The initiative is part of a strategy by the parent company to increase its focus on digital and other forms of emerging advertising. Even though 2001 has seen many competitors close their doors and potential clients do the same, Carat Interactive President Sarah Fay is proceeding as if the downturn will be fleeting and online advertising will return with a vengeance. As such, the unit is investing in new technology, services and research. It wants to increase staff from the current 45 to 70 by the early next year.
"People hear click-through rates are down and think the whole market is down. They confuse the demise of the dot-coms with the demise of the medium. A little knowledge is a dangerous thing. [Dot-coms' problems have] had nothing to do with us or our clients. Traditional advertisers are just waking up to how they can use the Internet media and why they should," Ms. Fay says.
SPUN OFF IN JANUARY
Carat spun off its interactive unit in January. Already it boasts clients such as Pfizer, RadioShack Corp., Hewlett-Packard Co. and Xerox Corp.-it snagged HP and Xerox without the parental pitch team. About 90% of Carat Interactive's 20 clients are traditional businesses, with dot-com revenue coming from stalwarts such as America Online and familiar names like Internet investment company CMGI. Ms. Fay says domestic billings should hit $100 million this year, up from about $40 million in 2000.
"There is a general sense in the traditional sector that [clients] should be doing things on the Internet marketing front. A lot of people [are trying] to figure out what Internet marketing means to them," she says.
A Forrester Research report titled "Online Advertising Eclipsed" notes: "As traditional marketers learn that online advertising is just the first stage of a campaign, they will augment budgets for later-cycle activities like promotions and e-mail."
PLANS TO BE RIGHT THERE
Ms. Fay plans to be right there. With backing from its deep-pocketed parent, Carat Interactive is gearing up electronic customer relationship marketing, performance marketing and search prominence, which is designed to make a client's name pop up quickly in online searches. "If they have a really strong, sophisticated unit that can coordinate and plan jointly with the traditional media groups and give the client a really integrated online and offline campaign, that's differentiating," Forrester Senior Analyst Jim Nail says.
"Carat Interactive is always on top of the latest happenings in our business and our culture," says Joel Carter, VP-marketing at RadioShack. He claims it would have been impossible for the company's e-commerce site to grow as rapidly without assistance from Carat.
The agency handles all aspects of interactive marketing, including business-targeted and consumer-targeted activities. Carat "saves us a lot of hiring and managing of staff ... It gets us to market faster," he says.
XEROX AFFILIATE PROGRAM
Carat Interactive is helping ailing Xerox Corp. launch its affiliate marketing program, initially a business-to-consumer proposition.
Bob Tubbs, Xerox manager of corporate e-business and business development, says the shop helped target partners where it might place banner ads.
Carat Interactive got its start in 1995 as a unit of Carat Freeman formed to help clients use Internet buttons, banners and interstitials, headed by Ms. Fay. Carat opted for a branded unit rather than leaving it in-house, largely because of financial accounting and a setup that allows it to grow especially quickly, Ms. Fay says.
In addition to Boston, Carat Interactive has offices in New York, Chicago, Los Angeles, San Francisco and 16 foreign cities. Ms. Fay says the unit has $200 million in worldwide billings, making it a leader in developing and executing interactive marketing strategies and digital media programs to help clients build brands and gain customer insight.
Brian Cavoli, director of innovation for Carat Interactive, says being independent helps the unit stay ahead of innovations and disclosures, which will be even more essential as wireless and broadband advance.
"As fast as technology moves, there are more opportunities to reach a customer in new ways. You can get at them through wireless so that you can reach them when they're not at their desks or home," he says. Carat Interactive "provides for a centralized place of learning and experience ... Instead of being part of one office, we are able to tap into Carat around the country. More importantly, they can tap into us."
Ms. Fay says she and her staff don't participate in all of Carat's new-business pitches, but they can be brought in after a deal is sealed or work has begun. They also pitch their own accounts. She discounted concerns that clients would suffer amid internal turf wars over money.
FIGHTING OVER SCRAPS
"If you're going to focus on the minutiae of billing dollars shifting from one medium or another, you end up fighting over scraps," she says. "But if you focus on doing what's right for clients, the money will come naturally. You produce great work, and more work will come your way."
She and other planners say media strategies have better penetration when one agency handles all aspects of buying and planning, rather than when it is farmed out to competitors. She plugs Carat, saying its global reach and strict media focus can provide clients with broader services than Web-only agencies or media agencies that grew out of creative agencies.
"At our agency, media always comes first. With creative agencies, the creative product tends to drive the entire program," she says. "As you deal with segmented markets, highly targeted campaigns, I think that media needs to come first."
Mr. Nail says Carat's move shows its commitment to the genre, which could help it lure talent.
"They're making a statement that `We have a really strong interactive unit.' They're not shoved off in some back room of a traditional agency," he says. `Interactive-at traditional agencies-does not get any respect. People who are really good and experienced in [interactive] don't want to go and work there."