"Wow. That is nuts," was the response of one executive at Dentsu Aegis Network on hearing that his former global chief executive, Jerry Buhlmann, had become non-executive chairman of performance marketing upstart Croud.
Buhlmann, one of the most senior figures in global advertising of the last decade, built Dentsu Aegis Network into a group with nearly 45,000 staff, before quitting in December 2018, seemingly after rising as high as he could within the Japanese group.
A quiet retirement for the 60-year-old was unlikely after a 12-month spell as an adviser to Dentsu. He was already a non-executive director of FTSE 250 car distributor Inchape and has prior stock-market experience as he led Aegis Group.
But his decision to join Croud in February was surprising. The independent agency, which was founded by Luke Smith and Ben Knight in 2011 and is based in Shoreditch, has only just hired its 200th member of staff.
By joining a young, agile business – Croud has an innovative network of more than 2,300 freelancers, called "Croudies", and a technology platform, called Serpico, that lets clients manage campaigns themselves in-house – Buhlmann is aligning himself with disruptive entrepreneurs, not an established corporation.
To add a little spice, Croud happens to compete in the same space as Dentsu’s iProspect and Merkle, although there is no suggestion of any Sir Martin Sorrell-style mission by Buhlmann to take on an old employer.
Buhlmann was introduced to Smith, Croud’s 44-year-old chief executive, and Knight, its chief strategy officer, who is 39, by the private-equity arm of Lloyds Banking Group, LDC. It spent £30m acquiring a large, minority stake in Croud in November. Smith and Knight had turned down other approaches, including from some big agency groups and consultancy giants, because they wanted to stay independent and keep expanding for another decade.
"In a sense, the reason that they didn’t take a trade deal is the reason I wanted to get involved," Buhlmann, who is sitting alongside Smith, tells Campaign.
Deciding to join Croud was not difficult, according to Buhlmann, because it ticked every box for him. He reels off his checklist: "You really like the people. You think they’re really good. They’ve got a proven track record. The investor who is going in there is serious and understands the business and is going to let them develop and build themselves. The business has got a strong vision, good leadership, a highly competitive product, innovation that is scalable, and a culture of high performance and good people. That’s a lot of criteria and Croud has all of that, which is relatively rare."
Buhlmann also likes the fact that Croud has offices in New York and Sydney, as well as a low-cost site in Shrewsbury. The Croud offering, he says, is "pretty unique", in reference to the Croudies and Serpico platform.
When doing "diligence" before taking the chairman’s part-time role, Buhlmann says "the client satisfaction scores were off the scale – higher than I’ve ever seen." He adds: "That’s a really good signal. That’s fundamental to an entrepreneurial business."
Buhlmann has taken "a small percentage" stake in Croud – "enough to be interesting and engaged from a financial point of view", as he puts it.
Full of courage
In some senses, Buhlmann is going back to his entrepreneurial roots, having co-founded BBJ Media in 1989; another time of disruption in the agency sector when the first wave of media independents broke away from creative shops.
Although Buhlmann is reluctant to draw parallels between BBJ Media, which he sold to Aegis Group in 1999, and Croud, he does concede that the founders have a similar mentality. "Entrepreneurs have courage," Buhlmann says. "One of the reasons that Luke and Ben have been so successful for eight and a half years is because they’ve got courage."
Selling to a big agency group and agreeing an earnout would have been the easy option for Croud. "It’s more courageous to continue to go on your own," Buhlmann says.
'Croud’s client satisfaction scores were off the scale. That’s fundamental to an entrepreneurial business'
— Jerry Buhlmann
Indeed, in any industry, it requires "a huge amount of courage if you want to be a successful entrepreneur", he continues, particularly when there is rapid change. "Fear stops you in your tracks in a disrupted environment where you’ve got to move fast, you’ve got to keep developing, you’ve got to keep changing," Buhlmann adds. "One thing these guys [Smith and Knight] haven’t got is fear."
There is a paradox in Buhlmann’s praise for the Croud pair for staying independent; after all, he was a champion of the "trade sale" in his previous role at Dentsu Aegis Network, as he oversaw the acquisition of more than 200 agencies.
Croud is one of a new breed of performance marketing agencies, which also includes companies such as Jellyfish and Brainlabs, that have shot to prominence in the UK after selling stakes to investors in the past 12 months.
Performance marketing itself – using data-driven targeting to drive short-term metrics such as a sale or an app install – is booming, despite fears that the creative and brand-building can be secondary to delivering business results.
Croud’s clients include Axa, Audible, Hiscox, IWG and Virgin Trains, plus several of the largest global advertisers, which cannot be named publicly. Revenues increased 40% last year, according to Smith.
A gap in the market
Smith began his career in publishing, before spending three and a half years at Google, where he looked after big agency spenders, while Knight worked for a decade in search agencies.
They saw a gap in the market because the traditional agency model "felt a little flawed", Smith recalls. "We launched this business because agencies were struggling with this digital world – the labour intensity of it, the amount of work that was required, the fact it wasn’t a single point of time [because work changes over the course of a campaign]. It was constant optimisation."
Smith and Knight believed they could "do something different" for several reasons. First, investing in their own technology could give them an advantage because most agencies had not invested properly in tech or put it "at the heart of what they do".
Second, they saw an "emerging gig economy", which meant it became possible to recruit "a flexible, scalable workforce" – the Croudies – who are based remotely and are available to do "multi-discipline, multi-market" work.
Third, by helping clients to manage more of their marketing themselves while at the same time outsourcing some of the work to a freelance network, the core Croud team could be more "strategic" in how they developed the business.
The "fundamental" point of Croud is doing "more", Smith says with emphasis. "We can do more for our clients’ money." He insists Croud’s role goes far beyond paid media as he talks about helping brands with ecommerce, email marketing and CRM data and "tying together" every aspect of their digital activity.
"This isn’t just a chief digital officer conversation or even a CMO conversation," he says. "This is a CEO, a business-wide, conversation, and we need to be at that table, helping influence that. If you believe 50% of the world of commerce is online, regardless of whether we talk about digital marketing, this is digital life. We are optimising businesses’ digital life – and we’re doing more of that for the same amount of money."
Lean in and build it up
Understanding how to work with Google, Facebook and the other big tech platforms has been key.
Mark Howe, Google’s managing director of agency and ad industry relations for EMEA, says: "Croud are distinctive in the way they have used talent from many diverse sources to create a strong functioning digital services agency.
"Like all the best independent digital agencies they lean in to partnership with companies like Google and build on our tech platforms, rather than start from scratch, and quickly become certified experts.
"This ‘leaned-in’ tech, their product expertise and their partnership set them apart from more traditional, legacy-based agencies and suits the demands of digitally engaged clients, which are looking for a point of difference."
Howe adds he is "proud" of Smith – they worked together at Google – for building Croud. "I wish I had had his courage to go it alone," he says, echoing Buhlmann’s point.
Andrew Stephens, founding partner of Goodstuff Communications, describes Croud as "good collaborators"; his media agency has worked with the performance shop on shared clients such as Hiscox and Eve Sleep.
"Croud have successfully built a timely business model that provides clients with breadth and depth of digital expertise, particularly within the Google stack, that can scale up and down, based on clients’ changing needs," Stephens says.
"As clients increasingly move towards wanting more services under one roof, Croud, along with Brainlabs and Jellyfish, have bucked that trend and are the three stand-out digital specialists that have created their own market."
Howe, who has an international perspective, believes this new wave of agencies is a sign of London adland’s continued health.
"One of the reasons the UK is such an advanced digital advertising market is the growth and success of the independent sector," he says.
Buhlmann says it would be "impolite" to give any advice to the big holding companies, with four of the big six – WPP, Publicis Groupe, Dentsu Aegis Network and Havas – all reporting organic revenue declines in 2019.
"These businesses are full of talented people and have a lot of scale" and "they don’t need me" to work out how to return to growth, he says. He dismisses the idea that the holding groups have become too big.
"Right now, very smart, highly talented innovative businesses are able to move faster and innovate quicker and that is why the sector that Croud is in is growing so fast. They can take advantage of disruption quicker and add more value for clients.
"It doesn’t mean the big agencies and groups are out of it. They’ve just got to deal with that conundrum."
A creative shortfall?
If there is one area where the sceptics have yet to be convinced about performance agencies, it’s their creative capabilities.
When Campaign asked to see some of Croud’s work, the agency offered examples that focused on technology.
In the case of offices group IWG, Croud began by doing a paid-search trial along with three other agencies and went on to win a global brief, including search engine optimisation, display advertising, social media and analytics, in more than 100 markets. Similarly, Croud helped Hiscox by using Google’s machine-learning products such as dynamic search ads and smart bidding, to reduce cost per click.
'We are optimising businesses’ digital life – and we’re doing more of that for the same amount of money'
— Luke Smith
The agency has also worked with Eve Sleep to improve its Amazon sales strategy, improving the brand’s "storefront" on the ecommerce site and targeting "high-converting category keywords".
Smith says Croud wants to invest in "executional creative" and M&A is an option, although, he adds: "I don’t think we’re going to become an ideation and creative strategy shop."
Clients want integration but tailored for each platform. "Increasingly, we are providing a full-service solution for Facebook advertising or Instagram advertising or TikTok advertising, where we will make the creative that they have ‘fit for purpose’ for [each of] these platforms and make it responsive," he explains.
Smith is modest enough to know Croud is not the finished article. An experienced media observer says: "I think some of these performance agencies might concede they struggle a bit with bigger brands who want a single agency solution."
Expansion is top of the agenda for Smith, who has talked about the possibility of a stock market float or further investment in the medium term. "My single-minded ambition is that we do this for at least another 10 years," he says.
Hypothetically, Croud could have a team that is "quite a bit bigger than 2,000 or 3,000" people by 2030, although some people have said growing at that pace might be "crazy", Smith concedes.
He and Buhlmann are still getting to know each other. In fact, it was only during Campaign’s interview with the pair that Smith discovered Buhlmann is a Chelsea fan and Buhlmann found out that Smith supports Preston.
"If you think about a football team working its way through the leagues, you don’t start at the bottom saying: ‘We’re going to win the Premier League.’ You say you’re going to get promoted," Buhlmann says. "The fact that Luke is talking about 10 years’ time means he is looking way beyond the forseeable future."
Smith is optimistic that LDC is a good partner for now. "I don’t believe they’ve got an ambition to replace Ben and me in terms of leading the business and, possibly slightly arrogantly, they’d struggle to find someone to do that with the ambition and the drive that we’ve got."
Is it worth following the 'Croudies'?
When Smith and Knight sold a £30m stake in Croud to LDC, they became multimillionaires; they owned an estimated 30% of Croud between them and the agency was valued at more than £60m.
However, they shared £8m with the team. About 160 staff received windfalls, depending on seniority. Rewarding staff matters, Smith says, "because if you haven’t got an engaged workforce, how are you going to do brilliant work for customers? Making them business owners and stakeholders seemed natural."
He adds that well-being and pay are important because "agency life is intense" and there are "mental pressures", especially in a period of "hyper-growth".
The co-founders had some "nervousness" that some staff might "clear off" once they got their cash but that hasn’t happened, Smith says.
However, the Croudies did not receive any payout. Is that evidence that the benefits of the gig economy are unequal?
"The words ‘exploitation’ and ‘gig economy’ are synonymous," Smith concedes, but the jobs where this parallel applies, he claims, tend to involve "lower-skilled employment" such as driving and deliveries.
Smith says Croud uses "highly skilled digital marketing talent" who set their own hourly rates, which are "always way, way above minimum wage" in the market where they work. Some of the freelancers earn $150 or $200 an hour, according to Smith.
"At any one time, around 400 to 500 Croudies are working for us," he adds, explaining what he sees as the benefits.
Some of these people might be unable to get to an office in the middle of a major city or have other commitments outside their working life. The Croudie model has "enabled and empowered" talent around the world in a new era of flexible working. "We’ve enabled them to work differently through our technology," Smith says.
He adds that "we think a lot about the culture of our Croudies" and there’s "constant communication" between the agency and the freelancers.
Croudies can apply for full-time roles at the agency but few do. Instead, Smith says there is more traffic in the other direction as staff leave to become Croudies.
Buhlmann chips in: "It’s not exploitation – it’s the complete opposite. It’s empowerment."
Smith believes it is part of a societal shift, as those in their twenties have entered the workplace in the past decade: "People want to work flexibly. They don’t want to work ‘nine to five’. They want to travel. They want to be able to do things differently. That’s what we’re empowering."