PR firms target DUMBO hot-shops for acquisitions

To enhance their digital capabilities, PR firms considering acquisitions in DUMBO, an area of Brooklyn that has become a hotbed for digital and social media agencies.

NEW YORK: To enhance their digital capabilities, GolinHarris and Middleberg Communications are among the PR firms considering acquisitions in DUMBO, an area of New York's Brooklyn that has become a hotbed for digital and social media agencies.

“Certainly, acquisition is in our mindset,” says Fred Cook, CEO of Interpublic Group agency GolinHarris.

Cook and senior executives at GolinHarris have met with several firms in DUMBO, home to more than 60 digital shops, from large creative agencies such as Huge and Spike DDB to emerging players including Prolific Interactive and Breakfast.

“We came away thinking of these firms not only as potential partners but also as potential competitors,” Cook tells PRWeek. “Many of them want to work for the same clients we do. That was a very interesting perspective for us.”

Take Carrot Creative, which bills itself as a “new-media marketing agency”, has staff whose average age is 27 and has grown to 42 people. In 2008, Carrot had just eight employees.

Initially, Carrot secured most of its client work by positioning itself as a vendor to large advertising and PR agencies. Today, the agency does direct-to-client social media design, strategy, and development for brands such as Jaguar, Target, Home Depot and Red Bull. “We felt our work with the large agencies was getting lost in translation,” explains Mike Germano, CEO of Carrot Creative.

“The ad agencies attack social media in terms of ‘what can we build to drive people into an application for a contest or promotion.' PR agencies have always been more about, ‘how do we build something that attracts as many people as possible so we can continually push out micro-messaging,'” says Germano. “We bridge the gap between those two approaches.”

In addition to building a new service offering, the shops in DUMBO are attractive acquisition targets because of their young, entrepreneurial talent, people who have gravitated to the area's relatively affordable office and living spaces and sense of creative collaboration, says Jason Stein, founder and president of Laundry Service, the social media agency for Middleberg Communications.

Middleberg, a $4-5 million New York-based firm, is looking to acquire DUMBO agencies in the $1-3 million range that focus on website and app development, confirms Stein. “If they have clients on retainer, we're absolutely looking at them,” he adds.

“There is a lot of talent there, and that makes some of the firms ripe for acquisition,” says Stein. “Talent in DUMBO is doing things other people can't at their level. So if company X gets acquired, the talent could then work for the buyer.”

Prolific Interactive, a firm in DUMBO focused on mobile strategies for start-ups and brands, works with ad agencies and PR firms who don't have in-house mobile marketing teams. “The features, hardware, and software are happening so fast it is hard for agencies to even hire that first right person who has enough experience in mobile,” says  Bobby Emamian, CEO of Prolific. “We were fortunate to get in at the ground level.” Prolific currently has 17 employees, up from just five a year ago.

While multinational agency leaders welcome the emergence of DUMBO as New York's answer to Silicon Valley, some are less bullish about the acquisition opportunities, at least at the moment. Harris Diamond, CEO of IPG's Constituency Management Group and agency Weber Shandwick, says most of the agencies have pretty small revenues, and the work they're doing “we're already doing in-house or contracting out to high-level production houses.”

Still, he says, “while we might not see what we're looking for today, it doesn't mean we won't tomorrow.”

Mark Hass, president and CEO, Edelman US, believes most DUMBO agencies are heavily focused on the technical side of creative, rather than strategy and execution. “We don't feel we're in the same competitive space,” he says. “But this expanding group of businesses does give us an opportunity to hire new talent, because more digital people will be attracted to work in New York.”

For the larger PR firms who are eyeing acquisitions, the other key question is whether these fast-growing, self-confident firms in DUMBO are even interested in being acquired. Both Germano at Carrot and Emamian at Prolific say they've so far turned down offers to sell.

“Our track record shows we've always been innovative in this space and ahead of the curve. Being independent allows us to keep doing that,” says Germano.

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