Publicis aims to penetrate China’s social media bamboo curtain
Last week my colleague Barry wrote about WPP’s adventures in Africa, so this week it seemed only fair that I took a look at Sir Martin Sorrell’s group’s great rival, Maurice Levy, and his group's activity in China.
Looking east: Maurice Levy of Publicis
We’ve written before in The Drum about Publicis Groupe’s five-year, $4bn expansion digital drive, but I think that the holding company’s acquisition earlier this month of Chinese social media firm Net@lk is likely to be one of its most significant pieces of business yet.
The Paris-based group’s strategy is to target small to mid-size digital firms in emerging markets for acquisition, but Net@alk is particularly interesting because, regardless of the latter’s size, it gives Publicis an important entry into Chinese social media.
Leaving aside (for this week at least!) any arguments about the merits or otherwise of social media as an advertising or marketing tool, things are very different in China from here in the west. For a start, social media’s two biggest brands, Twitter and Facebook (not to mention YouTube), are completely absent: all are blocked by the Beijing government.
Next up is the astonishing fact that, according to research published last month by consultants Global Web Index, six of the world’s most-used social media sites are actually China-based. Most of them, apart from Baidu (China’s Google) and Sina Weibo (China’s Twitter), will be largely unfamiliar to western readers, even those as well-informed as The Drum’s: Tencent Weibo, QZone, YouKu, and the Facebook-esque RenRen.
And finally, there’s the fact that these social networks are completely impenetrable to the English-speaking world, as they’re all in Mandarin (although Tencent Weibo offers an English interface) and they’re tricky to register with if you’re coming from outside China; and Chinese government censorship sits very uneasily – in a cultural sense - with many of the digital world’s pioneers (although of course business often trumps any squeamishness).
So, the purchase of Net@lk gives Publicis and its agencies a way in. The Chinese firm assists companies and brands (including Coca-Cola, Adidas, Pernod-Ricard and Walmart) in devising social media strategies; it also specialises in creating content, monitoring, and analytics for the aforementioned Chinese social plaforms as well as Taobao (the Chinese version of eBay) and WeChat (an equivalent of Viber, Line or WhatsApp).
Net@lk was only founded in 2007 and has pursued an aggressive and successful growth strategy, netting itself 200 clients and employing 350 or so people in six cities (Shanghai, Beijing, Hefei, Chengdu, Nanjing and Xiamen). It is in fact something of a mini-group, consisting of four semi-autonomous businesses: Net@lk and Simone, providing social media services; Lenx, producing social content; and Buzzreader, engaging in social intelligence including monitoring, research and analytics.
We don’t know how much Levy paid for Net@lk but I suspect that his investment will pay for itself many times over in the coming years – the company he’s just bought has over 200 world-class clients, great local connections and an experienced and knowledgeable workforce (both of which are essential for “outsiders” wishing to make headway in rapidly-developing and culturally very different markets). And it is a seamless fit with the group’s other digital businesses such as Razorfish and DigitasLBi, as well as Longtuo, a Beijing-based digital agency it bought last year and which specialises in e-commerce, creative, customer acquisition, marketing and measurement tools.
It seems that Net@lk will sit alongside Longtuo inside Razorfish and DigitasLBi China. The four constituent companies will be divided up according to their areas of expertise – so Net@lk and Lenx will be aligned with DigitasLBi, creating one of the largest strategic social media content and customer engagement agencies in China; Simone will be merged with the social media division of Razorfish, strengthening its existing capabilities; and Buzzreader will be aligned with Publicis’ digital media network VivaKi, making (crucially and, for clients, very attractively) Buzzreader’s social intelligence capability available to the entire Publicis Groupe.
Importantly, it also looks as if the local talent will be retained and incentivised. Thus, existing Net@lk CEO Lamy Zhang will lead the newly merged DigitasLBi Net@lk operation, and will report to Roy Capon, CEO of DigitasLBi APAC.
All of this fits in very nicely with Publicis’ strategy of bringing its current clients (most of them multinational brands which should appeal strongly to China’s mercantile and middle classes, as well as the young; and which will themselves be looking for ways to break into China’s vast but rather closed brand ecosystem) and suite of services to developing and/or high-growth markets. If the group can also pick up local clients who are looking to grow outside of China, then even better – the investment will pay off in spades.
Crucially, Publicis Groupe now might just be the biggest holding company player in the Middle Kingdom: with this latest acquisition, it now has 84 agencies in China with a total headcount of 6,300 permanent staff through its brands Publicis Worldwide, Saatchi & Saatchi, Leo Burnett, VivaKi, MSLGROUP, PHCG, DigitasLBi and Razorfish. It’ll be very, very interesting to see what rivals WPP, Omnicom, IPG and Aegis/Dentsu do next, and how they react to this characteristically astute piece of business by Levy and his lieutenants.
Andrew Moss is a partner at Green Square, corporate finance advisors to the media and marketing sector.