Refinery will be fully folded, name and all, into G2 Interactive, formerly Grey Interactive, although it will maintain its office in Hatboro, Pa., near Philadelphia.
Terms of the deal weren't disclosed. Refinery was named as the 45th-largest interactive agency by Advertising Age; according to a WPP stock filing, the agency's 2006 revenue was $21.1 million. Refinery will bring several new client relationships to G2, including Merrill Lynch, GMAC and Wyeth. Recent Ad Age estimates pegged G2 as the 13th-largest interactive shop with 2006 up 30% to $80.1 million.
Discussions between the two companies began in January, shortly after John Paulson joined G2 Interactive as president of its North America business unit and recognized the need to boost its technical prowess. G2, which had been born out of Grey, had a strong marketing and strategy pedigree but lacked the technical and web-development skills increasingly required in digital marketing. G2 and Refinery connected while sharing an assignment from Campbell's; Mr. Paulson saw the addition as a way to differentiate G2 from many of its competitors that were similarly born out of traditional ad agencies.
"They were all about starting with the technology first and came into the marketing space whereas we started as a marketing agency that came into the technology area," Mr. Paulson said. "We thought it would position us well to be more competitive against our peers in the business who I know are also facing many of the same issues in regard to technical and operational issues."
Outsourcing technical needs
More typically, interactive marketing shops might outsource the most technical assignments to a digital-production or web-design shop. Mr. Paulson said that as the business moves forward he didn't want G2 to become a front-end-only shop but to be able to fulfill the entire digital-marketing process.
"You can't just farm out those responsibilities -- they're too important," he said.
The acquisition also helps add 79 employees to G2's work force at a time when the interactive talent dearth is taking its toll on agencies, causing some shops to sit out of new-business pitches because they can't handle the work. That has not been the case at G2, said Joe Celia, chairman-CEO of G2 Worldwide, which in addition to G2 Interactive also includes G2 Branding & Design and G2 Direct & Digital. But recent wins, including Canon and Campbell's in the U.S. and an Olympics assignment from Visa and additional interactive work from Coca-Cola globally, have stretched the staff and created a need for a higher head count.
"It's not an uncommon problem," Mr. Celia said. "And other marketing communications disciplines are all now also incorporating digital into their offerings so in terms of the talent competition we're competing with general agencies, direct marketing agencies, everyone."
G2 has previously made several digital acquisitions around the world, including last month acquiring Star Echo in China and MDS Boole, a data and metrics consultancy in Spain. Mr. Celia likens the Refinery pickup to the acquisition of its Germany-based digital shop, Argonauten G2.