Yet another MDC shop is opening in China.
KBS will be hanging a shingle in Shanghai early next year, a move announced less than two months after sibling agency CP&B confirmed it would eventually open in China to accommodate the recent global Infiniti account.
The shop will be led by Jonathan Ip, partner and chief creative officer, and Douglas Lin, partner & CEO. Mr. Lin's most recent role was managing director of TBWA's Digital Arts Network China; prior to that, he led BBDO/Proximity China as managing director. Mr. Ip most recently was digital executive creative director at Saatchi & Saatchi, Greater China.
Mr. Lin said that the shop will open with five or 10 employees, and will aim to have upwards of 20 by the end of 2015, adding that while the agency won't necesarily turn down pitches, the focus for the next year or two will be on solidifying its culture and foundation and looking for opportunities within KBS's existing client roster.
The Shanghai office also comes on the heels of the agency earlier this year winning TE Connectivity, the anchor client for the new location. In August, KBS also expanded its footprint into Europe, not by opening a new office but through the acquisition of Albion, a 100-person creative and digital shop. Last year, Anomaly expanded into China with Budweiser and Diageo as the main clients.
New global clients like TE Connectivity see Europe and China as priority markets, and KBS's other clients are looking for ideas in those markets as well, said Lori Senecal, president-CEO of MDC Partner Network and global executive chairman at KBS. With the expanded footprint, "we'll be able to pursue those conversations more tangibly," she said, adding that MDC's strategy is to expand into new markets "on the backs of clients' needs." KBS also has offices in New York, Los Angeles, Toronto and Montreal.
The Chinese agency market, particularly in Shanghai, has long been dominated by multinational holding company networks like WPP's Ogilvy or Omnicom's TBWA and DDB. But local agencies like Blue Focus have been rapidly expanding, and more and more tiny but nimble shops founded by locals are popping up as well.
"You had the first wave of very large multinational companies establishing agencies in China," said Mr. Lin. "Now you're seeing a lot of boutique homegrown agencies and mid-size agencies with a different perspective coming into the market."
The introduction of KBS, Anomaly and eventually CP&B means more mid-size shops are getting into the market, and with that, comes its own set of challenges. Agency executives in the Shanghai market said that margins tend to be thinner in China than in other regions. Big multinationals can handle thin margins because they have the infrastructure of global networks with dozens of locations to make up for any potential loss. Small, local agencies tend to be nimble enough to adapt with low overhead.
Talent in the Shanghai market has a high turnover rate, and it affects agencies of all sizes. Executives in Shanghai said that a shortage in talent has led to desirable candidates being lured away from their current gigs, sometimes with salary hikes as much as 30% more than their current salary.
"We've definitely discovered that because there is a lot of opportunity, people are bouncing around quite a bit because there is demand in the market," said Ms. Senecal. "One of the things we like about our model is that we're able to create partnership at the agency and that's a motivating thing -- to have people be invested and want to develop at the agency for the long term."