Can ‘new era’ holding group Common Interest triumph in a market stacked against it?
The last self-styled “new era holding company” to make global headlines was S4 Capital. This week, its share price tanked amid a year-long struggle to find growth. So, in today’s economy, you would have to be mad to launch another promised rival to the establishment – right?
Last week, Common Interest’s entry into the advertising world didn’t shy away from poking a stick at its would-be rivals. Founder Anthony Freedman, former chair at Havas Australia, promised his new venture wouldn’t fall into the same trap as legacy ad networks that are “pursuing a narrowing focus on incremental performance gains driven by data.” It would not be focused on “short-term gains” or “shareholder returns” but would find a new way “to harness the power of creativity in culture to deliver growth in brand and business.”
The pitch: to deliver big, bold creative at the intersection of brand, entertainment, modern media and technology.
Arguably, not a novel idea. Freedman would say that its group of investors and advisors is the clearest indicator of its ambitions to stand apart from other holding groups. Rather than advertising, he turned to investors from the film, entertainment, tech, media and gaming worlds to fuel the group.
“The conventional way that these things happen is through securing private equity backing and that didn’t seem the way to progress because we were interested in having people who brought more than just capital to the business,” he says. “And in a way, it’s somewhat self-fulfilling; if you set out a point of view that says that the power of popular culture is the untapped opportunity to build connections between brands and audiences, then when you’re looking for people to invest, you need them to also share that viewpoint. That’s so much easier when they come from those worlds of entertainment. We can also take advantage of the connections that they have and the insight that they have in that space.”
But it was the acquisition of TwentyFirstCenturyBrand, the much-hyped trans-Atlantic marketing consultancy set up by ex-Airbnb CMO Johnathan Mildenhall and former chief strategy officer of TBWA\Chiat\Day Neil Barrie, that really gave the manifesto some gravitas.
With a mission to “create the most influential brands of our time,” which in turn “define their categories and also influence culture on a much broader scale,” the company has led the brand strategies for the likes of Airbnb, Depop and Headspace, as well as Pepsico, Pinterest and Mars.
Between the reputation of its founders, the caliber of clients it was working with and the growth it had seen in a few short years (60% in 2021, 30% in 2022), it was ripe for acquisition. That it sold up to a fledgling network rather than a Big Five group will perhaps go down as one of the more surprising acquisition stories of 2023. But Barrie says he and Mildenhall knew they didn’t want to “end up as a rounding error” on a WPP, Omnicom or IPG balance sheet.
“We’d had a reasonable number of friendly conversations [with other groups],” says Barrie. “What became clear to us was that we were attracted by the muscle of having a bigger place but also the ability to have a say and shape the culture and values. When things are established, you don’t necessarily have that opportunity. Anthony came in with a very clear vision to build something that bridged a clear gap in the market and that we can actually influence. Within the first 10 minutes of sitting down with him, we understood the mission of building the first network specifically designed to grow brands at the intersection of culture, entertainment and technology rather than it being the 10% thing that brands do on top of everything else.”
But the pros of joining a holding company still in its infancy versus a more established group also come with drawbacks. Chiefly, is Common Interest robust enough at this early stage to weather the current economic storm?
Just this week, Sir Martin Sorrell was forced to issue another profit warning to S4 Capital investors as it cut its revenue forecast on the heels of reduced client demand for its services. Its dwindling share price is now a fraction of that when it launched. Publicis, WPP, IPG, Omnicom and Dentsu are fairing slightly better but are still feeling the pressure from client cutbacks. WPP has lowered its growth forecast, IPG has been forced to make redundancies at some of its biggest agencies, Omicom’s share price fell 7.5% on its last earnings update as it struggled to find new pockets of growth. In short, it has been a brutal year for advertising groups.
“The odds are stacked against the traditional models and other traditional companies,” argues Barrie. “Joining one might seem more secure, but it was very important for us to do something that differentiated and was compelling to ambitious brand leaders. I know CMOs want to have a much stronger, integrated culture and do things that really land in culture and drive the bottom line. So if you look at it like that, it didn’t seem like there was a huge risk compared with joining something else.”
Freedman jokes that the timing of its entry into the market wasn’t intended to coincide with global fiscal uncertainty. But realistically, in the past five years, there’s been no “good time” to start a new business venture. Despite his last role being at one of the biggest advertising agencies in the world, Freedman proudly describes himself as an entrepreneur who thrives in the trenches of startups. If anything, today’s relentless economic challenges have encouraged him all the more.
“[Brexit, Covid, Ukraine] might dissuade more prudent people from doing something like this. But we were on a pathway and it felt like it was the right thing to do. It is difficult at the moment and I’m very cognizant that lots of businesses have got challenges,” he says. “But the companies that we are talking to, who are akin to what we’re trying to do, are all continuing to prosper despite the economic climate. It almost reassures you that there is this need for something different in what is an increasingly generic and homogenized marketing communications landscape. We can still do well and we’re optimistic that growth will only increase and we can do even better as we come out of this into slightly more economically encouraging times.”
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With a team of 40 divided between San Francisco and London, the TwentyFirstCenturyBrand acquisition gives Common Interest an immediate transatlantic footprint. By the end of 2024, it hopes to have acquired at least 10 other groups (not necessarily advertising agencies), which will aid its global expansion. It wants to snap up culture-focused, tech and data companies as well as creative companies that are able to develop “big platform thinking” and creative businesses that go beyond just “advertising comms.” The UK and US markets will be the priority, particularly the latter where Freedman says the budgets and general thinking of CMOs open more doors. Redscout alumnus Colin Chow will lead TwentFirstCenturyBrand's US operations.
“The US is still an enormous market with unbelievable opportunity,” explains Freedman. “The scale of that market often brings a budget that can be allocated to those things that are more experimental so you see lots of exciting things happening. If I were to consider some of the brands and businesses that have best leveraged culture, they do tend to be American. So there’s an opportunity and an appetite for the kinds of things that we’re talking about.”
There are currently a “number of deals at various stages,” one of which it is hoping to have tied up by the end of October. “As we progress, I do think that we will bring in businesses that look less like agencies. It might be companies that didn’t even begin with brands as a focus or revenue stream. Those companies that look less like agencies will bring something enormously valuable to brands.”
Common Interest’s future success will be predicated on its ability to stand out from the establishment. But it’s not just the likes of WPP it’s pitting itself against. It’s also taking on the management consultancies, Accenture and Deloitte, as well as global brand consultancies. And with CMO budgets under more pressure than ever before, brand leaders are understandably exercising caution. Can they be convinced that going against the grain with a “new era holding company” is the safer bet in today’s economy?
60% of TwentyFirstCenturyBrand’s business comes from referrals. On the whole, it doesn’t pitch. It hasn’t needed to “stand out” in the market, so to speak. Common Interest will try and mimic that at scale; the speed at which it can execute work and make things happen (the same reasons Barrie wanted to sell to Freedman rather than a conglomerate) are the reasons it will attract CMOs to its door.
“All our clients are trying to transform and perform at the same time,” says Barrie. “They’re trying to work on multiple horizons and are under a lot of pressure. They need fast fresh thinking all the time. With Anthony, I can pick up the phone or go on a walk and develop new things, and make decisions quickly in the time it would honestly take me to get a meeting with the person two rungs below him in an alternative holding company. That speed of access is what a lot of clients are craving right now. They can’t be stuck waiting. None of us can win by playing defense or trying to play it safe because marketing is existentially having to prove itself and adapt.”