Ad agencies jump from jingles into entrepreneurialism

• It’s not enough to talk up products: they want to make them too and sometimes promote a cause or agenda at same time

By Laura Petrecca

Rum, kids’ clothing, skin care products, software that teaches people how to play piano. Ad agencies nationwide are infiltrating an area dominated by their marketer clients: creating and selling new products.

“We are a source of intellectual capital. We don’t want to limit ourselves” by simply being labelled an advertising agency” – Anomaly Founding Partner Carl Johnson

Many of these top creators of TV commercials are no longer just in the idea business. They are dabbling in unrelated entrepreneurial ventures.

In March Crispin Porter + Bogusky introduced the Papa’s Pilar-branded line of super-premium rum. In February Bartle Bogle Hegarty launched its piano-playing tutorial, Playground Sessions.

Deutsch LA, known for creating buzz-generating Super Bowl commercial such as the mini Darth Vader Volkswagen ad, has a new program to support employees’ outside entrepreneurial pursuits.

In August, eight staffers pitched their ideas. Deutsch managers selected the initial two the agency will back: a floral-delivery service called Bouqs and an independent movie titled Between Us.

“The spirit of entrepreneurialism is just burgeoning in people working in ad agencies,” says Kim Getty, Deutsch partner and director of account management. “We wanted to nurture it. We don’t people to try to hide it.”

There are many reasons ad creators are embracing new ventures. Some are frustrated with providing ideas in exchange for a set fee and want to reap revenue from product sales.

Some agencies hope the initiatives will engage employees in fresh ways. At Deutsch, for instance, the firm won’t get a financial stake in the ventures it supports.

Instead, the hope is that the employee-oriented program will help the firm recruit sharp workers and hang onto good ones they already have, Getty says.

For a few businesses, the new ventures stem from the personal passions of management. Three executives at MMB, for example, created a line of charity-focused, environmentally friendly kids’ clothes, backpacks and books. Proceeds go to animal-related charities. Jamie Mambro, MMB co-founder and co-creator of Noah Wild kids’ brand, says he cares about the Earth’s futures and has an “enormous heart for animals,” so this was an ideal project for him.

Then there is Anomaly, which carved new product creation into its business model when it launched in 2004. It creates ads such as the popular Super Bowl commercial with a Budweiser Clydesdale foal and trainer, but also provides marketing and other resources on product launches in exchange for an equity stake.

Anomaly worked with brand incubator the Kind Group in areas such as marketing and product and packaging design during the creation of skin care line Eos (“evolution of smooth”)

The Kind Group was responsible for overall strategy, as well as manufacturing and sales.

“We are a source of intellectual capital,” Anomaly founding partner Carl Johnson says. “We don’t want to limit ourselves by simply being labeled an advertising agency.”

Hence the firm name Anomaly, he says, since they are not like typical commercial creators and don’t want to be lumped in the same category as traditional ad firms.

Taking a risk

For all their ambition, though, these entrepreneurial ad makers are entering treacherous ground.

George Brown, vice president for client development at product research firm AcuPoll Research says it’s incredibly difficult for a business to nail all the elements that go into a successful product launch. Only 12% of the ideas AcuPoll tests get an overall grade of an A, which takes into account the consumer’s probability of purchase, the product’s uniqueness and the price and value of the item.

There have been stumbles among these ad creators-turned-entrepreneurs. For Anomaly, a bet on a pay-by-text service didn’t pay off.

MMB’s Mambro says he initially spent too much on the material to make the Noah Wild-branded kids clothing line.

“Nearly everybody fails. It’s the law of new business,” Johnson says “The good news is that every time we do something and it fails, we learned something grow stronger.”

Working on a new product makes CP+B, which helped create Papa’s Pilar rum and Angel’s Envy bourbon, a better advertising agency says, CEO Andrew Keller. The initiatives give his firm a great perspective on what types of problems their clients face, he says. “It keeps us on the cutting edge.”

The creative process

Some businesses have separate innovation and incubation divisions. Others try to weave new product launches into their daily routines.

At Deutsch, each employee venture is “treated just like any other product here,” Getty says. “It goes through our formal resource assignment process.”

“We are big company – we have almost 500 people here – we do need to have some structure to how this works,” she says.

Anomaly’s Johnson finds it helpful to team with other firms, such as The Kind Group on entrepreneurial endeavors.

“If you do these projects on your own, you have to quick tendency to set them aside to service your clients,” he says. “We learned that if we partner with an outside person who is fully committed, their drive and urgency forces you to be a good member of the team.”

Anomaly invests staff time and expertise for a stake. At times, the firm has put money into new ventures, as well, but the overarching strategy is to provide intellectual capital instead of cash, Johnson says.

Ad agency CP+B joined forces with venture-capital firms RSVP Capital and Mahalo Capital on a fund that supports product development, such as the creation of the rum and the bourbon lines. The ad firm invests money and agency recourses.

Working on such projects allows CP+B to retain a financial interest – and reap continued revenue – from the brand’s success, Keller says.

Members of BBH’s innovation division, ZAG, came up with the piano-tutorial software Playground Sessions, says Chris Vance, who spearheads the venture.

The thought was “Could we do a Rosetta Stone for musical instruments?” he says, comparing his product with the language-learning software.

After they came up with the concept, they brought on others, including digital software firm Rain and composer Quincy Jones.

At MMB, an entrepreneurial venture was more altruistic. A portion of each product sale from the Noah Wild kids’ line is donated to an animal-related charity.

MMB co-founder Mambro says this side business is “a passion project.”  He and two others at the agency invested their own money to get the venture going. Yet, they take the help of agency volunteers who assist in areas such as design, marketing and, in some cases, just packaging up the Noah Wild products to send out to customers.

“About 15 people work on Noah in their spare time, but our clients’ work always comes first,” Mambro says.

All profits are given to charity or reinvested in the brand.

“We’re not trying to make money here,” says Mambro. “We’re trying to do some good.”

(USA Today)