Nike just bought a little-known tech startup inside Richard Branson's Virgin Group
In the release announcing the acquisition (which didn't reveal the terms of the transaction), Nike said the studio will be responsible for "expanding the community and functionality" of Nike's core mobile experiences.
So what does that mean? And why did Nike acquire an entire company to do so when it has its own marketing team and works with a roster of agencies that include AKQA, R/GA, and Wieden + Kennedy?
We caught up with Virgin Mega founder and CEO Ron Faris to find out.
Faris first joined the Virgin Group in 2006 as director of brand marketing and experiences. He was responsible for the free Virgin Mobile music festival and tie-ups with artists and sports brands, from Lady Gaga to the New York Knicks.
In 2013, Faris went to Branson with an idea for a new Virgin company: a tech startup dedicated to fan communities and shopping on mobile phones.
Faris said: "I left my post running marketing at Virgin Mobile to start a tech startup, mostly because I just felt I knew that millennials in particular were seeking new ways to interact with the brands they loved through mobile devices. Through my experience with working with companies like BuzzFeed, mobile, and music festivals, I saw that millennials require an experience when they connect with brands they love and they like to connect emotionally."
Virgin Mega was somewhat of a stealth startup. It didn't do a lot of press or attempt to hang on the coat tails of the Virgin brand name. It was also venutre backed, raising undisclosed seed investment from FirstMark Capital and QueensBridge Venture Partners.
Faris' plan with Virgin Mega was to build a team of engineers and product staff who would use data to test new types of mobile experiences.
The types of exclusive items ranged from a breakfast cereal and t-shirt designed by hip hop artist Cam'ron, A$AP Rocky jewelry, and a Valentine's Day cronut necklace.
Faris: "At music festivals I was always taken by how, right before the gates would open, you'd see tons of kids in line, in the rain, all super excited. There's a lot of energy that happens in lines. Not all lines are bad. A lot of magic can happen in lines. It's that tailgate where everyone is sharing their common love for something - be it for a football game, a concert, or Nike sneakers."
A short while ago, Virgin Mega met with Nike to discuss how they could work together to create a mobile experience for the so-called sneakerhead community - fanatical sneaker fans who often spend hours in line for the latest shoes.
"We started exploring discussions about how we could work together and as we were getting to know one another, the synergies were there, there was a great cultural fit, and one thing led to another," Faris said. "Honestly the passion they have for their community and their products is exactly the type of energy we seek in the clients we work with and it was undeniable that after several conversations, this [acquisition] would be a dream come true."
In a blog post, Branson wrote of the acquisition:
"I am sad to see Ron and his team go but they will nw create a new digital innovation studio in the heart of New York City where they will invent and incubate next generation mobile experiences. I can't wait to see what they'll cook up next with a brand as customer-focused and creative as Nike!"
Faris and the team's first focus is making the Nike SNKRS app more community focused - and there's every possibility that will come with a little help from the music relationships he has spent so many years building up at Virgin.
In Nike's most-recent earnings call, the company outlined its commitment to investing in digital to grow its business.
Chief financial officer Andy Campion said "demand creation" - marketing that educates consumers about why they need a new product - increased 2% in fiscal 2016 "as we strategically invested in digital consumer engagement and sports marketing while gaining efficiencies in traditional advertising." The company's operating overhead also increased 8% for the full year as Nike made investments in consumer-facing digital products.
CEO Mark Parker added: "Mobile innovation and personal services are dominating the landscape. That's why we invest in integrating digital and physical retail seamlessly, giving our consumers better access to the products they want and while we are working even closer with our best wholesale partners who share our vision for the future of retail."