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Over the past several years, Madison Avenue has made a concerted effort to cozy up to Silicon Valley and young technology startups.
And for good reason: with consumers spending more and more of their time online, the technology industry is increasingly important to brands. As a result, ad agencies have little choice but to keep up with technology and, if they're lucky, spot the next big things before they become big.
Establishing relationships with Silicon Valley and courting young startups by sending them some money from experimental budgets is a smart move, but in some instances, agencies are willing to go further. Perhaps the most notable example of this is Interpublic, which took a small stake in Facebook in 2006 for $5m. It sold that stake last year for $130m.
Is Interpublic's Facebook story a good justification for ad agencies to play the role of VC? Time will tell, but other agencies are apparently warming to the idea.
Case in point: today, WPP's digital arm, WPP Digital, announced that it has invested in mySupermarket, a UK shopping site that lets consumers compare prices and buy products online through major supermarkets and retailers.
WPP hopes to profit from the investment, noting in its press release that it "has set a target of 35-40% of revenue derived from digital in the next five years." But the investment is also strategic: major CPG brands are some of WPP's most important clients, so being close to a company like mySupermarket could prove to be very useful from an agency perspective.
On the other side of the transaction, mySupermarket liked what WPP brought to the table besides cash. "WPP provides more domain expertise and their breadth of relationship is unparalleled in both the data and advertising worlds," Allon Bloch, mySupermarket's CEO, told TechCrunch. Translation: WPP's client relationships can help us.
Time will tell whether agencies make good VCs, but if the mySupermarket investment demonstrates anything, it's that agencies are willing to take some risk. When Interpublic invested $5m in Facebook, the social network was already one of the largest in the world. WPP, on the other hand, was willing to put $7m into a site that is still relatively nascent; although it has been around since 2006, mySupermarket serves a modest 2m unique visitors a month.
If WPP can help mySupermarket grow, and put its client relationships to work for the company, it could be the start of a blueprint more agencies adopt.