Why BBH Bets on Creating Its Own Brands

Ad agencies often feel imprisoned by the time sheet. It’s the symbol of much of what’s wrong with the agency business, which is basically paid not according to the brainpower used and smart ideas produced but rather the hours it spends on problems.

There are many suggestions on how to change that. One of the most popular proposes that agencies get into the product business themselves. The thinking goes: Why give away ideas in exchange for hourly fees when agencies can turn those ideas into revenue-generating startups? The idea, of course, is easier said than done, as high-profile agency side-project flops like Droga5’s HoneyShed show.

That hasn’t stopped agencies from trying. BBH Zag, a five-year-old brand-invention business, is a wholly owned subsidiary of ad agency BBH, which is in the process of releasing its latest new product, Playground Sessions, a music learning software program that teaches the fundamentals of music through gaming principles. It not only sounds like a startup, but it has the it’s-like-this-for-that thing down, too.

“It’s Guitar Hero meets Rosetta Stone,” said Chris Vance, U.S managing director of Zag.

The software is, by far, the product development company’s biggest launch to date. Vance says that the Zag team became aware of David Sides, a pianist whose YouTube videos attract millions of hits. Partnering with Rain, a digital agency that Zag connected with when it gave a road show presentation at BBH, the team has developed an instructional program based on Sides’ arrangements that, according to Vance, is the “convergence of learning and gaming.”

Vance, who was recruited by BBH from Proctor & Gamble because of his experience on the brand side, said that the agency began Zag as a logical response to market conditions.

“The agency landscape has always looked for ways to evolve smartly like any good company should,” said Vance. “It used to be a big thing for agencies to try to go into brand consulting and things like that. Over the last five years, you’re seeing a lot of agencies get more into the IP game.”

This new model requires that agencies do a complete about-face on certain closely held beliefs. They have to spend their own money and be prepared to lose it. That’s a tough pill to swallow for agencies, which live and die by utilizing (and billing) the people who work for them. It’s hard for agencies to forgo client revenue in favor of a skunkworks project that may or may not pan out. And the emphasis in these types of projects is inevitably on the latter.

A quick review of Zag’s portfolio illustrates the point. The Ila Dusk personal alarm, a jewelry-like personal alarm that emits screams instead of an alarm has been a success. But Pick Me, a line of prepared vegetarian meals, has struggled, for example.

Other projects have borne fruit. Mrs. O is a blog launched soon into the Obama presidency that details the fashions of Michelle Obama. It developed a following, eventually landing a book deal.

“Within any agency, everything is about ideas,” he said. And Zag is able to leverage BBH’s strategists to assist in identifying ideas that will resonate with consumers. In a process that Vance calls brand lag, Zag’s creative team looks at areas in which brands have not kept up with consumer interest and activity.

When agencies develop their own brands, there is always the danger that their clients may balk at the prospect of competing with instead of being serviced by. According to Greg Andersen, CEO of BBH NY, the potential for that kind of conflict was one reason that BBH created a separate management structure for Zag instead of simply adding new product development to the job descriptions of BBH’s creative teams. “We coordinate to make sure that the areas in which Zag is operating won’t make our client roster uncomfortable,” he said.

But even with the backing of a large agency, brand building is not for the faint of heart. Vance said that the process is a long and expensive one that generally has two stages. The first stage is identifying the product and the market. “We apply a lot of commercial understanding to know if we can build a business over the next five or 10 years,” he said. The second stage is to identify partners to go to market with. “There may be a market for it,” said Vance. “But if you don’t have the partners, you’re just spinning your wheels.”

And it all takes time, he said, which can sometimes be the enemy of invention. “You never know when a big competitor identifies the same space you did and comes into it. All of a sudden you have to make the hard decision, even if you’ve invested time and resources against it: We’re not going to win there, so we have to go back to our process and figure out what else we have in the pipeline.”

And, of course, the sexiness of startup life isn’t lost on the agency as a recruiting tool.

“We are competing with a lot of adjacent creative industries for the best creative talent out there,” Andersen said. “At one point in their day they may find themselves working on a BBH Labs project. At another point in the day, they may be working on a campaign through BBH the agency. And the next day they’re working on a new brand through Zag. It’s a compelling environment to offer to people.”

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