Digital specialists emerge as power players in Washington

As digital firms gain greater influence over public affairs budgets, holding companies are identifying digital shops to both acquire and partner with in order to better control competition and provide stronger client service.

As digital firms gain greater influence over public affairs budgets, holding companies are identifying digital shops to both acquire and partner with in order to better control competition and provide stronger client service.

WPP said in December it would acquire Blue State Digital, a well-known digital shop often recognized for its work with Obama for America in 2008. WPP-owned Burson-Marsteller announced in January it had developed a strategic partnership with Targeted Victory, a digital shop founded by former Republican National Committee staffers in 2009.

"We know how rapidly the online marketplace is evolving," says Dallas Lawrence, MD of digital public affairs at Burson. "We are aggressively investing in the social space to stay ahead of the curve."

Building its political presence took little more than a Washington office for Blue State Digital. But, as the digital shop grew - it now employs 130 staffers in five offices, including London, and works with Vogue, the NAACP, Autism Speaks, and AT&T - the firm discovered a need for global capabilities.

"We found there's a lot of opportunity, which we weren't necessarily able to grow organically into," says Joe Rospars, cofounder and creative director at Blue State Digital.

Through the acquisition by WPP, considered the largest holding company in the world for marketing and communications agencies, Blue State Digital earned access to the group's global network of 107 countries.

"We're really excited to plug into a network of companies that does work we often find ourselves riding alongside on," he says.

A choice for clients

Much like mainstream independent firms, digital shops that provide public affairs services find offering global access to a potential client can lead to a make-or-break decision by that client.

"Historically, the question has been of reach," says Jake Ward, VP at David All Group, about why a client may choose a global agency over a smaller digital shop in a pitch.

The David All Group is an independent Washington-based digital shop that splits its work between public affairs and consumer marketing clients.

Ward adds that smaller, digital-focused firms, many of which are deeply entrenched in technology and strategy, have the case studies and "authenticity" to compete with larger agencies.

"That is why you see some of these firms being gobbled up by traditional agencies," he explains. "They see them as legitimate competition, but they also bring instant credibility to their shops."

Ward declined to say whether his agency, which was founded in 2007, has been approached for partnerships or acquisitions.

While agency leaders differ in how they view the success of such deals, the decision to grow digital capabilities, both internally and externally, is now a requirement. Blue State Digital has reported its annual revenue grew 30% each year since it was founded in 2004, showcasing the ongoing demand for digital services.

And, as digital budgets increase in Washington, some sources say digital margins are significantly higher than traditional PR retainers, in part because digital firms have the capability to offer technology services as well as strategy and implementation.

"Long gone are the paid advertising-only campaigns," says Lawrence. "Now it's all about the conversation you're having, the value you're providing to the dialogue, in coordination with your paid online advertising and your traditional paid advertising."

He says Burson is making "deep and broad investments" in its social media and digital offerings, noting that during 2010 the firm hired more than two dozen digital strategists.

Yet, adds Lawrence, the strategic partnership with Targeted Victory "brings a critical component - real expertise in targeted digital advocacy campaigns."

"We're finding that clients are getting savvy - and rightly so - about the need to integrate and to have the firm that manages your offline reputation be the same team and strategic counselors who are managing your online reputation," he adds. 

Key recent hires

Michael Slaby

Edelman hired Slaby, former technology director for the Obama Presidential Transition Team, to lead the firm's global digital practice in early 2010

Andrew Bleeker

Hill & Knowlton tapped the former director of online advertising for Obama for America to head up worldwide digital for the WPP firm in January

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