BtoB

Special report: Top b-to-b i-agencies

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In the first wave, the b-to-b sector spawned dozens of firms offering to build Web sites. In short order, traditional marketing and advertising agencies began adding these capabilities--often through partnerships or outright acquisitions of these Web shops.

The current environment finds a wide mix of i-agencies. All claim interactive capabilities; a handful are exclusively b-to-b. Some specialize in particular vertical markets, others position themselves as horizontal generalists. And while some expressly work on media strategy and branding--leaving technical implementation to others--a growing majority are claiming to be "full service" shops.

One thing is clear: The i-agency marketplace is large and growing. BtoB sister publication Advertising Age’s second annual Interactive 100 survey, published last month, found that revenues of i-marketing and Internet professional service companies reached $2.13 billion in 1999, an increase of 80% over 1998.

However, teasing out the b-to-b portion of this work--and further separating that figure from revenues generated by nonmarketing tasks such as management consulting and systems integration--is no easy task.

For instance, Chicago-based MarchFirst Inc. brings together strategic consulting, systems integration and marketing, and even claims an offline advertising capability through McKinney & Silver, the Raleigh, N.C., ad agency that CKS Partners acquired in 1997. (CKS eventually merged with USWeb, to make USWeb/CKS, which merged with systems integrator Whittman-Hart in March of this year, creating MarchFirst.)

Mergers continue to sweep the industry. Just last week, US Interactive Inc. announced its first direct investment in Europe, with the acquisition of The Fourth Room Ltd., a 25-person, London-based marketing and strategy firm. Fourth Room’s U.S. clients include General Motors Corp., Kraft Foods and Procter & Gamble Co., as well as U.K. clients such as The Royal Institute for British Architects. Terms were not disclosed.

For many shops, interactive work has arrived at a breathtaking pace. Take Greco Ethridge Group Inc., an 11-year-old b-to-b shop in New York that has grown its interactive revenues from zero three years ago to $12.5 million today. The 35-person firm had total revenues of $47 million last year.

"We started our interactive unit a little over three years ago," said company president Tucker Greco.

Uneasy balance

For many i-agencies, assignments from start-up dot-coms represent a major portion of their revenues--a balance that some i-agency executives admit makes them a bit nervous.

HSR Business to Business, for instance, says b-to-b interactive accounted for $30 million of its $70 million in revenues last year.

"Over the last 18 months, we’ve had an even mix of established, global brands and early-stage companies," said Chairman and CEO Rick Segal. But he plans to step down the percentage of dot-com clients. "Looking ahead into the next 30 months, we’ve made a decision to work a little harder to get our business mix to 80-20."

The prospects in b-to-b are so great that they have lured traditionally business-to-consumer agencies into the game.

"Historically, we hadn’t done the b-to-b," said Eric Ashworth, president of Addis Interaction, a year-old unit of Addis, known best for its brand strategy and corporate identity work. "But with the advent of the Web, and the ability to reach thousands of people at once, b-to-b companies began coming to us for strategy and design implementation."

For client Pandesic, the systems integration joint venture between Intel Corp. and SAP AG, Addis handled the Web site, advertising and collateral. "Anything with a Pandesic logo on it, we did it," Ashworth said.

Some i-agency executives believe the writing is on the wall for boutique specialists.

"Those places that do purely creative, for example, will find it increasingly hard to find business," said Lance Thornswood, VP and director of technology at Martin/Williams iGroup, a division of half-century-old Martin/Williams, which is now doing about half its business in b-to-b accounts.

On some accounts, the firm has done ground-floor work on such thorny technical topics as supply chain integration and logistics.

Specialists wanted

Small specialists aren’t going away.

Eight months back, enterprise applications software firm Mincom Inc. began working with Folio Z Inc., a 25-person Atlanta-based agency that did $36 million in revenues last year.

"Industrial [products] aren’t sexy for many agencies, but it’s what Folio Z gets excited about," said Kathy Seabolt, senior director of marketing at Mincom.

And firms with demonstrated strengths in one or more areas, such as creative, still attract their share of clients.

In fact, despite the hype about "integrated solutions" and "full service agencies," agency executives will admit that they rarely get every last drop of a client’s marketing budget.

"We know that, on average, three or four partners are working with midsize or large companies in their Internet efforts," said Steve Lagana, VP-marketing and communications at Circle.com. The Baltimore-based shop, with revenues of $58 million last year, reports $20 million came from b-to-b interactive work.

Logistics.com, for example, offers a transportation management system, an online marketplace for procuring transportation and software for trucking companies. The company has used a variety of agencies.

"We’ve been doing in-house development of the Web site, some of which we outsource," said Carl Drisko, Logistics.com managing director for technology and product strategy.

Asked about the panacea of using a single i-agency, Drisko said: "If there were a perfect firm out there, I’d be happy not dealing with 22 contracts. But there’s an awfully big gap between, say, branding and building a scalable Web site."

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