What You Need to Know About China's Rapidly Growing BlueFocus

Agency Company Did Two Deals in London. It's on the Prowl for U.S. Acquisitions

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The five co-founders of BlueFocus (from left): Wu Tie, Sun Taoran, Oscar Zhao, Xu Zhiping and Chen Lianghua.
The five co-founders of BlueFocus (from left): Wu Tie, Sun Taoran, Oscar Zhao, Xu Zhiping and Chen Lianghua. Credit: Du Qingyu

Bluefocus Communication Group makes its Agency Report debut as the world's No. 17 agency company.

Blue who? It's time to start paying attention to this rapidly growing firm, the first from China to appear in the ranking.

Beijing-based BlueFocus -- which got its start in PR and is the closest thing China has to a WPP or an Omnicom Group -- has clients ranging from Lenovo to BMW to PepsiCo to Procter & Gamble Co. Its revenue, boosted by acquisitions, in 2013 surged 68% to $579 million.

BlueFocus now is going international. Last October, it bought a nearly 20% stake in London-based Huntsworth, a PR and health-care agency company (No. 31 in Ad Age's ranking). Then in March, BlueFocus snapped up London-based social-media agency We Are Social.

Steven Chen, VP-international business, said BlueFocus is on the prowl for U.S. acquisitions. Helen Fu Thomas, president of BlueFocus America and the top U.S. executive, is eyeing potential deals from her office in San Francisco.

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BlueFocus has huge ambitions. It aims to increase its revenue tenfold within 10 years. The company also wants 33% of its business by then to come from outside China.

"They're not looking to become WPP overnight. They're looking for the right investments around the world to expand their capabilities," said Greg Paull, Hong Kong-based principal of agency-management consultancy R3 Worldwide.

About half the company's business today is digital, and BlueFocus hopes to expand that to two-thirds. It has a broad vision of what that means, and it includes social media, big data and e-commerce. The company last year rebranded its flagship agency, BlueFocus PR Consulting, as BlueDigital; the PR agency ranks No. 9 in the world.

Western agency companies are its model for expansion -- to a point.

"They have a long history, and we learn from all of them, but we think because the environment is changing, our opportunity is in the digital area," Mr. Chen said. "Because we are much smaller, it's easier for us to change to that new direction. We don't have that burden of history."

Oscar Zhao co-founded BlueFocus in 1996.
Oscar Zhao co-founded BlueFocus in 1996.

Could BlueFocus be the target of a takeover? "Anything is possible," Mr. Chen said. "But we are very expensive." He noted that BlueFocus' share price is about 50 times annual earnings per share, compared with about 19 for Omnicom.

Market cap tops $4 billion, not too far from the $4.9 billion that Dentsu Inc. paid last year for Aegis Group, at the time the biggest acquisition of an agency firm. (To be sure, the pending Publicis Omnicom Group merger would by far be adland's biggest deal.)

BlueFocus launched in 1996 as a tech-PR agency. The five founders chose the name because blue is perceived as a high-tech color in China.

PC marketer Lenovo is still the company's biggest client. "We've served them for more than 15 years. We grew with them," Mr. Chen said.

After an initial public offering in Shenzhen in 2010, BlueFocus expanded, with purchases of ad and event-marketing agencies. It paid $58.5 million for its 19.6% stake in Huntsworth. In March, it completed the purchase of an 82.8% stake in We Are Social for an initial payment of $31.1 million. Future performance-based payments could bring the total price for We Are Social to $91.5 million.

BlueFocus said it plans to make We Are Social its primary digital-agency brand outside China.
Robin Grant, co-founder of We Are Social, said his team has a good personal connection with BlueFocus executives, who "set out to build an international business that happens to be based in China."

BlueFocus is on We Are Social's board and has a say in big decisions, though day-to-day operations remain in the co-founders' hands. "One of the key reasons we decided to partner with BlueFocus is because they really believe in us," Mr. Grant said. "We wanted a partner to help fuel our growth and not fiddle too much with the business. … That's how it's working so far."

See profiles of World's 50 Largest Agency Companies in Agency Family Trees 2014.

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