Dept, the private equity-backed Dutch agency group, has bought Byte, a UK marketing technology shop that specialises in digital creative work on platforms such as Facebook and TikTok.
Byte’s co-founders, Alex Miller and Jamie Kenny, set up the business in 2014 since when it has grown into a 150-strong agency that is known for work including augmented reality, chatbots and automation. Clients include Spotify, Asos and Just Eat.
Byte, which has opened offices in New York and Berlin, had fee income of £11.6m and operating profit of £2.6m in 2019, according to its most recent published accounts for Byte Club, and said it increased revenues by 20% in 2020 as it tapped into the continued growth of the major tech platforms.
Miller said they set up Byte having seen an opportunity to build a new breed of integrated digital agency, because “to be brilliant on Facebook or Instagram, you need that combination of creative, media, data and tech” under one roof – something that was a relative novelty seven years ago.
“We think we’re at the cutting edge of digital marketing,” Miller said. “We’re doing things that are new and innovative and we’re doing them very fast for clients, so we’re giving them first-mover advantage, and we’re doing it in a way that proves tangible business results – rather than innovation for innovation’s sake.
“That’s why brands like TikTok turn to us for digital marketing and other brands like Asos turn to us for how you advertise on TikTok.”
Miller and Kenny met when they worked at I-level, a digital agency that was active in the early 2000s, and set up Byte with “two laptops” and without taking investment.
They have sold now because Byte has “a lot of momentum”, they want to service clients in new markets and Dept is a “progressive, fast-moving digital business that can give us global reach and expand our service offer”, such as search marketing, Miller said.
Byte’s co-founders will have equity in Dept. Other staff will receive bonus payments from the sale, based on the number of months served at the company.
'Big, hairy, audacious goal'
Dept has been expanding through acquisition after receiving investment from private equity – first from Dutch firm Waterland in 2015 and most recently from The Carlyle Group in 2019.
It has grown from 120 people in 2016 to 1,750 staff, including more than 500 engineers.
“We look for like-minded agencies at the top of their game”, according to Dimi Albers, chief executive of Dept, which grew out of TamTam, a small Dutch agency founded in 1996.
Other acquisitions have included Amazon specialist factor-a in Germany in 2018, digital shop e3Creative in the UK in 2019 and digital branding agency Basic in the US in 2020.
Albers said Dept’s own focus on being 100% digital and its integrated approach makes Byte a “perfect fit” and will boost its presence in the UK and US – two markets where Dept wants to expand.
In addition to The Carlyle Group as majority owner, 115 “Deptsters” are shareholders in the top company and all acquisitions are integrated into one group, rather than being a holding company, Albers said.
“We set out a strategy – as we say, the big, hairy, audacious goal – of becoming the best digital agency in the world. That means we will grow from predominantly European to a truly global agency and we want to do it across creativity, tech and data.”
Asked whether an IPO could be on the agenda for the future, Albers said “it could very well be that at one point we could go to the stock market” but it would be possible to stay private. “We don’t have a clear opinion or goal that we need to ring that [stock market] bell.”
A realisitic ambition is to reach about 5,000 people in four to five years, he said.
Simon Nicholls, partner at corporate advisory firm GP Bullhound, which advised Byte on its sale to Dept, said: “We are seeing digital agency challenger groups of scale emerging, often backed by private equity, which are driving significant M&A appetite right now in a market historically dominated by the big networks.
“Dept, S4 Capital, Jellyfish and You & Mr Jones are all strong examples of new digital challengers, which we see as increasingly active consolidators in market.”
New breed of integrated digital agency
Miller and Kenny were deliberate about their intention to create a new breed of agency and to hire a broad mix of talent – because they saw how the agency sector was struggling with structural separation of disciplines.
Kenny recalled: “A big part of the idea that we had is absolutely that combination of creative and media, powered by data and tech.
“If you look at a lot of digital agencies in the last ten years, they’ve either been creative agencies or they’ve been media agencies – and the media largely sat within the big groups.
“There have been some amazingly successful independent media agencies but rarely do you find businesses that have brought both together from the ground up.”
Miller added: “Byte was born out of a frustration of siloed thinking and old-fashioned thinking. We thought combining media, creative, data and tech in a truly integrated way – culturally as well as practically – for clients was what was needed seven years ago.
“When we first started the business, the first hire was a service-side engineer, then a data analyst, then a creative planner, then a designer."
Other notable appointments have included architects, who combined left- and right-brain thinking.
“Creating those integrated skillsets, working on a single brief, solving a problem for a client, is what we want to be able to do and really focusing that and pointing it at the major digital platforms is where our sweetspot is,” Miller added.
“It is as much a cultural step-change as it is having the right expertise. We want our creative planners to be really interested in data analytics and performance and we want our media planners to be coming up with creative ideas, and I think that’s what’s made us relatively unique with our clients and meant some of the fastest-growing tech brands in the world have wanted to work with us.”