On February 14, Kirshenbaum Bond Senecal & Partners, an advertising agency owned by MDC Partners, launched KBS&P Ventures, a division that will invest in companies developing advertising technologies, mobile, and design.
In addition, media outlets reported this week that JPMorgan Chase plans to start a social media fund that will invest in Internet and new media companies.
“Investing in the early-stage ecosystem allows us to be closer to the garages and lots of where innovation is really happening, which allows us to be much smarter for our client base,” says Darren Herman, founder and MD of KBS&P's new venture.
Investment in early and mid-stage companies is hardly new for holding companies in the marketing and communications industry – one of the most well-known examples is Interpublic Group's less than 0.5% investment in Facebook in 2006.
WPP announced a strategic partnership and $5 million investment in Buddy Media in 2010. The trend goes back even further, with the investment Bozell, Jacobs, Kenyon & Eckhardt (now part of IPG) made in DoubleClick, the display advertising company acquired by Google, in the late 90s.
“We're always looking for potential opportunities in marketing services companies,” says Harris Diamond, CEO of the Constituency Management Group (CMG) of IPG. “Sometimes we invest, sometimes we partner.”
Diamond adds that CMG, the unit which houses Weber Shandwick and GolinHarris, has been successful in the new media space, particularly with partnerships.
“Holding companies have historically invested into technology companies,” says Herman, later adding: “That's nothing relatively new. The timing is certainly right in the marketplace as agencies are trying to figure out what's the next version of what they are. The marketplace, overall, is ripe for innovation.”
Meggan Friedman, an analyst for William Blair & Company, calls the KBS&P and JPMorgan Chase announcements “apples and oranges,” in part because JPMorgan's news is about the creation of a fund.
“This could present something of a game-changer relative to back to when Interpublic invested in Facebook,” she says. “That seemed interesting but was really unproven [then].”
Yet, as the timeline for the consumer adoption curve for technology and social media usage becomes shorter and liquidity returns - Herman says the liquidity market is coming back - companies that invest in social media and mobile technologies are seeking to position themselves as being at the forefront of these changes.
“Now that social is much more mainstream than it was then, and mobile is finally poised to take off, and location-based opportunities could present meaningful opportunities for advertisers, and the proliferation of devices, there's a recognition that there are opportunities to do something and to be an investor and to capitalize,” says Friedman.
For holding companies and agencies, the benefit lies in the commercialization of any innovations developed through investment.
In addition, Herman notes that investment “allows us to predict trends, allows us to predict fads, allows us to understand where the market is moving.”