A spate of recent acquisitions, topped by Ogilvy’s surprise move for DNX, shows B2B agencies are hot property. So what is driving this unprecedented interest in a sector that was previously dismissed as a dull niche? Joel Harrison reports
DNX’s acquisition by Ogilvy & Mather, which broke last month, is the latest in a long line of takeovers of UK-based specialist B2B agencies – a trend that appears to be escalating as interest in the sector grows.
Agencies have always been the bellweather for the health, vitality and vibrancy of any aspect of marketing. For proof of this, look no further than the rapid decline (in terms of numbers and health) of agencies describing themselves as ‘direct’ (i.e. specialists in direct marketing) over the past few years, as spend has migrated to digital.
By contrast, the growth in agencies describing themselves as B2B in the UK has increased dramatically over the past decade. When B2B Marketing ran its first Agencies League Table, back in 2005, it featured only 30 agencies – the 2013 equivalent list featured almost 70, and this total looks set to grow again in 2014.
As interest in the category has grown, so too has alignment with it from both agencies and clients. The result is that the B2B agencies sector has become a bigger pool that is harder to ignore.
Success across the board
The factor driving this increased interest is success – the likes of DNX and SteinIAS have built highly profitable and robust businesses during a very sticky economic climate, delivering excellent, award-winning work for clients and impressive year-on-
year growth.
But this success is not only apparent at the medium-large end of the spectrum (DNX and SteinIAS were placed 12th and 16th respectively in the Agency League Table) – it can be seen across the board. In 2005, the average gross income of the agencies in the league table was £3.1 million, with the total gross income achieved by the entire list reaching £93 million. In 2013, the average gross income per agency had risen to £5 million and the total gross income earned had risen to £305 million, which is a 300 per cent increase. Business is clearly booming for B2B agencies of all sizes.
Digitisation
So how have B2B agencies flourished in what has ostensibly been such a difficult economic climate, when marketing (and consequently agencies) has been so distinctly under the cosh?
The answer, to an extent (predictably), is digitisation, and the impact this has had on business buyers and their access to, and consumption of, information. In the pre-digital age, brands were in control of the information exchange and communication with buyers was largely limited to sporadic, seasonal bursts of communications – otherwise known as campaigns. Agencies were geared up to deliver this, with skill levels, resourcing and remuneration all designed accordingly. This was all very well while it lasted but brands were rarely willing or able to pay monthly retainer fees, which meant agencies working on a project-by-project basis, thereby compromising business planning.
New model agencies
Over the past five years, the situation has changed dramatically – buyers have become savvier and have taken control of the information exchange, demanding Googleable content to help make much of their purchasing decisions before they even make contact with vendors. As a result, marketers and agencies have had to focus more and more on content production, and more constant flows of messaging designed to nurture relations, than big seasonal bursts of activity designed to bludgeon their way towards awareness. The successful exploitation of marketing automation, as demonstrated by SteinIAS in particular, creates yet further opportunities for agencies to break from the traditional revenue/relationship model. In other words, as SteinIAS CEO, Rob Morrice, has often put it: it’s about ‘the big, long idea’ not just the ‘big idea’.
The good news for agencies is that this potentially means longer tenure with clients, more reliable revenues and better ability to plan resources. In short, this was a model you could build a business around, and use to plan for expansion. DNX grew from £2.3 million gross income in 2007 to £6.7 million in 2013.
Chris Wilson, MD of Earnest, and chair of the Agencies Council at the Business Marketing Collective (BMC), agrees with this overview of how B2B agencies have changed their business plan, but also argues B2B agencies have also moved up the intellectual food chain in the last five years. He claims the smarter agencies have shifted their focus from volume-based to value-based activities. “B2B agencies have focused on what is truly valuable, such as real market insight and better creative solutions,” he says. This, more than anything else, has made the big agency groups sit up and take notice.
Going global
The digitisation of marketing may have played the key role in the rise to prominence of B2B agencies as acquisition targets over the past five years but, increasingly, globalisation also looks likely to be a key factor. Gyro and Doremus proved the case for a proprietary international network of B2B agencies, followed by Gravity, but the most recent contender for the throne is SteinIAS, which is actively building out its global presence, with significant presences in the UK, US and France, plus partnerships elsewhere, and rumours of further direct acquisitions on the cards. SteinIAS has actually resigned from network BBN (which it had played a key role in founding) earlier this year in order pursue a strategy of more direct international expansion.
Ironically Ogilvy’s acquisition of DNX is almost a case of internationalisation by reverse, given that the Surrey-based acquiree has no physical presence outside the UK, while Ogilvy is a truly global operation. The stated intention is for the merger to enable the newly-formed OgilvyOne DNX to access this network to build and service its global and increasingly international client base.
Big networks looking for targets
The big agency networks are the most likely driver of further B2B agency acquisitions, but it remains to be seen whether they seek to build global B2B specialists under a single brand (such as Gyro, Doremus or Gravity), or whether they acquire and cultivate localised expertise, allowing local brands to flourish. In an increasingly global world, the latter strategy seems more likely than the former. It’s interesting to note that Leo Burnett has a business-focused arm in the US, but not one in the UK despite a significant presence here.
By its very nature, the agency landscape is constantly changing. But the fact B2B agencies are succeeding means they are producing great work and building robust businesses, and that must be good news for the industry.
The intervention of WPP Group, which owns Ogilvy & Mather, and its famously astute and ruthless CEO Sir Martin Sorrell (nicknamed ‘the Sage of Soho Square’), in the B2B market for the acquisition of DNX can be seen as confirmation of this new-found credibility and a signal that B2B marketing as an industry has arrived. The big agency groups are recognising that B2B is a significant category; but more importantly a distinct category, which requires specialist expertise.
Significant B2B agency acquistions 
