Here's why a printing company is buying an ad agency for $132 million to fix the 'broken, expensive and complicated' holding company model
- Printing giant Quad/Graphics acquired ad agency Periscope to grab a bigger piece of ad budgets.
- The new company wants to be an alternative to agency holding companies that often tack on extra fees and services for brands.
- Periscope will help its clients and Quad/Graphics' clients crank out creative for ads, including TV and video ads.
The types of companies trying to horn in on the agency business continue to grow.
The newest example is printing company Quad/Graphics, which acquired Minneapolis-based ad agency Periscope on Tuesday for $132 million.
The 47-year-old printing firm is best known for printing magazines and direct mail but has increasingly moved into agencies' turf in recent years with an advertising services arm called BlueSoho, an agency called Ivie & Associates and majority stake in digital shop Rise Interactive.
Business Insider talked with Joel Quadracci, chairman, president and CEO of Quad/Graphics, and Periscope president and CEO Liz Ross about how the acquisition will work and why they want to become a holding company alternative.
Lauren Johnson: When did both of you start talking and where did the idea come from?
Liz Ross: We started to evaluate the future of Periscope about 10 months ago and all the options out there: Consultancies, holding companies, new holding companies, international companies. We met the leadership team at Quad/Graphics where we felt like this is something really amazing.
Joel Quadracci: We made an investment in a group called Ivie & Associates, a production shop, and we made an investment in Rise Interactive to get better visibility into online consumer behavior. As we were looking for a world-class strategy and creative group, we found Periscope. They believed an integrated offering is really what the marketplace needs right now. Working with siloed agencies in different media verticals was kind of a broken, expensive and complicated solution that clients are forced to use right now.
Johnson: What is the goal of combining these companies?
Ross: The creation of a world-class integrated marketing services organization that is really able to answer clients' needs without necessarily asking the clients to compromise in the same way a holding company would.
It is built to address where clients' core needs are - whether that need is around understanding how their products sits inside of a grocery store to how their product is merchandised inside of Amazon all the way up to awareness campaigns that are television and video based.
Johnson: Will Quad/Graphics be making TV ads for brands?
Ross: Of course - that's what we do today. As a combined entity, we will continue to do that and expand.
Johnson: Why avoid the holding company model?
Ross: The holding company model is predicated around this notion of discreet lines of business. If you're inside of a holding company, you could have a separate media agency, separate programmatic agency, separate social or creative agency. If you're in one of the agencies, you're asked to push the services of another agency, whether or not those services are right for the client.
That's problematic because it's about thinking about your own bottom line as opposed to thinking about the clients.
Quadracci: We already have 70-plus locations where there's BlueSoho employees on-site, inside the client. Because we have these employees literally on-site with the client, we have better information than a lot of other agencies and marketing solutions.
Johnson: You've seen a lot of publishers building out similar services in-house. Why go the route of acquiring an agency?
Quadracci: We're doing both. We are hiring, especially on the account strategy and the account evolution side, where we're bringing on more consultative or ex-clients.
Where we're partnering is more in the area of technology.
Areas where we see a magnitude of impact, like Periscope where you've got world-class strategy and creative, that can take five to seven years to build in-house.