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Matthias Schrader: Are we experiencing the next internet bubble among digital agencies?

"At the beginning of the week, the French advertising holding Publicis took over the digital agency Sapient Nitro for an unbelievable 3.7 billion dollars. In cash. With a premium of around 50 percent on the average price of the last 30 days. And at a valuation that is almost three times the turnover of Sapient Nitro is another significant premium for the evaluation of AKQA when it was bought by WPP in 2012 - and that was already considered extremely ambitious.

Are we experiencing the next internet bubble in digital agencies?

Of course, no one knows today whether Publicis will ever earn the purchase price of Sapient Nitro again. A purchase price of 40 times the annual result is, that much is clear, a brave bet on the future. After all, with the deal, Maurice Lévy has revealed how the world's third-largest advertising holding company envisions the future of marketing.

First: Technology rules.

Despite some major (nitro) and minor acquisitions, Sapient's DNA lies in technology. Two thirds of the global Sapient workforce are based in India. The recruitment of these software developers has cost Publicis nearly $ 300,000 per capita - that, too, is a record, especially on this scale. With the acquisition, Publicis has acquired the ability to offer and deliver technology projects worldwide. The major marketing tasks today can only be mastered by combining creation and technology.

Second, the CMOs will drive the digital agenda and control technology budgets.

The famous Bonmot von Gartner from the year before last, that in 5 years time the CMOs would manage higher IT budgets than the CIOs, becomes a self-fulfilling prophecy. Because that is the case: being able to offer large digital platform projects not only keynotes, but also turnkey right away, via the flight path of reliable relationships with the highest marketing decision-makers. After all, the boundaries between agencies, management consultancies and IT service providers are increasingly blurring in digital projects. Implementation houses like Accenture are dusting their Powerpoint decks from the New Economy years and pooling their services again under the labels "Digital" and "Interactive" - ​​they were only gone for a short time.

“Today it is less about building sleek speedboats and more about modernizing the tanker fleet, for which agencies need a critical size. "

Third: The digital transformation has only just begun and project budgets are rising.

Digital investments have been an option for many brands in the past few years; today, due to the completely changed consumer behavior, they are an absolute "must". Today it is less about the construction of sleek speedboats and more about the modernization of the tanker fleet, for which agencies need a critical size. It is no coincidence that two large digital agencies, Syzygy and SinnerSchrader, are currently growing organically at around 30 percent more than the average in the agency market. Others try to get the much-needed technological expertise on board through company acquisitions.

In short, Lévy bets that the digital transformation of his customers is only just beginning and that agencies, as partners of the marketing decision-makers, have to act technologically on an equal footing. With the crucial difference of creating beneficial and differentiating customer experiences from the deep understanding of consumers and brands. I don't bet against it. " Matthias Schrader