Inside IBM’s $1.9 billion digital ad agency, iX

IBM’s internal digital agency Interactive Experience (iX) went on an acquisition spree last week hoovering up three digital agencies: two in Germany and one in the U.S. It’s the first time iX — the biggest global digital agency network, according to AdAge’s Data Centre report, with 2015 revenues at $1.9 billion (not bad for a 2-year old) — has turned to acquisitions to boost its digital agency capabilities.

Ohio-based marketing and creative agency Resource/Ammirati, Berlin-based digital marketing agency Aperto, and Dusseldorf-based digital shop Ecx.io will all retain their brands and operate as subsidiaries within the agency.

“In an analog world, you could separate the product from the marketing, but in a digital world, they’re closer together,” said Ian Maude, BeHeard director and former analyst. “Marketing and data inform new products, they’re symbiotic. If IBM wants to be a one-stop shop in digital transformation, marketing has to be a part of it.”

Post-shopping spree, IBM gets better traction with clients in Germany who wouldn’t typically peg IBM as a marketing and creative services provider. It also inherits local relationships from the agencies’ client rosters — including Adobe, SiteCore, Coke Zero, Volkswagen, and Airbus — while adding 800 digitally savvy staffers to its current 10,000 agency head count.

In return the agencies will get full weight of analytics and access to “cognitive” data that IBM and its AI engine Watson can offer, along with the broader business strategy and design capabilities.

Matt Candy, IBM iX vp and European boss, said Germany is of particular interest as it is the largest European economy and a market with an advanced appetite for digital transformation. Last December, it made Munich headquarters for IBM’s Watson Internet of Things unit.

In short, IBM wants to own customer experience. “The word ‘experience’ is the North Star that guides all we do,” said Candy. “It’s what’s driving digital transformation. That’s because more and more industries are becoming commoditized at their core, and the only way to drive competitive differentiation is through experience.”

That’s partly why IBM iX is throwing so much weight into design. It now has 25 design studios, having just launched three in Warsaw, Prague and Dubai. “It’s not about design as in how something looks, but design at the meta data level — the approach to problem solving,” said Candy. “It’s about using design as a tool for problem solving, and that’s what we see as being transformational with clients in the public sector.”

IBM isn’t the first consultancy to push aggressively into advertising: Deloitte, Accenture and PriceWaterhouseCoopers have all made similar plays. Still, Forrester senior analyst Anjali Yakkundi said plenty of consultancies ad tech services firms have made successful digital agency acquisitions over the last few years, but added that some of these agencies can flounder within the parent groups.

“They may struggle with turnover or lose some brand credibility in the market,” he said. “Time will tell how IBM iX is able to take these acquisitions and integrate them into their existing capabilities, and whether they are able to build momentum around these firms. If they successfully avoid these pitfalls, these acquisitions could position them well against other large services firms especially in Europe.”

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