The E-Players

Is there any stopping digital media? There are more than 750 million websites out there, and more and more businesses are looking into the logistics of e-commerce. Research company Verdict, which is normally conservative in its e-tailing estimates, forecasts that on-line sales among UK consumers will soar from £406m in 1998 to more than £6.1bn in 2003 (Verdict on Electronic Shopping 1999).

But this is peanuts compared to opportunities in the business world. The volume of businesses buying on-line is soon expected to dwarf purchases by consumers. US research group Forrester forecasts that the £12bn of US business-to-business sales recorded in 1997 will balloon to £157bn in 2000. By 2003 it believes the figure could have reached £875bn. Some of these companies have started setting up e-business portals.

Everyone is taking dotcom businesses seriously – in July the Government appointed Patricia Hewitt as the first minister for e-commerce.

But it’s the venture capitalists’ reaction which is fuelling the incredible growth of e-companies. Venture capital houses are desperate to invest in digital media start-ups. To this end they are putting together special on-line incubators, such as Spark, set up by venture capital group NewMedia Investors last month to fund digital media companies “with great ideas”.

All this sounds like excellent news for those wanting to make their mark in digital design, but what are the implications for design groups?

For both pure digital consultancies and multi-disciplinary groups, it means expectations of substantial growth, according to our digital media survey. The average projected growth in 2000 for the top 40 consultancies is 99 per cent. It is the traditional consultancies, whose digital media offer is mostly at fledgling stage, which have the most bullish plans for expansion. Projected percentage growth in digital media income for 2000 is, for example, as high as 700 per cent for Tayburn, 300 for Pauffley, 200 for Revolution, and 100 for Marketplace. It is these sorts of groups which are busy hunting for specialised, particularly technical, recruits to service existing clients’ digital media needs.

For the annual report houses, like Pauffley, digital media is an obvious, if not mandatory, step. How much longer will it be before blue-chip companies stop pouring hundred of thousands of pounds into the production of a glossy marketing tool-style annual report in favour of quarterly on-line figures?

Despite all these digital media in-roads, there is still a vast chasm between the perception and delivery of the multidisciplinary groups and the pure digital media consultancies. Only a handful of traditional consultancies can yet be considered major players in this discipline. Nucleus made a conscious decision to focus on digital media, surrendering its coveted place on Superdrug’s packaging design roster in the process. Sixty-two per cent of Nucleus’ fee-income is generated by digital media. This compares with Paper White at 40 per cent, Precedent at 60 per cent, Rufus Leonard at 70 per cent and Pres.co at 95 per cent. Glasgow-based Black Information Design can claim to have made a complete switch. It started in graphic design in 1988, and has since focused on digital media, which now accounts for 100 per cent of its work.

But even such digital media-heavy consultancies as these are not considered a serious threat by the purists. “Multidisciplinary consultancies have traditionally been weak at applying their thinking at anything but printed matter,” says Ajaz Ahmed, founder of AKQA. “The industry is relentless in its change and the solutions that we’re focused on delivering are more to do with software, and making it customer-facing and easy to use.”

Whether a purist or a multidisciplinary group is called in seems to depend on the client’s needs and own understanding of this “new” media. If a digital media job grows out of an existing communications project, it is more likely to go to the multidisciplinary group already handling the branding and literature design. If, however, clients needs a new e-commerce site, they will approach a specialist.

To this end, some traditional consultancies are setting up their digital media offer as a separately branded entity. CLK.MPL has Look Interactive, while BFK has Stratathree. Marketplace has just launched its dedicated digital media unit MTwo, which will “build on the portfolio of work already completed for Audi, Lexus, Renault and confidential fmcg projects”, according to a Marketplace spokesman. Meanwhile, Ovendigital is part of Ovendigital US, which has offices in New York, San Francisco, Tokyo, Sydney.

Of course, it’s not only design consultancies which are buying into digital media. The ad agencies are wary of losing status and hence revenue to these upstarts, and are investing in existing groups or setting up in-house capabilities. Ammirati Puris Lintas has APL Digital; and Omnicom has stakes in Razorfish, Agency.com and Organic (none of which responded to our survey). Pres.co is part owned by one-to-one marketing services company Primecom.

So if a successful digital consultancy is still independent, it’s not for want of trying on the part of other marketing services businesses. The notable groups which are hanging on to their independent status for the moment include Entranet, Clarity, AKQA, Hyperlink, Hyper-media, Deepend parent Deepgroup, Blueberry Group and Digit. But how much longer these groups fend off tempting offers remains to be seen. The other route is going public. The backers are clearly there, and while some groups are considering it, none have yet made the leap.

In terms of fee-income, digital media generated more than £42m in total for the Top 40 groups surveyed, and nobody would expect anything but a hike in this figure for next year. How long this boom time will last is another question, but one certainty is that the nature of Web-based digital media is already changing, and consultancies wanting to get ahead are exploring the potential of new platforms.

But high revenues do not necessarily mean high creativity. While standards of creative design are not measured in this survey, it is worth noting that anecdotally, only one group’s name gets linked consistently with creativity, and that is Deepend. The 80-strong group has plans to open a US office – an indication of the sophistication of some UK digital design.

Survey Results (see {storylink (“DW199912030059″,”Tables”)})

In first place, Pres.co is one of four groups in the top ten which are multidisciplinary. The others are Rufus Leonard, Nucleus and The Partners. However, Pres.co’s non-digital media work – in exhibition and event design – only accounts for 5 per cent of its total fee-income.

Founded in 1987 as The Presentation Company, Pres.co’s digital media fee-income for the last financial year was more than £8m, with a turnover of £9m. It projects an annual growth in digital media for 2000 of 60 per cent. ‘We will keep the events side [of the business], but it will not match the rates of growth for digital media,’ says group managing director Phil Redding.

Clients include Dr Martens, Cable & Wireless Communications, Marks & Spencer, National Savings, Homebase, United Biscuits, PowerGen and Channel 5. ‘In terms of sectors, [Pres.co will put] more focus on financial services and retail,’ says Redding. ‘The intention is to extend the consultancy’s range of services, to provide a complete solution,’ he adds. Pres.co became part of Primecom one-to-one marketing services holding group when it launched in March.

The efficiency table is intended to indicate the amount of digital fee-income generated per head in each consultancy. This is calculated by dividing the total digital fee-income by total number of staff. Nine-strong Edinburgh consultancy Dow Carter, which reported a fee-income of £830 000, heads this table. An independent digital media design specialist with four designers, the consultancy has recently worked on the Honda Joymachine website, and the site for Saints, The Scottish American Investment Company, which is behind the current ITS campaign.

What we did

As well as trawling respondents of the Design Week Top 100 Survey published in March, we approached digital media consultancies which don’t normally take part in that line-up. In doing so we were aiming to give a fuller picture of the UK digital media sector.

Consultancies were asked what percentage of their total design fee-income for the last financial year was derived from digital media. The Top 40 listing is a mix of multidisciplinary consultancies and digital design purists, in an effort to reflect the major players’ mixed backgrounds.

Pure digital media groups’ staff numbers are broken down, to demonstrate the different weightings between designers, developers and production people, and freelances.

Multidisciplinary consultancies were not asked for this breakdown, as staff in some such groups work across disciplines, making it difficult to quantify exactly how many dedicated digital media staff they have.

Some groups were unable or unwilling to disclose their finances, and so do not appear in the main table. However, some purists which have not revealed figures do make it into the staffing table, thereby giving an indication of their size – at least in terms of people. These groups include Blueberry.Net, Entranet, Clarity, AKQA and Scottish Media Group subsidiary Delphic Interactive.

AKQA, whose clients include Durex, Orange, Sainsbury’s, Rover, Nike and Cable & Wireless, was unable to separate all revenues from its consulting, communications and media groups – a total of £15.2m.

Meanwhile, Revolution, whose digital media design generates 25 per cent of its design fee-income, has a total turnover of £11.3m, but would not reveal its fee-income.