Agencies have flocked to Brazil in recent years, snapping up any digital firms they could get their hands on ahead of the 2014 World Cup and 2016 Olympics. Brand marketers will spend big bucks around both of those events, and agencies want a piece of the action.
SapientNitro is the latest to get in on the act, with the majority stake in 60-person Sao Paolo-based shop iThink, it announced this week. iThink is one of the few independent digital agencies of any size left in the market, after a land-grab by the big four communications groups that have taken place in the past three years. Since 2010, WPP picked up Gringo, F.biz, Foster, Midia Digital, and I-Cherry; Publicis went for AG2; and Interpublic bought Cubocc. Dentsu followed suit with its purchase of Lov Interactive early last year.
All that M&A activity means there are very few, if any, appealing acquisition targets in digital, according to SapientNitro’s chief creative officer Gaston Legorburu. “There’s not much left,” he said. “There are maybe one or two shops slightly smaller than iThink, but after that, you’re getting to really small boutiques.”
In that respect, Sapient was late to the game. Holding companies have been spending millions in Brazil for years, but Sapient held off. That’s not because it wasn’t looking; it’s because it hadn’t found the right target, Legorburu said. In fact, it passed up opportunities with some of the companies listed above for that very reason. “We’re not a holding company, so we were looking for something that shared the culture and ethos of SapientNitro; not just a dot on the map,” he explained, suggesting holding companies have been making investments with little strategic forethought.
From an agency perspective, Brazil itself is also an extremely hospitable place to do business. Sure, there are differences in culture and etiquette when it comes to things like pitching for new business, but the practice of advertising is viewed with reverence. Agency folk are treated like rock stars, and advertising itself is a major part of popular culture. That in itself makes it an attractive place to set up shop.
Strategic or not, the demand for digital assets in Brazil clearly demonstrates the potential of the market there. The Brazilian economy is booming, and it’s a perfect hub from which to branch out to other South American markets. What’s more, global brands and marketers are investing more aggressively there ahead of the Olympics and the World Cup, but also more generally.
Legorburu himself admitted that it was client demand that finally prompted Sapient to get its check book out. As marketers begin to think more about their marketing as a centralized, global practice, their agency partners must be able to follow suit. That’s why holding companies have felt the need to invest there.
With that in mind, the appeal of the Latin-American market for agencies is broader than just capitalizing on major sporting events. They’re a bonus, of course, but Sapient and the holding companies that have invested there are looking to the region for long-term gains, as digital continues to grow rapidly from its currently small base.
As a result, interest in any and all-digital-focused shops there will no doubt continue. “If you strip away the bubble around those events, the market is still pretty damn attractive,” Legorburu said. “And when you factor in the ability to support more global relationships, that’s when things get really interesting. They’re fruitful and stable, so for us, it’s about positioning ourselves to capture more of those.”