Interview: Razorfish's Jeff Lanctot: Looking To Lessons In The Last Downturn; We're Still Shopping
This story was written by David Kaplan.
Last year, when observers were generally referring to an ad industry "depression," the thinking was that even as online ad growth slowed, digital shops would weather their storm relatively comfortably. But after the global economy collapsed last fall, the thinking at a number of young agencies quickly changed and fear began to set in. But at least the way Jeff Lanctot, chief strategy officer for 14-year-old Razorfish, tells it, we've been here before. Lanctot, who's been with Razorfish for about 10 years, said that the company's main strength has its diversified set of offerings, which encompass media, web development as well as creative advertising. Furthermore, the Microsoft-owned digital shop's international acquisition strategy has also served to reduce its exposure to the uneven effects of the worldwide recession. Lastly, Lanctot told me, speaking after a panel session at the AlwaysOn NYC conference this week, "relative to the holding companies, we're much more small and nimble. That, coupled with our diversification and global presence, serves us well and that will be especially beneficial when the economy improves."
Globe shopping: While M&A activity in the digital sector has pretty much ground to halt when compared to the year before, Razorfish is still very much in a buying mood. Back in October, just after the fallout from the economy began its deluge, Razorfish purchased Spanish digital ad shop Wysiwyg. At the same time, however, it did lay off a few dozen staffers in the U.S. While Lanctot doesn't suggest that acquisitions in the US are done ("We're always looking"), he did say that company, who's parent aQuantive was acquired by Microsoft (NSDQ: MSFT) for $6 billion in May 2007, is interested in doing more deals in Asia and South America. As for speculation a few months ago that Microsoft was thinking of swapping Razorfish for WPP Group's Open AdStream, Lanctot waved the question off and said it never rose above the rumor level.
More from my interview with Lanctot after the jump.
To buy or create?: In every market Razorfish has expanded, the company execs ask themselves, "Should we make an acquisition or should we open an office with current staff?" The answer to date has been to make an acquisition in each case. Lanctot: "We'll keep asking ourselves that question, but our track record suggests that an acquisition is a path we're comfortable with. And our record of integrating companies has been good as well, which adds to the comfort there. We look for companies that fit our profile: the same culture, the same services. We haven't stretched to make acquisitions."
Coming soon?: Being able to boast of greater offerings in the social media and analytics realms is particularly intriguing to Razorfish, Lanctot said. "We have some products coming in that areas and business intelligence that could be real differentiators for us and our clients. Everyone is looking for the right suite of services to crack the social media nut, but we're pleased with the progress we've made and where we're heading."
Lessons of the last downturn: Lanctot: "Something we did then and somethng we're doing now is making sure we respond quickly to market conditions. If we see weakness in certain businesses, we address it. At the same time, there are areas where we're seeing real growth and some clients have been increasing their budgets. There are a lot that are having a tough times in terms of earnings and they have to cut expenses as a result. If we have to cutback on services or staff, certainly we'll do so."
Quick to cut, slow to add back: A few months ago, Lanctot told an interviewer that the speed and flexibility of online ads represents "blessing and curse." Since most print and TV ad buys set months in advance, marketers took the carving knife to online ad budgets simply because it's easier to adjust spending. While Lanctot doesn't expect online ad dollars to snap back just as rapidly as when they disappeared, he is optimistic about the ease online advertising provides marketers makers with. "In Q4, the ability to quickly optimize, which can be read as 'immediately cut budget,' was a curse for the industry. For retail, you've got your catalogs printed, you're TV spots shot. But with online, you can move dollars around very quickly. And so there was a pullback that was more extreme than it would have been if there was more time to plan and take money out of other areas. So I think that was a fairly short-term issue because the economic problems were so sudden and so extreme. I think 2009 benefits. But it won't come back as quickly as it left. That provides comfort in the economic environment we're in. Now, I'm not so nave to think that online will have a boom time over the next 12 months. But relative to other channels, digital will hold up quite well, thanks to its accountability, which is increasingly important in this environment."
By David Kaplan