Barbarian Group CEO Benjamin Palmer said there are two benefits of
the deal: It would give Barbarian the ability to expand in size and
location and give it more security in its future during a time of
major industry flux. "It's exactly time for us to make a big, new
move," said Mr. Palmer, one of three founding partners that remain
at the company. "In some ways, that's growing in size and location,
and in some ways it's becoming more capable at handling the great
unknown of the future."
He called Cheil "untapped" and said he liked its formula for
partnership: "They have a whole bunch of agencies that are just
like you, that they compare you to, or you compete against. What we
were looking for was a global partner with some infrastructure and
some financial backing that could help us grow but wasn't going to
put us in a mold of the past."
Subservient Chicken
Barbarian blew onto the ad scene in April 2004 when it created one
of the earliest brand-sponsored viral phenomena -- the
then-groundbreaking "Subservient Chicken" website for Burger King,
on behalf of Crispin Porter & Bogusky. The project left an
indelible mark on Barbarian as innovators and helped shape its
culture; Mr. Palmer still has the chicken doll on a shelf in his
Victorian-themed windowless office.
Since then, the company has had a mix of largely project-based
work for General Electric, CNN, Comcast and Virgin America and
others either directly serving the advertiser or as a production partner
to agencies. It has also handled more esoteric digital work,
such as installation-based projects veering toward art, and a
software project it sold to Apple that uses it as an iTunes
visualizer. But like many small digital shops with
production-oriented bases, Barbarian Group suffered in the last
year, laying off 15% of its staff this summer.
An initial blog post reporting rumors of the sale pegged the
deal at $10 million (Barbarian denied this at the time), but
according to an industry executive familiar with Barbarian's
business, a likely total price tag for a deal like this could run
closer to $20 million. Barbarian's revenue has fluctuated between
$9 million and $13 million, but it had yet to be routinely
profitable, which drove away at least one interested suitor in the
past. In this deal, AdMedia Partners represented Cheil.
'Not my retirement plan'
While the deal's terms weren't disclosed, Mr. Palmer said they
include a scheme to keep the founders around longer than the
standard acquisition earn-out agreement. "I'm 35. This [deal] is
not my retirement plan," he said. "There's money, it's a good deal
for us, but it's very much structured for growth versus flipping
the company in a fixed couple of years and walking away. That's not
the track we're on."
Barbarian Group's headquarters will shift from Boston to New
York, which is largely ceremonial, as the principals and financials
have been based in as SoHo office for the past few years. (Chief
Operating Officer Rick Webb and Executive Creative Director Keith
Butters are the other founders, and both are based in New
York.)
Mr. Palmer stresses the Boston office will remain an important
hub using the talent already in place as well as recruiting new
blood from the city's strong base of technology-oriented graduates,
and said Cheil's investments in software, hardware and R&D will
offer Barbarian Group a "lot of opportunities to do installation
work, R&D work."
Investing in digital companies is a key part of Cheil's future
strategy; in September, it acquired a top digital agency in China
called Open Tide Greater China. "This year, CEO Nack-Hoi Kim Kim is
really pushing the digital marketing in Asia and globally. A couple
months ago, we put a lot of resources on a very large-scale
exhibition held at our Cheil headquarters, taking up an entire
floor, showing the latest and most cutting-edge digital marketing
initiatives. Basically, this is the future of marketing in Korea,
and hopefully the rest of the world will follow," said a Cheil
spokesperson in Seoul.
Cheil Worldwide is currently ranked by Advertising Age as the
world's 16th-largest advertising firm (based on 2008 figures). It
started as Samsung's in-house agency but today Samsung owns about
20% of Cheil Worldwide. The rest is owned by Cheil itself and
shareholders. Samsung is still Cheil's largest client, but not its
only client. Cheil has a handful of other global clients and more
than a dozen non-Samsung accounts in Korea such as oil refiner
S-Oil, Hankook Tire, leading Korean integrated wired/wireless
telecommunication service provider KT and Dong Suh Food.
Non-Samsung business it has outside Korea (and won this year)
include Orion (Russia), WoongJin (China), Maeil Dairies (Vietnam)
and KT&G (Russia) and the Korea Tourism Organization
(global).
Suitors for Barbarian Group have included most major holding
companies, and many observers thought Dentsu would be a natural fit
for the company. "We have talked to agencies in Asia before;
nothing really clicked," Mr. Palmer said. "This is not about us
doing Korean work, though, this is part of their plan to invest in
America. But the opportunity for us is that we can go outside of
America." He noted none of the founders have yet visited South
Korea, but, "culturally, I think they're the indie rock version of
Japan."
"It's new adventure time, that's the main thing," Mr. Palmer
said. "It's not us cashing out, it's us getting a boost towards the
future. We're a young bunch of people; we want to kick more
ass."
~~~
Contributing: Normandy Madden
