Is this the answer?

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As the internet consulting and advertising business goes through a cataclysmic shakeout, a variety of consolidation models have started to arise, all of them hoping to produce the robust revenue flow that has been missing from the nascent industry for almost a year now.

In recent weeks, Reston, Va.-based Proxicom accepted a buyout offer from Dimension Data Holdings for $448 million. Proxicom, one of the more technically focused i-shops, will operate as a separate unit of the South African network infrastructure services and solutions company. Rare Medium agreed to be purchased by interactive infrastructure company Motient Corp. for approximately $180 million, and Omnicom Group transferred its shares in, Organic and Razorfish to Seneca Investments LLC. That new company, is owned by Omnicom and Pegasus Partners II, a Greenwich, Conn.-based investment firm that specializes in distressed companies.

While all of those deals speak to the desperate situation among the i-shops, one consolidation has been relatively overlooked, even though, for many in the industry who fancy themselves 21st century business consultants, it represents what looks to be a dream scenario. That deal is the merger, finalized in March, that combined London interactive agency AKQA New Media with San Francisco traditional agency Citron Haligman Bedecarre-which had once had the idea it would only focus on dot-com clients; Washington, D.C.-based Magnet Interactive; and The AdInc., an Asian new media agency in Singapore, to form a new version of AKQA. (The acronym stands for "all known questions answered.")


But for many interactive shops, which have dreamed of partnering with the more prestigious consulting industry, the interesting part is one of the new venture's strategic partners, Accenture (formerly known as Andersen Consulting), that is contributing $71 million to the venture. The other funding partner is private equity firm Francisco Partners, with a history in the interactive industry that can best be described as checkered. It contributed the last $150 million to MarchFirst, which filed for bankruptcy in April.

As dot-com brands collapse in the current economic climate, interactive agencies want to focus on traditional global brand owners. Meanwhile, the traditional global marketers served by management consultancies have been increasingly demanding more innovative marketing expertise. The answer, said AKQA's founders, is an agency that can handle marketing strategies online and offline and serve clients' needs in any part of the world, locally or globally.

Staffan Engdegard, analyst at London-based Jupiter MMXI, the European arm of Jupiter Media Metrix, said the formation of such a partnership has been inevitable. "The dot-coms are becoming less and less attractive to agencies. Now, it's about getting big global brands, and you need to be able to serve them in the best way in as many markets as possible."

He said marketers are increasingly looking for one-stop shops with international creative and strategic expertise, especially those that have an understanding of the Asian market, which AKQA hopes to provide through the participation of AdInc. All told, the company has five offices.

Prompted by demands from its global clients, Accenture decided to bring together the partners that formed AKQA. Jupiter MMXI analyst Mr. Engdegard believes the Accenture link is a major coup.

"Accenture is really good at CRM [customer relationship management]. It is increasingly interested in the [technological] systems integration and marketing strategy areas. To implement them, you need tactical creative experts," he said.

If the deal does turn out to be a coup, it hasn't revealed itself to be yet. Despite funding that competitors would salivate over, AKQA has had to make difficult decisions in light of the downturns in e-consulting and advertising. In late April, AKQA, San Francisco, formerly Citron Haligman Bedecarre, laid off about three dozen of its 170 staff members, and the former Magnet Interactive, an i-shop based in Washington, D.C., shuttered its Los Angeles office in February.

On the other hand, according to Ajaz Ahmed, founder of AKQA and now chairman and chief marketing officer of the new entity, the new company has already won 11 new engagements (note the use of the consulting lingo "engagement" over the ad industry terminology "account" to describe the new clients). He declined to go into further detail, citing the less chest-beating nature of consultancies.

AKQA London has launched for Nike, which lets visitors send email movies and text messages to mobile phones. And, in an example of the potential synergies in a union that combines multiple disciplines, AKQA in San Francisco has launched an ad campaign that enables customers to beam Palm applications to their Palm devices at interactive kiosks in Manhattan.


The Pilot campaign, which broke last week, aims to communicate that the company's hand-held devices are more than organizers.

The agency also developed a microsite at "The opportunity to do things like this is the reason we evolved our agency the way we have," said Kirk Citron, chief business development officer, AKQA San Francisco.

London-based Tim Breene, managing partner at Accenture's Global Service Lines division and an AKQA board member, said: "This was something we had been thinking about and we were instrumental in creating AKQA in its current form.

"What we wanted to do was develop a strategic partnership with a very focused marketing and communications company, especially one that was established in a way that reflected the new realities in the offline and online worlds."

New York-based Mr. Rick Hadala is now AKQA's CEO. For better or worse, Mr. Hadala is best remembered in the ad industry as the former CEO of the New York and North America units of Ammirati Puris Lintas (now Lowe Lintas). He left the Interpublic Group shop after six months in April 1999 after a well-publicized failure to transform the agency into the consulting model he had learned while at McKinsey & Co.

This time, Mr. Hadala feels he has the mix right, with a company that will meet the marketer's online needs, instead of creating campaigns just for the sake of them. Mr. Hadala argued that his company takes its cue from traditional consultancies, not ad agencies with an interactive arm.

"One of the mistakes the traditional ad agency has made is to focus too much on geography," he declared. "Consultancies, however, focus on clients." He said international ad agencies' weakness has been to calculate profit and loss by local (geographic) office.

Moreover, with the wider variety of clientele that the strategic alliance with Accenture could bring, Mr. Hadala believes AKQA will be acquiring specialist knowledge of a wide variety of industries. "We're going to make sure people understand what we know," he said.


Of course, Mr. Hadala's beliefs have dissenters. Simon Rule, CEO of the U.K. unit of Grey Global Group's Grey Interactive, disputes AKQA's claims that traditional ad agencies are too decentralized. "As part of a global ad agency network for global accounts, [Grey] is part of a marketing communications group across traditional media digital platforms," he said.

He added that the links with Accenture means AKQA's role is geared more toward management consultancy than marketing.

To Accenture's Mr Breene, the true difference between AKQA and its competitors may be that the union was entered into willingly. "Our advantage is having conceived of this and the collaboration required from the outset, rather than [forcing] different companies to get along," he said.

Several industries will be watching to see if he's right.

Contributing: Alice Z. Cuneo

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