driven by client demand. If clients are looking for a full range of services, and I think they are increasingly, then this will lead to further consolidation in the market, though there is a question in more developed markets about the quality of the assets to consolidate.
More broadly, what are the big trends that you're seeing for 2010?
I think going forward, the ability to master content, conception, and creation together with search marketing gives us an opportunity to capitalise on a more cohesive approach to social media marketing. Agencies that can provide a more complete service can help brands to navigate that landscape.
One major challenge for clients is to find the correct organisational structure to be able to adapt, and this is something we talk to clients about a lot, to help them overcome the restrictions of organisational design.
Another trend this year is that measurement of clients budget spend in digital channels will evolve and become more sophisticated in linking back to KPIs and combining qualitative and quantative information.
With this, the link between insight gained from measurement and the action taken in response will be much tighter, leading to a real time iteration of messages.
Mobile will be a growing trend this year- we’re already starting to see brands expecting a mobile touchpoint to be a much more meaningful experience for customers. As a result, spending will accelerate markedly in this area.
What’s next on the agenda?
After a few celebratory drinks with the guys from Bigmouthmedia, it’s down to the serious business of executing the integration of the two agencies really well.
We’ll be continuing to engage with our clients, and spending the extra funding wisely so we can continue to be the pre-eminent agency.