John Riccio reveals plan to double Merkle’s size with APAC acquisitions
Merkle’s new APAC leader John Riccio outlines his strategy to make the agency more competitive. Can he double its size in just a few years?
Merkle APAC CEO John Riccio reveals its M&A strategy / Merkle
With rivalry from marketing consultancies increasingly fierce, Merkle’s new Asia Pacific boss wants to compete harder, better, faster and stronger by offering more consulting services of its own.
John Riccio, the company’s chief executive officer in the Antipodes since February and leader throughout the entire APAC region from July, wants to consolidate Merkle’s previous expansion into consulting and expand further through new acquisitions. He’s starting from a deficit, however.
”The positioning of Merkle in this part of the world is fairly poor. It’s not a very well-known brand, its heritage and history are in the US, data and marketing, email marketing, SMS marketing,” says Riccio. ”Within the Merkle business, we’re the smallest region after the Americas and EMEA. My role across APAC is to make people aware of who we are, simplify our model and scale it.”
Merkle’s Asia set-up has spotty coverage across the region and has seen only limited success in the past, Riccio argues. ”China was Merkle’s first foray into Asia Pacific through an acquisition; they turned that into a delivery center and it didn’t quite work. Singapore has been a media performance-based offering.”
While its India operations are sizable enough for domestic clients, they can’t support its work outside the country. ”It’s about scale; we’ve got the core, but how do we scale it for a demanding market?”
His plans are central to parent company Dentsu’s own goals for Merkle. ”We have ambitions to be half of Dentsu’s revenue over the next few years. That means at least doubling the size of Merkle globally.”
Riccio spent most of his own career prior to Merkle in the consulting world – he was at PwC for two 10-year stints and held positions at EY and IBM – and much of that was spent in the burgeoning customer experience space. He says Merkle’s focus on experience ”through the lens of customer and employees” attracted him, as well as the challenge of establishing the agency as a force to compete with his former employers.
Accordingly, his vision for the company’s future in the region has experience services at its heart; Riccio wants Merkle to be known less for its media and programmatic expertise, and more as a problem-solving organ for brands. ”If a client thinks about a problem that relates to the customer or the employee’s ability to service that customer ... that’s what we do,” he says.
Since Dentsu embarked on its years-long restructure scheme, it’s been reluctant to make M&A plays, last year’s acquisition of LiveArea excepted. But to add the necessary expertise to the network and grow at pace, Riccio will need to begin putting its slush fund to work. ”We have a $2.6bn war chest set aside for acquisitions; a big chunk of that is coming to Merkle and a big chunk of that is coming to APAC. I’m going shopping for data, SalesForce and experience organizations.”
Expertise in SalesForce has been an area of hot competition between digital agencies hoping to refine their retail and e-commerce chops. Dentsu itself recently acquired Pexlify, an Irish agency that specializes in the software.
While Riccio’s plans for Merkle span the entire region, some territories require a specific approach. Its business in China, previously used as a ”delivery center” to service region-wide clients, will now focus on picking up more Chinese clients, a sector Riccio believes is potentially more open than the multinational brands that work with Merkle’s rivals. ”We have a slightly different approach in China. Most of our competitors are focused 100% on multinational corporations – we’re not and the hiring we’re doing is in line with that. We’ve got an opportunity to address totally different clients than our competitors are targeting.”
In Singapore, he wants to build out its media and performance specialty into a full-fat Merkle offering; alongside Australia and New Zealand, the territory is a prime candidate for some of those potential acquisitions.
Merkle isn’t the only network that would like to eat into the lead held by the Big Four consulting groups in APAC; however, it is also not the only one that would like to better integrate its regional presence. Riccio says its overall package in the region can win the confidence of clients. ”It is a competitive space, but not many do it well. Looking at [other] agencies, they over-index on one of the elements, rather than offering end-to-end. We’re breaking down silos between data, technology, experience, design, creativity and strategy and going to market as an end-to-end.”
At the same time, he claims consultancy rivals can’t match a network’s experience service offer. ”They make all their money out of finance, HR, supply chains and transformation. They never invested the same level in the CX end because the projects are smaller, they’re more complicated and more difficult to sell; it’s always the poor cousin. I think we have an opportunity to put ourselves in a category of one, an alternative.
”A lot of the clients are sick of spending the money that the Four charges and the lack of attention they get, because they’re so big. We’re big enough to have global scale and leverage, but small enough to care.”
Further recruitment, though a heavier lever to push, will also be critical. ”Over the last five years, we went from 2,500 people to 15,000 people globally. We can scale organically and through acquisition, and the strategy focus is very similar over the next few years in terms of that growth trajectory.”
Big hires have already begun trickling in since Riccio was put in place. Last month, the company hired chief data and analytics officer Dr Catherine Lopes, who vowed to help the business ”dream bigger and deliver amazing experiences for our clients.”
”Hiring organically is tough. However, there are a lot of people leaving organizations and going elsewhere. Our objective is to ensure that we get the lion’s share of those people who are wanting to move on.” He suggests Merkle can put together a better offer for prospective workers than its consultancy rivals by prioritizing its non-financial benefits.
He concludes: ”Wage inflation is certainly something that we are very conscious of and very sensitive to, but we have to make our [employee value proposition] more than money. People only look at the money component because the other things aren’t there. We need to pay the market, but we need to be a magnet for people that want to focus on experience, creativity and technology in their careers and give them the opportunity to be part of an organization that is growing.”