Once considered the Davids that would slay the agency giants, the small shops instead are being eaten up by agency holding companies.
Organic Online, San Francisco, is the latest to take the money, accepting Omnicom Group's offer to join its interactive agency "holding company" last month (see related story on Page S-14).
There are holdouts, though-shops that are finding ways to finance themselves. Valuing creative freedom and independence over immediate cash and a big-name boss, they believe they have what it takes to go it alone.
Although worldwide advertising conglomerates, investment banking groups and venture capitalists have all approached Avalanche Systems, New York (http://www.avsi.com), the company isn't interested, said CEO Michael Block.
"We've been quite consistent about our point of view, which is to remain independent," he said.
With billings of $5 million last year, Mr. Block said Avalanche is able to attract its own creditors and has the skill set to develop strategic software support for its clients.
He's also adamant about preserving the company's creative culture, fostered by award-winning Creative Director and President Peter Seidler.
"Introducing an outside element into this culture, which we're so fond of, would be somewhat disruptive," Mr. Block said of the company.
The company's clients include Price Waterhouse, F.A.O Schwarz and NBC.
"We're gracefully funding our growth," Mr. Block said. "With a large cash infusion, there might be the tendency to grow at a pace we're not ready for."
Another advantage of staying single is the freedom to court several agencies for projects. Rare Medium, New York (http://
www.raremedium.com), recently teamed with Saatchi & Saatchi Advertising on General Mills' site dubbed "You Rule School." But it also counts D'Arcy Masius Benton & Bowles, J. Walter Thompson USA and Deutsch, all New York, and Schieffelin & Somerset's Tanqueray as clients.
When marketers or agencies work with the company, "no one has to worry about that competitive advantage," said President Glenn Meyers.
RAISED $2 MIL THROUGH WEB
To fund its growth, Rare Medium is raising its own capital. With revenue expected to hit $5 million this year, the developer just raised $2 million in a private offering managed through its Web site. Mr. Meyers said he hopes to enter the public market within 12 to 24 months.
Remaining independent also has plenty of drawbacks. For one, it makes it difficult to keep big-name clients, according to Andrew Sather, creative director and CEO of Adjacency, Madison, Wis. (http://www.adj.
"Getting there first" enabled Adjacency to garner clients the likes of Land Rover North America, Motorola and Specialized bikes, he said. Now, it's not so easy.
"It's still a real challenge to wrestle away new media from a client's agency of record," Mr. Sather said.
Novo Media Group, San Francisco (http://
www.novomedia.com), believes the secret to thriving as an independent agency is in staying away from the small-project assignments.
"Our best play is to put ourselves in an ongoing development role," said CEO Kelly Anthony Rodriques. "Some of that can grow out of developing a Web site, but your organization has to have competencies beyond maintaining a Web site."