Digital A-List 2008

Digital A-List 2008: No. 2, AKQA

Ad Age's Digital Agency of the Year Is Actually in the Business of Product Innovation

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When most of his peers were still in school, Ajaz Ahmed was embarking on a wholly different kind of education. Just 18 years old and working in Apple's marketing department on new-product launches, Mr. Ahmed landed on a conclusion that many seasoned business people are still struggling with: "The worlds of technology, media and entertainment were colliding," he says.
Four years later, Mr. Ahmed founded AKQA, a digital agency built on yet another collision. "Our belief is that marketing and product have converged," says Mr. Ahmed, the agency's chairman. "The consumer doesn't separate the marketing experience from the product experience."

Only the densest of old-school agency execs will need that one explained. There are a million ways to see how it's a dark day for advertising as it was practiced throughout most of the 20th century. Study after study shows that consumer immunity to advertising is as jacked up as it's ever been. Put simply, even if you get people to watch your ads, those ads aren't gonna fool anyone. That's why, it could be argued, the notion of agency as embodied by AKQA and shared by only a few others is the most vital one around.

Overnight success
Its books certainly suggest that. Fourteen years after it started as a boutique in London, AKQA has become a global powerhouse. In 2007, the San Francisco-based agency reached nearly 700 employees; revenue was up about 40% to $99 million; and new-client wins included Kraft Foods, Unilever, Cadbury Schweppes and Motorola, adding to a roster that already included Nike, Visa, McDonald's Corp., Microsoft Corp. and Coca-Cola Co.

But, of course, a half-wit monkey trained in Flash could grow a digital agency in a media environment where marketers of all stripes are dumping millions of dollars into online advertising. What has set AKQA's model apart and makes it a destination for the biggest of brands are its polished, high-end creative and a strategic focus that's been honed on five areas that fit the new-media model: interactive experiences, content creation and distribution, interface design, e-commerce, and new-product development.

In other words, it's not just another interactive ad agency. More and more, AKQA is working at the level of product innovation, not just marketing products that have already hit shelves.

'Halo' launch'
When it does do marketing, the output doesn't consist of banner ads and the usual paid-placement fare. Instead, AKQA is creating experiences such as the one it did for the launch of Xbox's "Halo 3," which turned out to be one of the most visually arresting campaigns of 2007.

The website, part of the marketer's "Believe" campaign, gives visitors a virtual tour of a still-life diorama of all the characters and weapons in the video game, with 360-degree views that include detailed information about each character. "The diorama is absolutely stunningly executed, and 'Halo' fans always want to know more about the 'Halo' world, so it gave the chance to really immerse themselves," says Lars Bastholm, AKQA's executive creative director.

Other work for the launch of "Halo 3" included "Iris," an alternate-reality game that leads fans to the origin of the "Halo" universe, with an interactive narrative that used media such as newspaper circulars, conspiracy street teams and coded ringtones to give fans clues about the story line. AKQA's bet on the lengths to which gamers will go to crack a puzzle paid off, as preorders for the new "Halo" release reached the 1 million mark.

With the "Iris" game, AKQA "really took huge risks, and they turned out for the best," says Jeff Bell, VP-global marketing, Inter-active Entertainment Business, for Microsoft.

Mr. Bell notes one especially innovative feature of the game, where users could download a ringtone, play it into their computer and unlock a server that would dispense a clue. He was dubious at first, but "sure enough, we had 300,000 people play the ringtones."

Team players
Mr. Bell praises AKQA for its ability to mesh with other partners -- "they are willing to work with someone else's creative idea and make it better" -- and the consistent quality of the agency's creative.

AKQA isn't "dependent on single creatives or single account-executive relationships," Mr. Bell says. "They have a consistent ability to attract new talent. It's more about the process than it is solely on the people."

Other notable work in 2007 included a Coca-Cola website in which AKQA re-created Wieden & Kennedy's award-winning "Happiness Factory" TV spot with a Pixar-like web experience where users can apply for virtual jobs at the Coke factory.

Though its top-notch creative is outstanding, what makes AKQA intriguing is the commitment to build a new model for agency/client relationships and the focus on convergence that Mr. Ahmed first learned as a teenager at Apple.

AKQA is well-known for its interface design practice, which launched two years ago when the agency designed the Xbox 360 console and has continued to work on projects for major brands. Content creation is another area of focus for the agency, evident in a 12-part documentary about the history of basketball and sneaker culture it made for Nike.

Innovative products
Product development is another important space for the agency. AKQA is currently working with Aircell, a company that's introducing in-flight e-mail and instant messaging to American Airlines and Virgin Atlantic Airways fliers. Last year, the agency helped Nike launch Nike Route Finder, a Google Maps tool for runners to use to create routes and share them with others.

If Mr. Ahmed is the visionary behind AKQA, then CEO Tom Bedecarre is the savvy entrepreneur who's propelled the agency to where it sits today. The two men have very different styles, but they have a single vision for the agency: putting innovation at the core of marketing.

Mr. Bedecarre became CEO of AKQA in 2001, when his own agency, San Francisco-based Citron Haligman Bedecarre, was merged with Mr. Ahmed's operation in the U.K., along with two other shops, web developer Magnet Interactive and Asian ad agency The AdInc., helped with a $71 million investment from consultant Accenture.

With Mr. Bedecarre as CEO, AKQA has built a global presence, making shrewd business moves along the way. In February 2007, AKQA sold a majority stake to private-equity company General Atlantic for $250 million. AKQA could have gone the holding-company route (WPP Group is just one of the conglomerates said to have courted the agency), but Messrs. Ahmed and Bedecarre wanted the agency to maintain some of the boutique feel it had -- and, of course, avoid any of the potential political quagmires moving into a holding-company structure can bring.

"Our independence has been part of the reason we create innovative work, and I think General Atlantic bought into the track record," Mr. Ahmed says.

Opening salvo
Later in 2007, AKQA started to spend some of that capital, buying Silicon Valley search specialist Search Rev, likely the first step in many Mr. Bedecarre and Co. will take toward building a next-generation digital-marketing platform.

However, Mr. Bedecarre cautions not to read too much into the industry rumor that AKQA is looking to become a holding company itself. "I don't think we'll be rolling up companies," he says. "That's not our goal." In recent years, the agency has also focused on building out media offerings and a mobile division.

"I think our clients appreciate how effortlessly we can jump from brand experience to websites to mobile," Mr. Bedecarre says.

With its stable of new-media service offerings and focus on technology, AKQA is naturally upbeat about its prospects for 2008. The year ahead likely will bring a new office in India; additions to locations in the U.S., Europe and China; and more investments with that General Atlantic capital.

Exactly where those investments will go is a question mark at this point -- or at least Mr. Bedecarre isn't fessing up -- but without a doubt, AKQA will continue evolving to meet the needs of clients tackling an ever-changing media landscape.

"The vision we both have is innovation at the core," Mr. Ahmed says. "[We have] a love of new adventures and taking a different path."
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