Growing Multicultural Firm, Which Counts Jay-Z as a Partner, Wants to Take on General-Market Agencies
Translation, the agency launched by marketing mogul Steve Stoute, is negotiating a buyback from parent Interpublic Group of Cos., Mr. Stoute told Advertising Age, as the shop moves away from its identity as a multicultural agency and seeks to rival bigger, general market firms.
The desire to recapture its independence comes as Translation is increasingly being tapped by blue-chip marketers for work outside of solely African-American marketing duties. Mr. Stoute said Translation is McDonald's agency of record for sports and entertainment marketing; is engaged on product development and packaging for Wrigley; and handles national advertising campaigns for State Farm, Estee Lauder, DSW and Target. It's also recently won assignments from Coca-Cola and Nokia as well, he said, though he declined to elaborate.
Still, Translation is currently is one of the smallest firms under Interpublic's umbrella of agencies. It had 26 employees before being acquired almost four years ago and has 65 employees today; in 2010, it posted $9 million in revenue, up from $6 million in revenue in 2009, according to Ad Age's DataCenter. Mr. Stoute partnered with rap mogul Jay-Z in 2008.
Interpublic, the fourth-largest advertising holding company, in October 2007 bought a majority stake in Translation for an estimated less than $15 million. As of April 2011, Interpublic owned 60% of the firm, an increased ownership stake compared to two years prior when it owned 44% of Translation.
Mr. Stoute says the deal hasn't gone as he had initially hoped, largely because Interpublic agencies haven't been willing to collaborate on campaigns.
"The experience, like any other relationship, has had its growing pains," he said. "I'd say that my desire to work with their clients, and my initial thinking didn't come to fruition. The agencies are clinging onto their relationships and don't want to open up." He added: "A lot of great talent is wary of holding companies and you don't have to worry about conflicts, which becomes important when you begin getting AOR relationships."
Interpublic, in contrast, was complimentary. "We continue to be supportive of and invest behind Translation," the holding company said in a statement. "We understand Steve's ambition to move in a new direction and look forward to continuing to work with him when possible, no matter what form an ownership structure may ultimately take."
One person close to the discussions noted that negotiations are ongoing but no transaction has been agreed to yet.
For Interpublic, this won't be the first time this year one of its shops will go down the buyback road. In January, PR agency MWW Group bought back its independence, saying it was driven by both emotional and business factors post-recession.
In Mr. Stoute's case, the decision seems to be driven by those factors, as well as not wanting to be pigeonholed as a specialty firm. "I don't believe in African-American shops anymore," he said. "African Americans are Americans and drive popular culture. But I do believe that work should have the opportunity to cater to specific groups through nuance that appeals to that particular group."
Tim Van Hoof, advertising director at State Farm, said Translation "seems to understand cross-culturalism as well as any group I've dealt with, and what I mean by that is how can culture bring audiences together rather than speaking with them separately."
Asked whether it matters to him if Translation is independent or owned by a holding company, Mr. Van Hoof had this to say: "It only makes a difference to me if it impacts their ability to develop amazing creative. At the end of the day no, but if it impacts either positively or negatively, one way or the other, then the answer I want the best from the agency. If it helps from a financial or talent standpoint, great, but if it hinders, as it sometimes does, well ... I just want the best work."
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Contributing: Brad Johnson
Contributing: Brad Johnson