R/GA readies for AI future with private equity backers

As ad agencies struggle against cost-cutting and consolidation, iconic agency R/GA has bucked the trend with new private equity firm owners and a significant investment plan for innovation.

R/GA global chief creative officer Tiffany Rolfe

Creative innovation agency R/GA believes private equity backing could be the secret to unlocking growth to power the future for the advertising industry.

The iconic 48-year-old global agency reclaimed its independence last week through a deal between private equity firm Truelink Capital and R/GA’s global management team to buy the company from holding company Interpublic Group (IPG).

The move means the agency is now a privately owned company after 23 years within IPG, and its first major announcement was the establishment of a $50m innovation fund to drive investment in talent, tools, platforms, skillsets and potential business acquisitions.

R/GA global chief creative officer Tiffany Rolfe told The Australian the fund was an example of the importance R/GA was placing on investing to drive growth, an idea that runs counter to the current industry trend towards consolidation, mergers and cost-cutting.

“We talk about building our clients’ brands, transforming their brands, investing in their growth, taking risks for growth, and yet the industry sometimes doesn’t look and do it for themselves,” Ms Rolfe said. “That’s been a big thing for us, because this is what we do. We transform brands, we help them evolve and connect with people in new ways, and so for us to be able to do that for ourselves, it’s an amazing opportunity.”

Ms Rolfe said the sale process, which kicked off midway through last year, gave the agency time to focus on its future and determine the next stage for the business. While she said there had been a variety of options, it became clear that private equity was the strongest avenue for the sale.

“Across the industry there’s been more and more interest from private equity firms in terms of unlocking the value of agencies within holding companies,” she said. “It became clear to us that the private equity path with the right private equity partner, one that really understands the potential value and opportunity of new technology, and what that means, and how we could really define a new model for the future, allowed for a lot of untapped potential.”

The R/GA sale came months after former IPG sister digital agency Huge was acquired by private equity firm AEA Investors in December. It also followed the announcement that holding company Omnicom was acquiring IPG and would merge the two businesses together.

Ms Rolfe said while R/GA was unaware of the end game of IPG’s decision to streamline its business as a media and data-focused business, the decision to split off from the group made sense to both parties.

“We didn’t know at the time that there was a bigger transaction under way; that happened midstream,” she said. “ (IPG) recognised that we were not aligned with the path that they were going on, and we realised that we were sort of on our own already – many of our clients didn’t think of us as part of a holding company. It was the right opportunity for everyone.”

The ownership deal involved Ms Rolfe and R/GA global chief executive Robin Forbes investing in the business, together with members of the global management team, including Asia Pacific chief executive Michael Titshall.

Mr Titshall said the move would help power the agency’s next chapter of growth as it moved to embrace and integrate artificial intelligence technology.

“We’ve got to give ourselves a better platform on which to do impactful creativity,” he said. “With the changes in technology and how people are connecting with brands, being able to invest in those things will enable our work to be so much more impactful. As the industry has contracted, holding groups have looked at how they can get more efficient, which you need to do, but it bottoms out. Our view is that there’s big disruption here and there’s actually new opportunity for growth, just like when the internet came along and interactive agencies came out. In this next cycle there’s new opportunities for growth, and I think private equity really sees that opportunity, hence the investment.”

Mr Titshall said the new independent status would help kickstart a new chapter for the agency, which operated a nine-year model of reinventing its focus in line with evolving technology.

The agency, which launched in 1977 as R Greenberg & Associates, originally planned to design graphics for film and video productions and was recognised globally for its work on the graphics for the opening sequence of the 1978 Superman film. Its second iteration focused on interactive content and CD-ROMs, however it was the internet and digital explosion of the late ’90s and early noughties that positioned R/GA as an interactive and digital media agency, securing clients such as IBM and Nike and producing iconic work such as the Nike+ platform.

R/GA’s next chapter is firmly focused on the role of AI with the establishment of a Strategic Advisory Council, which will include senior marketing and technology executives from across the business to identify and create AI solutions for clients.

However, while the majority of AI conversations and strategies are focused on efficiency gains, Mr Titshall said R/GA was leaning into its heritage in using design to combine technology with consumer needs to help brands grow.

“Design and technology has always been at the core of the company since we started in ’77 and I think it gives a very different lens on creativity, especially compared to competitors in the Australian market,” he said.

“All of our clients know they need to do more with less, but there’s only so much efficiency you can get. It doesn’t help effectiveness, and so they’re looking for new ways to do things in new ways to connect with customers. To date, everyone’s been too focused on doing the same stuff that we’ve been doing, just more efficiently, where this is more about that new growth opportunity.”

Ms Rolfe said “R/GA hasn’t always just done innovative work”. “It built an innovative company, one that was designed to change how they can actually deliver on innovative work,” she said. “We have a principle that we live by which is ‘only 80 per cent finished’, this is the notion that 20 per cent of the business is always recalibrating and figuring out what’s next as it then fully transforms. That is always something that is part of our DNA.

“We’re a 48-year-old start-up, where we have the legacy and the knowledge and the benefit of great clients, and now we get to take that and think about what we could do differently.”