We don’t know yet how much IPG received for R/GA, the once-flagship digital agency it’s just sold to Truelink Capital but we do know that Truelink has promised to put $50m into the business via an “innovation fund” to help its AI ambitions and other activities. This is rather more than it might have expected under IPG ownership, even if IPG had chosen to hang on.
R/GA (above) was one of a trio of holding company big digital agencies along with Huge, also at IPG which has been sold to AEA Investors, and WPP’s AKQA, currently undergoing a management upheaval after its merger with Grey. WPP recorded a mind-numbing £273m charge against AKQA in its full year 2024 results, presumably a write down of its initial £300m purchase alongside difficult trading. Rather oddly it seems intent on holding on to the AKQA part of Grey despite reported overtures from founder Ajaz Ahmed and other senior managers to buy it out.
Why didn’t these companies work? Or why didn’t they work under holding company ownership? One reason offered in all three cases was the prevalence of project work, hammered in a difficult global economy.
Yet when the business world appears intent on digital transformation in all its guises, why did such work dry up? Is it because there’s more competition with WPP as a whole now proclaiming it’s the “creative transformation company” based on its Open AI system? Other tech-based conglomerates including Mark Penn’s Stagwell and the UK’s Next 15 (owner of House337 and Elvis too) are busily trying to occupy this space. Then there’s the big consultancies of course.
Or is it just that holding company economics are against such companies. Holding companies try to cream off about 30% of agency profits for their own purposes (especially when they’ve paid top dollar to buy them) and that only works when such agencies have a reliable, regular flow of income – as in the traditional agency of record (AOR) model. Digital agencies get regular work such as low cost, low margin content creation but the big bang – the digital transformation (for better or worse) – is often be a one-off.
If R/GA and Huge under their P/E owners (and maybe AKQA or its second coming) can find a new way to make things work then it could be a useful model for the rest of the agency sector.
