As part of the deal with Live World, the global agency network has the option of purchasing a $2.1 million stake in the company if it exercises a warrant to purchase one million shares at $1 each and another million at $1.10 each. (Live World's stock closed Wednesday night down 1 cent to 46 cents a share.)
The deal is part of a recent trend, coming just weeks after IPG Media announced it had purchased a 0.5% investment in Facebook and agreed to spend $10 million as part of a media buy on behalf of its clients, two separate transactions.
Community and chat site
Live World, based in Los Gatos, Calif., was launched ten years ago as Talk City, an early community and chat site. Its clients include HBO, which runs message boards on HBO.com; Campbell's Soup, which boasts an online recipe-sharing site; and BMW's Mini Cooper, which has created an "owner's community" to which Live World boasts 70% of Mini Cooper owners belong.
Because the deal was created as a joint venture, it's nonexclusive and doesn't prevent Live World from working with non-WPP agencies and clients on its own.
"We build communities to fit brand cultures," said Peter Friedman, CEO of Live World, and cited as one of his biggest success stories the online community that Dove, a WPP client, built around its Campaign for Real Beauty, with 200,000 people from 27 countries.
He insists consumers aren't reluctant to be part of a community formed around a brand as long as it's a venue in which the consumer can build relationships with other people who have common interests. For the brand, it can be the ultimate research tool.
"For many years a major brand lived on TV, but today a brand lives in the voice of its customers," he said. "A branded community gives a brand the opportunity to hear that, listen to that, understand what the brand is, follow it and move it ... a brand can learn a lot."
Mr. Freidman said the WPP-Live World deal was initiated about a year ago and that his company can also help WPP figure out how to advertise in social communities.