Jay Farrell sees Davidson Marketing competing on an equal footing with the largest promo agencies and marketing conglomerates now that the 20-year-old Chicago agency has the resources of new owner Lighthouse Holdings, Inc., behind it.
“This will give us the deep pockets we need to go forward,” says Farrell, Davidson’s president and one of the four shareholder-owners of the 90-employee agency. Julie Colbrese, Shireen Moore, and Patrick Keegan are the others who unloaded their stakes in a cash-and-stock deal completed last month with Chicago-based Lighthouse.
However, promotion shops owned by Lighthouse – including Davidson’s London-based “mirror,” Communicator (acquired in May) – won’t be finding ways to work with sister ad agencies. That’s because Lighthouse doesn’t own any ad shops, in contrast to other would-be marketing conglomerates that have sprung up around ad agencies. As it’s configured right now, the two-year-old company offers services in promotions, product design and creation, sports marketing, and business communications.
By investing in brand and product-design firms such as Fitch plc of London and Worthington, OH (bought for $50 million in April), and Primo Angeli, Inc., San Francisco (acquired in July), Lighthouse is positioned to help firms build product equity from the point of creation.
“They will focus on understanding consumer needs and creating the essence of the brand. On the promotion side, it then becomes our job to translate that into programs for building trial and brand franchises,” Farrell says.
“The premise is that it is getting very difficult to do business through traditional media forms. Marketers require less costly ways to reach and motivate people,” he says.
Fitch might enlist the anthropologists and model builders on its staff to help firms design their brands. The company added hipness to Hush Puppies in retooling that brand, and is designing Burger King’s new look. Primo Angeli was named to create the look and feel of the 1996 Atlanta Olympics, and had a hand in designing the Games’ torch, signage, and ceremonies.
With clients including Kraft, Nabisco, Microsoft, and Jim Beam, Davidson ranked 44th on the 1999 promo 100 with $8.5 million in 1998 net revenue and 17 percent two-year growth.
Farrell says that Davidson will be adding staff to support Lighthouse’s sports marketing companies with proprietary ideas. Lighthouse has purchased three sports marketers since October 1998.
Davidson will continue to work with agencies outside the parent umbrella with which it has strong relationships, such as event marketer GMR, Farrell says.
When Terence Graunke announced two years ago that he planned to build a $150 million communication services company, the then-36-year-old entrepreneur had formed and sold two marketing businesses in five years.
Graunke earned a bundle when he went public in 1996 with his Avon, CO-based Eagle River Interactive, a corporate Web site designer. He sold it the following year to Omnicom Group for $13.5 million. Then Graunke built Mastering, Inc., an information technology training company, into a $50 million concern before selling it to Platinum Technology.
A former president of two Omnicom Group subsidiaries, direct-mailer Rapp Collins and Focus GTE, Graunke established Lighthouse Holdings with backing from Chicago private-equity firms Frontenac Company and GTCR Golder Rauner LLC. The company lined up $400 million in equity and debt for its portfolio drive.
“When the vice president of marketing of a Fortune 500 company makes a request to help sell their products or services, we want to be in the best position to deliver,” Graunke said at the time, predicting that marketing services growth of 25 percent would eclipse 10-percent growth in advertising services.
Lighthouse plans to build out in four areas: consulting and research, product development and design, new media, and marketing communications. Fitch chief Martin Beck was named Lighthouse president in June.
The building blocks at Lighthouse may differ from other conglomerates, but it has a familiar-sounding operating method: Individual divisions are free to operate independently, but will look for chances to integrate their strengths.