Category: Interactive Agencies

Musings on LBI International AB announcement

I met my deadline early, so I will post some commentary here on the LBI/Framfab announcement. What we have here is a post-dot-com era rollup strategy. LBI International is now, unquestionably, the largest interactive agency in Europe. Robert (Pickering) told me in an interview recently that LBI is roughly 10x larger than the number 2 player in Europe and that the company is #3 in the world and probably #4 if you include Sapient. His plan to grow the company is still expanding. Margins have improved about 20% a quarter for the past six quarters and still moving up. Utilization is in the 50% range with a lot of opportunity for improvement. Overall the company has been growing 40% a year– organically 20% a year. With cash on the balance sheet and zero debt, the company share price has steadily been improving over 49% a year.

This is what Robert does. He’s a financial guy. He’s got the stret cred of a turnaround CEO. He did it at Philips global IT division, Origin B.V. and he’s doing it here. The question is, however, has this industry matured enough to withstand the weight of a rollup strategy? In web 1.0 the first to crumble were the rollups– iXL, USWeb/CKS, Luminant, etc. I may be off base here, but recognizing that these firms, interactive agencies, are largely creative services firms, there may be the same recurring issues. Creative people don’t always mesh; creative people are not a labor pool. Maybe the Europeans are cooler than Americans afterall, and they can “mashup” a culture. Any American who has spent time in Europe or the U.K. in a pub during World Cup season would be hard-pressed to believe that. I guess time will tell.

LBIcon/Framfab merger closed today

I don’t have time to comment on this today because I’m on deadline.  It’s worth posting the press release info, however.  I will come back post-deadline with comments.

From the Press Release:

LBI International AB, Europe’s leading digital and interactive agency is born

With today’s registration of the merger between Framfab and LB Icon the leading digital and interactive agency in Europe has been born. The combined entity will adopt its new name, LBI International AB, as of August 1. In addition to the existing listing on the Stockholm Stock Exchange, LBI International AB will as from August 1, be listed on Eurolist by Euronext in Amsterdam. The new company symbol (ticker) on both exchanges will be “LBI”.

 

The Swedish Companies Registration Office (the “SCRO”) has today registered the merger between Framfab AB and LB Icon AB. The SCRO has also registered the issue of 35,634,133 new Framfab shares which will be used as merger consideration where LB Icon shareholders receive one Framfab share for each LB Icon share. The new shares are expected to be registered on LB Icon shareholders’ accounts on August 1. Following the registration of the merger and the new issue of shares, Framfab has in total 60,522,946 shares outstanding.     

 

The registration of the merger and the new issue completes the merger process from a legal perspective and as a result LB Icon has been dissolved. LB Icon will be delisted from the Stockholm Stock Exchange and Eurolist by Euronext in Amsterdam as of August 1. The last day of trading in LB Icon shares on the Stockholm Stock Exchange was July 26 and the last day of trading in LB Icon shares on Eurolist by Euronext in Amsterdam is today, July 31.

 

On July 13 Framfab held an extraordinary shareholders meeting where it was resolved that the parent company Framfab AB, subject to the registration of the merger, would change its name to LBI International AB. With today’s registration of the merger such condition has been fulfilled and as of August 1, the merged entity currently known as Framfab AB will be renamed LBI International AB. The completion of the merger process between Framfab and LB Icon and the related name change to LBI International AB marks the creation of the leading digital and interactive agency in Europe.  

 

Making up Another Mind*

Yesterday, I notice I had a flurry of activity on the blog (a blip really, in blogosphere terms, but a flurry in relative terms for my usual activity) with a reader coming in from a search for “Sapient Blog.”  I would like to cover the Interactive Agency sector fairly aggressively, but my overtures to this market (other than Sapient, actually) have fallen flat.  Remember, most of the firms I covered in my 2000 report have vanished.  The survivors are very different firms today, even Sapient, for that matter.  The firm I have the best relationship with– LBIcon— is a continent away and not a major player in the US.   All that being said, it looks like I’m left standing behind the velvet ropes on this private club.  So, it’s like I told a newly crowned Dick Brown taking over at EDS who chortled at me, “Be good to me Susan!”  I told him he had to earn it.  I’m now on the other side of that hubris and will have to earn the respect of the IA community before they’ll confide in me and allow me into their party.

In the absence of focusing on the IA sector, I’ve turned my attention to the SaaS market and the budding enterprise 2.0 sector.   I’m finding developments and discussions in this sector extremely interesting and addicting.  I’ll be writing a story for GITS for the next two weeks on how the prospect of new enterprise SaaS applications may stand to disintermediate the billable consultant.  It has major implications for the consulting and systems integration markets over time.  I’m looking forward to what I discover in the reporting. 

I have managed to reconnect with more of the IT Services fraternity.  Jeff Kaplan, whom I’ve always had a lot of respect for, has turned his attention to SaaS.  I also had a nice lunch recently with Vinnie Mirchandani whose blog is listed in my blogroll. 

*See post May 17 for headline reference.   

Back to Sapient…

I've been pestering Sapient with a few questions. Craig Endicott from Ad Age who did the Top 50 Interactive Agency ranking told me that Sapient did not submit an application last year. I thought, humm, that's odd. "Absent" to "#2" in just one year, eh? So, I asked Sapient if they were ever listed in the ranking before.

The answers unfold this way: Sapient ranked in the Ad Age rankings in 1999, 2000, and 2001. The company did not submit a response for four years. Remember the Ad Age ranking is US-based interactive revenue. In the U.K., however, the company has consistently ranked 1 or 2 interactive agency in the U.K.'s New Media Age leading interactive magazine. But, a corporate spokesperson describes the sudden reappearance on the Interactive scene in the US this way:

"Following the Internet bust, while Sapient continued to do great design and brand work for marquee clients such as Hilton and United Airlines, our external marketing focus shifted to outsourcing and other complex business and IT solutions which were big pain points for our customers.

As we started getting increased demand for our web services and recognized the early shift towards digital media, we opted to round out our capabilities very rapidly withthe acquisition of Planning Group. This move also reinvigorated our focus on Experience Marketing. Moving forward, you will be seeing much, much more from Sapient in the area of Experience Marketing."

Now. What's at issue here still remains, is Sapient deserving of the number 2 ranking… ahead of, Digitas and Agency.com? Then again, does it matter? I think it does matter and each of these firms bring unique capabilities to the market and deserve to be niched where they belong.

In 2000, I gave Sapient the only 5-star classification and commented the company existed in a "class of its own" in my ITSA research report on the e-services providers market. Sapient was also awarded "most admired competitor" from the other firms profiled in the 300+ page report. I am not, not a Sapient basher. In fact, Sapient, with its full breadth of capability has a tremendous advantage in today's market.

But, let's give the real Interactive Agencies their due… Does Tribal DDB and AKQA look like Sapient?

Not just Integrators, now Management Consultants and Big Blue eyeing the Ad Business…

Thanks to my friend Tim at Pixel Bridge, I'm posting what Ad Age published yesterday regarding Accenture, IBM, and McKinsey reshuffling how Advertising dollars are distributed for corporate clients. "Management Consultants Push Further into Ad Business."

I placed a quick call to my friend Tom Rodenhauser, who has covered management consultants for decades. Tom told me he wrote a similar story about ten years ago with help from an Ad Age freelancer. He promised he'd send me something pithy today to post here, so stay tuned.

Here's Tom's quote (9:39 p.m EST): "The debate between ad agencies and management consultants is one-sided. Essentially, the agencies are pulling a Rodney Dangerfield (God rest his soul) by demanding respect for something they don't provide — strategy. The ad folks can be creative geniuses with positioning products. But have they ever helped the client determine whether that product should even be produced? Or where to build it? Or how to distribute it?
No, and the reason is fairly simple. Consultants make money by selling their brainpower; ad agencies make money by selling airtime. When a client plans to invest millions (or billions) into a new product or business line, they don't turn to the ad guys for a business case."