Robert Sawatzky
Aug 16, 2022

Dept unfazed by concerns over growing too big, too fast

The leaders of the challenger digital agency network say their Asia growth plans remain on track, expecting up to 500 employees in this region by year’s end.

Dept unfazed by concerns over growing too big, too fast

With economic storm clouds on the horizon, many adland executives are likely battening down the hatches, preparing for a slowdown in spending from advertisers as recessions loom.  

For several of the large holding companies, the exercise isn’t unfamiliar—they had already been streamlining and consolidating operations for several years and continue to be more prudent with acquisitions. It’s a narrative that has allowed the new pure-digital challenger networks (S4, Dept, Brandtech) to project a new alternative to the industry—one of rapid growth leveraged through technology, backed by new capital, unencumbered by legacy. 

Lately, however, the tribulations faced by S4 Capital have called into question the fast-growth strategy, which saw Martin Sorrell’s digital network absorb more than 30 companies in the past four years and hire hundreds, but also contribute to accounting irregularities, audit delays, salary cost spikes, a profit warning and subsequent freeze on hiring, and further takeovers

While it would seem this might be a good time to ditch the Red Bull in favour of some good old-fashioned prudence juice, not everyone is ready to give up on their fast-growth ambitions.  

Netherlands-based Dept has been on a similarly steep growth trajectory, backed by the deep pockets of global private equity juggernaut, Carlyle Group. Formed from CEO Dimi Albers’ founding agency Tam Tam with 130 employees in 2016, the agency now employs 3,000+ in 18 markets around the world. 

While Albers admits with a chuckle that current market conditions mean an IPO is unlikely anytime soon, the challenger agency is signalling few signs of slowing down.  

Hiring Havas’ former Asia business leader Vishnu Mohan in December 2021, the agency outlined regional plans to scale to 1,000 people in Asia Pacific with 10% of global revenue from the region by 2024.  Since then, we’ve seen Dept continue to gobble more firms like UK-scaled creative shop Feed, US data science firm Raybeam, Web3 and virtual events specialists Dog Studio, digital innovation shop Hello Monday and just last week, UK-based design studio ShopTalk, among others. 

Some of Dept's more recent acquisitions include Feed, with its Sydney office in December 2021 (top-right); Dogstudio in May 2022, which built the virtual festival Tomorrowland Around the World (top-right); digital innovation studio Hello Monday in March 2022 (bottom-right); London-based design studio ShopTalk in August 2022

While acquisitions like Feed have helped Dept grow its staff in Sydney to about 30 employees over the past year, and all these names continue to add more client work in APAC, we have not yet seen Dept swing big on takeovers here, which might call into question the scale of their ambitions. 

But Mohan says there is no change of strategy. In fact, he tells Campaign that his APAC expansion plans are moving even faster than he envisioned last December, adding Dept is in active talks with a few “gems” that he hopes to announce later in Q3 or Q4 this year. Sources close to Dept suggest an APAC deal could be announced within weeks.

Mohan says that the companies he's negotiating with  are each “defining in some way” in terms of skill sets, but may not all have large headcounts. Nonetheless, he figures Dept is still on track to have about 500 employees by the end of this year and to be more than a quarter of the way to their APAC 10% revenue goal. Australia, Southeast Asia and India remain their focus operational markets, including a potential nearshoring centre in the Philippines, much like Dept already has in Croatia, Macedonia and Argentina.  

Vishnu Mohan, partner and chief growth officer at Dept

Avoiding speed traps

Part of the reason why Dept feels it can avoid some of S4 Capital’s more recent growth-related turbulence is because it has had a longer runway. Its first private equity partner was Dutch firm Waterland in 2015, who put them into growth-mode early on, before selling to Carlyle Group at the end of 2019. Now, being able to tap Carlyle Group’s M&A experience continues to be a very helpful resource, Dept says. 

CEO Dimi Albers tells Campaign that while no two agencies are alike and none can be treated exactly the same, its acquisitions are becoming easier to integrate with practice and pattern recognition. And that holds true for both the clients and disciplines that are being brought together, he says. Moreover, “almost every” Dept acquisition, Albers says, involves companies and clients they have already been working together with, since it forms part of the integration process in a deal cycle over many months.  

He also stresses that the financial onboarding for new joiners is rigorous. On the day of the deal closing, Dept consolidates all the numbers and change any financial processes necessary to ensure that financial figures are reported in the same way across theire business with sign-off from their auditors. 

“You can be lenient on a lot of things except for that,” Albers says. “For everybody that joins, [we say] the terms of what you do every day and how you run the company we don’t change, because you’re brilliant at what you do. But when it comes to the financial numbers, everything is super tight and there’s no alternative to it.”  

‘Big enough to cope. Small enough to care’

With the above slogan as a cultural motto, Dept argues it has the scale of a holding company ($500 million in revenue, managing over $3 billion in digital media) but the agility, personal relationships and drive of a boutique agency, which helps to fuel their organic growth. 

Albers says that over the past year they’ve hit an inflection point in size that now allows them to compete for any type of business that is relevant to them. Clients feel more comfortable, Albers says, which is why already in APAC they’re fielding new interest from blue chip brands in the automotive, financial, energy and industrial sectors, without providing names.  

There is also increasing acceptance among clients toward the new breed of challenger agency networks to which Dept belongs, alongside the likes of S4, Brandtech and Accenture Song. Though competitors, Albers says their collective emergence has given them far more collective consideration than they had three to four years ago. 

Dept global CEO Dimi Albers

“We almost see all of us as a group of colleagues, because we're basically the digital native companies, who are disrupting the market. The more that these players grow, the stronger our category is becoming, which makes it more attractive and more logical for CIOs and CMO's to look at this category,” Albers says. “In five to 15 years the category will become very mature and get to a size where the pie is big enough for all of us and will disrupt [the holding companies].  It’s maybe a bit unnerving if you’re on the other side, but it’s exciting for us because something is actually changing.” 

While all are looking for growth, Dept wants to avoid turning into a slower-moving giant like those it’s intending to disrupt. For this reason, it keeps a simplified structure like that of a boutique firm, only granting shares to those with active roles in the agency, about 200 people in the company currently, including the heads of acquired agencies and some select investors. It means that both clients and employees will be in regular contact with company owners, Albers says, who are incentivised toward global growth rather than divisional successes. There are no free options schemes or earnouts for the shareholders of acquired firms.  

Dept differentiators

Aside from its ownership structure, there are a few other ways Dept contrasts with its competitors. Chief among these is its positioning as an integrated half tech and half marketing company.  The marketing side involves performance marketing, media and data services and digital creative, where it runs up against the big holding companies. The technology side, meanwhile, involves customer experience, design and engineering services where it competes with the likes of Accenture and Deloitte Digital. While many consultancies and holding companies are also acquiring more of each other’s core capabilities, Albers and Mohan argue their competitors are still 80 to 90% focused on one or the other, whereas their split is much closer to 50-50, giving them an edge in the growing numbers of pitches involving the full customer journey and speaking the languages of not CMOs, but also CTOs and CIOs.  

Dept is also vying to stand out as a leading metaverse-enablement company, joining the likes of agencies Cheil and Vayner Media among others trying to take leadership in this space.  At the end of June, Dept put considerable resources into hosting a global 24-hour Meta Festival with hundreds of web3 innovators on five different virtual themed stages, attended by over 6,500 people. On the surface, it might seem that Dept has succumbed to a bout of metaverse fever and may be diving in too deep, too quickly.  

But Albers says that while they’re enthusiastic about Web3 and always want to show clients they’re ahead of competitors, they’re taking a long-term approach to the metaverse.

“The way we look at it is that this technology is here to stay,” Albers says. “It will become increasingly important every year for the coming 10 to 20 years and if you are a technology and marketing services company and want to be the best at what you do, you need to be pioneering these new technologies. We are one of the front runners of this technology and it will be one of the most important fields.” 

While Albers says initiatives like their global Meta Festival are like a global calling card to the industry, he argues their underlying focus is not on “the shiny stuff” that most agencies and brands are experimenting with. Instead, he says they’re concentrating on the blockchain technology behind it which will be the most critical part for society. “We go quite far into the technology,” Albers says, listing various partners including more environmentally friendly blockchain companies.  

The environmental footprint of Dept’s blockchain activities will definitely be under consideration as their other differentiator lies in their B Corp certification last year, purportedly the first global agency to have it. Those familiar with the B Corp process know it’s a rigorous test, and for an acquisitory organisation like Dept, a constant one, as each agency that joins is also audited and required to be certified as well. 

The sustainability certification has been important to them on many levels, Albers says, including giving them a business edge. “It basically gives you a standard which is higher than the companies who are asking for your standards,” he says. By setting aside 1% of their profits to make donations or create impact projects, Albers says they’re able to help clients along as they can offer them to be part of the projects.

“That’s an important part of the culture," he adds.   

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