Publicis’ acquisition of digital agency AG2 is the latest in a string of investments from major ad holding companies seeing promise in the market.
Publicis Groupe has extended its reach into South America with the acquisition of major Brazilian digital agency AG2 for an undisclosed sum. The purchase follows a string of digital investments in the country in the past six months, including those from global ad holding companies WPP and Interpublic Group.
In May WPP Group acquired two Brazilian digital agencies, Midia Digital and I-Cherry, for undisclosed sums. Midia Digital, based in Sao Paolo with 91 employees, offers services including Web development and creative development for clients including HSBC and Johnson & Johnson. I-Cherry, meanwhile, is a 34-person search agency based in the city of Curitiba with Match.com and Hotels.com among its clients.
In March, Interpublic Group also acquired Brazilian digital agency Cubocc in an effort to bolster its social and mobile expertise in Latin America. Its clients to date include Google and Doritos.
Roxana Strohmenger, a Forrester analyst following the interactive marketing space in the Latin American market, pointed to the 2014 Soccer World Cup and the 2016 Olympics as two incentives for marketing services companies in Brazil. With two major sporting events taking place in such quick succession, global advertisers will likely seek to integrate their brands with both, presenting an opportunity for ad companies with an established presence in the market.
“With preparations and ramp up to [the events]… the amount of ad spend in the Brazilian market will increase significantly,” Strohmenger predicted.
In addition, she suggested Brazil’s relatively limited exposure to the financial turmoil that swept through the U.S. and Europe in 2009 makes investments there a safer bet than in other markets. “As the world’s 9th largest economy and one of the fastest to emerge from the global recession, Brazil is one of the hot markets right now,” she said, adding, “With gross domestic product forecasted to rise at about 4 percent to 5 percent per year over the next 10 years, it really isn’t a surprise that companies are focusing a lot of their attention on Brazil.”
Coupled with those factors, however, the growth of the overall online audience in Brazil is also an attractive prospect for any digital firm. According to data from comScore, 36.3 million unique users aged 15 and over accessed the internet from home and work locations in June 2010, representing a 19 percent year-over-year increase compared with the 30.5 million that did so in June 2009. However, comScore says the total Brazilian online population, including users accessing the internet from public computers such as those at cafes and universities, is over 73 million. That data suggests users are likely to spend more time online as they continue to gain more convenient access at home or at work.
Strohmenger also placed emphasis on the prevalence of social media among Brazilian users, describing them as “voracious consumers” of such services, including Facebook and local market leader Orkut. She suggested users are more accepting, and even expectant of brands on such services, presenting different challenges and opportunities to markets such as the U.S. “As long as advertisers build campaigns that are interactive and rewarding for their online target audience, social media will be a critical and successful channel,” she said, implying further opportunities for agencies to help brands do exactly that.
In further recognition of the Brazilian market’s promise, comScore itself enhanced its reporting capabilities there at the end of June, adding more detailed geographic information to its repertoire. Commenting on the rollout, Alex Banks, comScore’s managing director for Brazil and VP for Latin America said the enhancements were necessary to serve clients in a “fast-growing, active market.”
Publicis said its AG2 investment was indicative of its strategy to invest in high-growth markets, and citing numbers from its ZenithOptimedia media buying unit, suggested online spending in Brazil grew by at least 40 percent, year-over-year, between 2004 and 2008, with the market “poised to recover rapidly” following the financial turmoil of 2009.
The AG2 purchase brings Publicis Groupe’s total number of employees in Brazil to almost 750, with a local presence through its Vivaki and Saatchi & Saatchi brands, among others. AG2’s 170 staff offer competitive intelligence and brand management services, and build digital experiences around those offerings. With offices in Porto Alegre, São Paulo and Pelotas, clients have included General Motors and Bradesco, a major Brazilian bank.
Following the acquisition, the agency will be rebranded AG2 Publicis Modem, aligning it with the company’s other digital properties in the Modem arm of its business. AG2 CEO Cesar Parz will continue to head up the agency, reporting into Publicis Brazil CEO Orlando Marques.