If Vice files for bankruptcy, can its Virtue agency survive on its own?

The agency employs hundreds of staff across 21 offices worldwide and has carved out as formidable a reputation in adland as its parent company has in publishing. Its ‘Backup Ukraine’ campaign released last year, for example, brought in armfuls of industry awards and saw the company in the top 30 agencies on the planet in The Drum’s World Creative Rankings.

Vice is currently exploring a sale to five potential suitors, according to The New York Times, in order to avoid filing for bankruptcy. Earlier reports suggested its owners sought a sale to help the new media company grow sustainably after it missed revenue targets in 2022 by $100m.

Should that effort fail, bankruptcy would lead to an auction for the company’s assets – including Virtue. Would it be viable as a standalone agency, if a buyer amputated the business from the wider Vice group?

Is Virtue viable alone?

According to M&A expert Tony Walford, partner at Green Square, Vice’s quest to find a buyer doesn’t necessarily reflect on Virtue.

“I’m not surprised that it has been hard to find a buyer for the Vice Media Group as a whole, primarily because of the diverse nature of its operations – from news, to ad creative, entertainment platforms, TV and feature film production, distribution of the content it has created and more,“ he says. “Many acquirers will likely want some of these capabilities and assets, but not all. But if you separate any or all of them does the sum of the parts end up at a value lower than the whole? One has to question if there’s some co-dependancy.“

The agency’s connection to the media company is both pro and a con, he notes. “Virtue will probably have won some pitches simply because of the connection to Vice – the halo effect. It will have won work because of the unique cultural insight and expertise it can bring from elsewhere in the group.

“What if it no longer has access to this? Or has Virtue been though childhood and adolescence and matured into an adult that can now master its own destiny, with this being a new chapter in its story?“

Rebecca McKinlay, managing director of the Financial Times content studio Alpha Grid and formerly head of The Economist’s Impact outfit, says such an outcome is possible, but difficult.

“Virtue has a great client base and it has got very strong creative credentials… it has got an opportunity to stand up as a standalone creative agency or creative content agency. But as we all know, that’s a massively competitive market.”

“What is that differentiation when it’s not ‘powered by Vice’? It’s a very hard thing to differentiate in a marketplace when you’re talking about culture and creativity – because so many others are.”

Virtue has established a heavyweight reputation among a set of peer agencies created by rival publishers, including names as diverse as The New York Times and LadBible.

Business consultant Mark Sandford, who helped to establish Shortlist Media’s in-house creative agency Family, says: “They have got a great reputation in the market as great content creators for brands.”

There’s a future for the business, he says, “if brands are still confident that they can deliver on what they want. Their big thing is reaching young people authentically and making sure that the content they’re putting out is relevant and engaging, and they are very good at that. It’s something they can certainly build on for the future.”

And though Virtue operates in a competitive agency space, he suggests Vice’s connection to younger audiences has given it a “leg up” that could provide a distinct foundation even after a potential separation.

Publisher-owned agencies are, however, very closely tied to their parent companies. McKinlay notes that “for a business like Alpha Grid, truly our differentiation is our ownership by the FT. There are no other creative businesses owned, supported and invested in by the FT.”

As such, “the majority of our clients come to us via the FT… to reach its audiences of C-suite decision makers and financial influencers. That has historically always been the majority of the business.

“We do work with clients that might not want to spend on FT.com and want content for their own channels. That’s where the real competition lies because any agency can build content for clients and lots of clients can do it themselves.”

Though the studios have different clientele and different target audiences, she says the principle applies to Virtue, too.

One media executive, who asked not to be named, was skeptical Virtue would be attractive to an acquisitive agency group without its umbilical cord to Vice. “Would anybody buy it? I doubt it very much. I can’t see any of the agency groups buying it. I don’t know what you would buy.”

The primary temptation for a potential acquirer, they suggested, would be the agency’s talent. “There may be individuals within [Virtue] that have specific knowledge of certain formats. The speed of being able to turn around content on social platforms, the whole idea of being able to generate engagement… most creatives in agencies, even the cool ones, wouldn’t be able to do that.”

It’s not just the association with Vice’s brand. The publisher’s access to first-party data is an invaluable aid to creative agencies like Virtue, says Sandford.

“The advantage of having real first-party audience insight is great for forming those ideas and making sure they get the best outputs,” he says.

Vice may yet reach an agreement with a buyer that takes the entire group, keeping Virtue and its parent company intact.

But even then, Virtue will likely come up against heavy competition from other agencies hungry for its share of youth-focused brand budgets.

“No one can rest on their laurels,” says McKinlay. “Innovation across formats, across messaging, deployment of AI, you do need money for all of those things.”

Sandford agrees that Virtue will likely find other agencies parking their tanks on its lawn. “Without investment… other agencies are going to be looking and saying: how can we replicate that? They’re going to see a gap in the market to counter what they’ve done.”

A Virtue spokesperson declined to comment for this story.