New kid on the block: The effects of Accenture's buying spree
Accenture Interactive has acquired 15 advertising and marketing companies in the past five years. Should Madison Avenue be worried?
When it comes to Accenture, no other company so perfectly summarizes the changing landscape of advertising. Once part of an accounting company and later a major player in management consulting and professional services, Accenture now seems intent on remaking Madison Avenue — and traditional agencies should be worried. A series of high-profile acquisitions have helped Accenture advance that goal, and turned it into one of the world's biggest advertising companies.
Accenture Interactive, the consulting giant's marketing subsidiary, has acquired 15 advertising and marketing companies in the past five years, the company said in a recent press release. And the pace of those acquisitions has only accelerated. The two most recent of Accenture's buys — design and marketing agency Wire Stone and marketing and sales consultancy Brand Learning — were announced within days of each other in early August.
Accenture, it seems, smells blood in the water and opportunity in the air. That's because two factors seem to be driving brands to consider non-traditional players such as Accenture for their marketing and advertising needs:
- First, the ongoing problems surrounding programmatic advertising has brands feeling skittish and distrustful and willing to entertain new approaches with all-new marketing service providers.
- Second, brands are pushing hard to lower their advertising spend and simplify the business of marketing. In America's corporate boardrooms, consulting giants like Accenture are the go-to guys when costs must be cut.
These factors, combined with myriad transparency issues currently bogging down the agency space, have created a perfect window to snap up more brand clients. Accenture is not alone in seeing the opportunity. Many of the major information technology and consulting companies have become bigger players in advertising in the past few years.
In 2017, four such consultancies — Accenture Interactive, PwC, IBM iX and Deloitte — made Ad Age's ranking of the 10 largest agency companies in the world. In 2016, there were only two consulting firms on the list — Accenture and IBM. And it was only in 2014 that IBM's iX became the first consultancy on the list.
Now Accenture Interactive, with 2017 projected revenue of $6 billion, is the biggest of the consultant/advertising players. Acquisitions have been the drivers of that growth, and indicate where the shop may be heading in the near future.
Consultancies understand that there is a huge opportunity to gain new revenues at the expense of the "Big 6" ad holding companies — WPP, Omnicom, Publicis, Havas, IPG and Dentsu, according to Olivier Gauthier, founder and CEO of COMvergence, a research company that tracks the global developments in the marketing, media and advertising industries.
"However, in order to become an alternative to the holding companies, they had to reshape their business segments and strengthen their capabilities in some areas," he said. "And to be able [to] be part of the competitive field they have to offer the full spectrum of services, including media, strategy and creativity. The time of setting-up joint ventures with creative agency groups is over."
For Accenture, in particular, such a do-it-all approach is the key, according to Brigitte Majewski, a vice president and research director at Forrester who tracks the advertising and marketing industries.
"Accenture must be betting that the market is right for their unique value proposition — which is to lead companies through the digital transformation required to serve the modern empowered customer," Majewski said. "Enough brands are 'getting it' — that digital transformation is required and that it takes a partner who has relationships and skills that span their enterprise in order to make it happen.
Accenture is not interested in the isolated project that any of these new acquisitions can do — it's about the big picture: all the projects required to execute a true digital transformation over time," she added.
Majewski is particularly intrigued by Accenture's August purchase of Brand Learning and November 2016 buy of UK shop Karmarama.
"Karmarama represent a full leap into agency territory. There's no question now that Accenture is going after the agency business," she said. However, she added that the Brand Learning acquisition indicates Accenture doesn't intend to be just another agency pitching ads, "but instead has embraced the need to drive improved brand experiences [...] with Brand Learning, Accenture can help clients define the whole customer experience and then help them build out each component."
COMvergence's Gauthier thinks there's an additional reason that Accenture is on an acquisition spree: adding customers for its core business.
Accenture and the other consultancies "remain primarily focused on their most lucrative service: consulting," he said. "Operating a development strategy by acquisition is a clear solution to offer new capabilities in a timely manner, and of course to grab new clients."
The Karmarama deal, for example, bought Accenture connections to marketers such as BBC, Honda and Unilever. Accenture's purchase early last year of a controlling stake in German digital agency SinnerSchrader gave the consulting giant access to marketers at Allianz, Audi, BMW and VW.
Despite Accenture's buying spree, there are still holes in what it has to offer.
"Accenture still has a long way to go before it can prove out its creative idea and storytelling chops," said Majewski. "This isn't to say that it can't develop the necessary creative idea that conveys the brand purpose; just that it doesn't have the long legacy of rich, emotional storytelling that have been the creative agencies' sweet spot."
Additional acquisitions are a sure bet, however, and could put Accenture on a more even keel in terms of creative capabilites.
"They will hunt for additional creative assets like Karmarama and The Monkeys and Maud, content, mobile, data agencies and tech companies," said Gauthier. "They will also think in terms of geo coverage."
Majewski also expects more acquisitions by Accenture — "likely in measurement and analytics, and customer data/CRM."
"Accenture already had some strengths here, but these two areas will be the backbone of marketing in the future and I’d expect Accenture to work on bolstering their position further,” she said. There's also at least one area that Accenture will likely avoid, per Majewski.
"They haven't made any venture into media, but I would not expect them to do so anytime soon," she said. "Owning the media component is not necessary for them to achieve the strategic objective of digital transformation services, and it's a land mine these days."
If there's one thing that should chill the traditional agencies of Madison Avenue as they look back at Accenture's rise, it's this: the fast-changing world of advertising and marketing is filled with landmines, but Accenture Interactive — owned by a company that specializes in helping companies in hundreds of industries avoid disaster — has managed to sidestep them all.