Founded in 2000, the company employs 200 people throughout its Beijing headquarters and offices in Shanghai and Guangzhou. The addition of Longtuo will more than double the size of Razorfish in China, which currently has 130 staff.
"With 70 per cent of e-commerce spending in China currently going to Chinese businesses, Longtuo opens our doors to a number of key clients," commented Jean-Yves Naouri, Publicis Groupe COO and Chairman of Publicis Groupe China.
Longtuo serves a roster of 258 marketers including 360buy, Kohler, Masamaso, Taobao, Yves Rocher, Vancl, Gome and Renault, while Razorfish provides e-commerce services to clients such as Converse, Hertz, and GM Onstar.
Publicis hopes the acquisition will give it more commanding clout in China’s booming e-commerce market, which Forrester projects to be a US$94.6 billion business in 2012. eMarketer also estimates the market to grow at more than 92 per cent annually for the next three years, while China's Ministry of Industry and Information Technology forecasts a more conservative 32 per cent year-on-year growth in e-commerce sales volume.
The Publicis Groupe's overall strategy in China is to boost revenue derived from the e-commerce sector by 35 per cent. Longtuo’s CEO and founding partner, Su Yi, will become the managing director of Razorfish Longtuo China, and will report to Vincent Digonnet, president of Razorfish Asia Pacific and executive chairman of Razorfish Greater China.
Digonnet regards China as the El Dorado for e-commerce. "We haven't even scratched the surface as the e-commerce ecosystem in China is not yet at the levels of the US or Europe," he told Campaign Asia-Pacific. "Only 500 sites in China have more than 10,000 orders a month on average, but a smaller country like France has 1000 sites with the same indicators."
With new advances in payment technology, broadband access and delivery systems making e-commerce an attractive alternative to retail shops, China has the potential to become the world’s premier e-commerce market very swiftly, outstripping even the United States, Naouri said.
Most of the smaller e-commerce portals are not profitable, according to Digonnet. "Fundamentally, our growth will not come from servicing big ones like Taobao or 360buy, but from brands who have been testing the waters on a little corner on such e-commerce platforms, and want to build their own online flagship stores and e-commerce solutions," he said.
The acquisition of Longtuo is another step toward Publicis’ objective to double its size in the fast-growing Chinese market between 2010 and 2013. In the past four months Publicis has acquired another three agencies based in China: UBS in February and King Harvests and Luminous in March.
"At the core of e-commerce is technology, because the back-end reality is how you can sync sales with logistics, or handle huge web traffic, or organise the store," Digonnet said. "It's a different business than just digital marketing or advertising."