The Australian spatial design and digital content start up MashUp did just over A$1 million in sales in 2015. That same year it was bought by Deloitte, and in 18 months—bolstered by the muscle and might of the world’s largest professional services networks—MashUp has transformed into a A$4 million business.
“[MashUp] gets access to a much broader client base and access to more senior people,” says Frank Farrall, Asia-Pacific leader of Deloitte Digital. “What we gain are new ways of thinking and talent—and then our brand in the marketplace changes.”
Deloitte has spent hundreds of millions in design acquisitions over the last few years. Purchases include The Explainers, an Australian “storytelling” company that uses animation, film, infographics and text to help explain processes for consumers, and virtual-reality business Kid Neon. That has helped Deloitte Australia grow to a record revenue of A$1.53 billion for the year ending 31 May 2016, a 15 percent increase over the previous year.
“It doesn’t matter how much you try to optimise the customer experience. If you are working with a poor brand strategy and poor creative content, you will fail.”
—Ben Tolley, partner, Clarity
“We acquired a digital agency back in 2002 when we brought our first group for creative into the firm—we’ve scaled that to a point where we now have 300 designers in Deloitte Australia. This is not a new story to us,” says Farrall, explaining that Deloitte Digital’s remit ranges from mobile applications to customer experience interfaces to spatial design. “For consulting companies to be relevant in business right now you absolutely have to some level of creative and design capability.”
Deloitte isn’t the only accountancy and consultancy firm who is aggressively moving to purchase creative agencies and design firms. Accenture, IMB, KPMG, McKinsey & Company and PricewaterhouseCoopers have proved just as eager. In May, Accenture announced that it had bought The Monkeys, alongside sister design business Maud. The Monkeys—known for its punchy, provocative work, which won it Campaign’s Australian Creative Agency of the Year award 2016—provide Accenture with prestige. The acquisition is also a means to streamline technology, creativity and consultancy for a seamless end-to-end offering for clients. To that end, Accenture now has 18,000 digital and creative professionals globally.
Such expansion is largely a response to disruptive technology, says Ben Tolley, a partner at Clarity, which advised The Monkeys and Maud on their sale. “As predicted by Gartner several years ago, CMOs are now spending as much on IT as CIOs. This great convergence of IT and marketing has meant that the traditional turf of the advertising and media investment groups has become increasingly contested by players in digital business consulting, systems integration and outsourcing,” he expounds. “It has reached the point now where only one of the Big Six marketing groups is represented in the top five global digital networks. Their lunch is being well and truly eaten.
“However, what the consultancies, systems integrators and outsourcers have realised is that you cannot truly own the CMO relationship and offer an end-to-end service without understanding the world of brand strategy and creative advertising and marketing.
“Put another way, it doesn’t matter how much you try to optimise the customer experience, if you are working with a poor brand strategy and poor creative content, you will fail.”
Lucy McCabe, OgilvyRED’s president for Asia-Pacific, believes that changes in the way consumers are approaching brands is driving the shift. “I think when you look at what is happening in advertising at the moment, it’s really interesting to look at the massive disruption which every single industry is going through”, from airlines to banking, she says, referencing “the Uber effect”.
“That’s putting enormous pressure on traditional businesses. Everybody is looking to drive digital transformation, develop new customer experiences—[particularly] in Asia where the main platform that brands interact with their customers is the smartphone.”
In the past, television provided the main outlet for advertising. Now digital forms of brand marketing—ranging from customer experience interfaces to online pop ups—are taking increasing market share.
McCabe says it used to just take “enough money and a good creative idea”, then you could drive brand awareness through television slots. “Today, that whole interruption model of advertising just isn’t working anymore. So everybody is trying to find technology data driven solutions.”
For Farrall that means “looking more at digital channels and social media as a way of helping clients to drive campaigns”. “We stay away from some of the traditional advertising. We’re really looking at that next generation of advertising.”
One example of this is ‘Barossa be consumed’, an interactive video framework designed by Deloitte Digital in collaboration with the South Australian Tourism Commission. Another is a virtual game experience for the Australian Open developed by Deloitte Digital for ANZ Bank in January called ANZ Breakpoint. The 54-square-metre installation at Grand Slam Oval allowed visitors to use a normal tennis racket in an interactive game.
Slicing the pie
The key question is whether consultancies’ bid to gain a slice of the advertising pie—which rose to US$579 billion in total worldwide spend last year—is truly a threat to traditional agencies.
Not necessarily, says McCabe. “There’s so much in the press about the consultancies verses ad agencies, and it is probably not the most useful angle because it’s not necessarily a [combative] situation,” she says.
What it does mean is a rethinking of creative agencies’ remits. To compete with consultancies, they are increasingly moving into developing their own strategic end-to-end services. Launched in 2016, OgilvyRED is one example of a firm building a consultancy arm aimed at driving transformation using technology.
In 2016 OgilvyRED launched the MILO Champ Squad Programme in Australia—a new service platform from the Milo brand consisting of a wearable band for kids combined with an app for parents aimed to help combat childhood obesity, which it is now rolling out worldwide. Crucially, it created a significant new revenue stream and has brought Milo into new distribution channels, specifically Harvey Norman the electronics retailer.
“The first creative acquisitions are the hardest as your culture has to change in order to accommodate people with different ways of working and dressing ”
—Frank Farrall, Asia-Pacific leader, Deloitte Digital
But Mike Beck, managing director of independent Australian brand, communication and digital agency Fluid, believes that while consultancies may be encroaching into ad agencies’ space, staying small has its benefits.
“If you want to sell the creative agencies and these strong personalities and founders move out, there’s a high risk that what you bought isn’t going to be the same as it is now,” Beck says. “If you want to corporatise creativity, it’s a pretty big ask.”
Simon Collins, Sydney-based creative director of 1 Kent St, a WPP AUNZ consultancy, agrees. “Ever since they saw their agency clients’ lunch bills in the 1980s, accountants have been trying to get a slice of the advertising pie,” he says. “But it’s too soon to know if simply hiring a latter-day Don Draper or buying a successful creative shop constitutes a good business model.
“There’s a cultural dimension to this. At the heart of all great advertising is something that cannot be quantified or measured—whatever The Gunn Report may suggest to the contrary—and therefore something you’d think most accountants would give a very wide berth. An accountancy firm going into the creative comms business seems to me a bit like an architecture firm going into the travelling circus business.”
One challenge facing Asia-Pacific-based consultancies is expansion in the region. “Asia is very fragmented,” says Farrall, noting that in Singapore and Hong Kong “you don’t see the creative intensity that you do in Sydney”.
“We are in the market for acquisitions at the moment [but] we haven’t seen a lot of targets that we like and some of the businesses that we have seen we thought are too expensive relative to the capability that they bring,” he says. “In Asia I feel there’s a capability gap and we’re looking to grow but it’s much harder to grow in those markets.”
Then there’s the process of merging different business cultures under the one umbrella to take into account. “The first creative acquisitions are the hardest because your culture has to change in order to accommodate people with different ways of working and of dressing. But once you have a critical mass it’s easier,” says Farrall.
At the end of the day, though, Farrall is not too concerned. “Creative agencies are converging towards us in terms of building out technology capability and dabbling in strategy and we are converging towards them in the context, towards them in campaigns and marketing. I think we’re making life more uncomfortable for them,” he concludes. “And that would worry them. But there’s space in the market for all of us.”