Razorfish

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Razorfish remains one of the best known brand names in digital marketing, but the original business had all but disappeared by the end of 2019, only to be relaunched again in early 2020. Owned since 2009 by Publicis Groupe, it was absorbed in 2016, after a troubled year's performance, into newly acquired sister agency SapientNitro to create SapientRazorfish. That business was in turn swallowed up into the monolithic Publicis Sapient in 2019, and the Razorfish name abandoned. It lives on only within healthcare specialist Razorfish Health. The business had already passed through several different hands since it was conceived back in the boom years of the late 1990s. Marooned by the collapse of the first internet bubble in 2001, it was rescued by technology roll-up SBI before subsequently merging with digital media group Avenue A to form aQuantive. That business was in turn snapped up by Microsoft in the frenzy of consolidation which seized the digital industry during 2007. At the end of 2009, Razorfish found itself a new corporate parent when Publicis agreed to acquire the business from Microsoft for a lavish $530m. Initially, it retained standalone branding within Publicis, working alongside other acquisitions such as Digitas, which had previously been its most significant global rival. In 2014, Rosetta and several outposts of newly acquired Nurun were also absorbed into the Razorfish network. See Publicis Sapient for more.

Competitors

See ranking of Leading Digital Agencies for other companies.

Brands & Activities

Razorfish was one of the digital industry's best-known brands, but ownership by Publicis softened much if not all of the edginess for which it was once renowned. In reality, by 2016, Razorfish was already quite far removed from the company which threatened to overturn all marketing traditions at the beginning of the first online boom. Originally a pure creative agency, its absorption in 2004 into Avenue A, then best known as a leading online media planner/buyer, created one of the first completely full-service digital specialists. Known initially as Avenue A | Razorfish, the latter brand gradually regained prominence before being re-established as the official name in 2008.

The acquisition of parent group aQuantive a year later by Microsoft for an astronomical $6bn - in retrospect an absurd sum - led to a gradual blunting of Razorfish's cutting edge, not least because its positioning as an objective creative consultancy was to a large extent compromised by the fact that it was now a subsidiary of not just a major online advertiser in its own right, but also one of the biggest digital media networks. In 2009, Microsoft began canvassing potential buyers for Razorfish (although it kept control for several more years of aQuantive's smaller adserving business). A deal was agreed with Publicis Groupe in August 2009 and completed in October. The software giant remained a client and, as part of the buyout, Publicis Groupe made a commitment to place a certain amount of advertising at pre-agreed rates on the MSN network.

As a result of Publicis Groupe's continuing buying spree and the ensuing consolidation of those acquired businesses, Razorfish had ended up by mid 2016 as the smallest of what were then three major standalone digital networks within Publicis Groupe, smaller in revenues and global footprint than both DigitasLBi and SapientNitro. It offered a full range of services from design and build of web sites and intranets to creative advertising, search, media planning and buying and other interactive marketing disciplines. Advertising Age had estimated global revenues of $493m in 2014 for Razorfish, compared to $923m for SapientNitro and $821m for DigitasLBi.

During 2014, an expanded Razorfish Global entity was created to absorb standalone digital agencies Rosetta and its dedicated Apple subsidiary Level. At the same time several offices of the recently acquired Canadian digital agency Nurun were transferred into the Razorfish brand, including the Paris outpost, which became Razorfish France. That boosted Razorfish's estimated global total for 2015 to $769m, but it still trailed its two larger siblings.

The end product of the Groupe's steady consolidation of digital assets was the merger of Razorfish with sister network SapientNitro at the end of 2016. The newly combined SapientRazorfish was unveiled in March 2017, but then absorbed into Publicis Sapient two years later. It was spun out again as a separate arm of Publicis Sapient in January 2020.

Specialised unit Razorfish Health still exists separately as a standalone unit in Philadelphia. It was in effect merged in 2011 with Digitas Health, with reporting responsibility for both transferred to Publicis Healthcare Communications Group, although they retained their original names. Razorfish Health also absorbed in 2015 the healthcare-focused operations of aligned standalone agency Rosetta.

Management

Bob Lord resigned as CEO of Razorfish in 2013 to become chief executive of the advertising and technology division of AOL. (He is now at Accenture). Shortly afterwards, his predecessor Clark Kokich, who had been chairman, also left the group. (He is now a director of Acxiom). As a result, a new senior team moved up the ranks, with Pete Stein becoming global CEO. Another change in 2014 following the merger of Rosetta into the network led to appointment of Tom Adamski as CEO of Razorfish Global. Sadly, Adamski passed away just a year later after a short battle with cancer. Shannon Denton, previously president of Razorfish North America, was named as interim CEO. Following the merger of Razorfish into SapientNitro he was appointed as chief strategy officer in the merged agency, but left the company a month or two later. Daniel Bonner, global chief creative officer of Razorfish since 2012 and then of the enlarged SapientRazorfish, left the company in summer 2017. Virtually all the other top managers at the old Razorfish had also left the merged entity by mid 2017, with the exception of chief technology officer Ray Velez.

For its relaunch in 2020, Josh Campo was named as president, Razorfish USA.

Background

Razorfish was originally founded in 1995 by Jeff Dachis and Craig Kanarick. An ambitious entrepreneur, Dachis had paid his way through high school and college in the late 1980s and early 1990s with a series of different schemes ranging from car dealing to grass-roots marketing. In 1994, he ran into former childhood friend Kanarick on a New York street corner. Kanarick, by now a computer programmer, introduced Dachis to the fast-evolving world of the internet. Combining Kanarick's computer skills with Dachis' pushy marketing skills, the duo set up in business to design web sites for big companies. They quickly earned a reputation for ultra-stylish design, and in 1996, sold a 30% stake to Omnicom Group, who in turn recommended the fast-growing business to clients. A key breakthrough was a commission to design the ground-breaking Pathfinder website for Time Warner. Then in 1997 Razorfish was hired to provide design and administration services for the Charles Schwab online brokerage business. As the internet boom exploded in the late 1990s, Razorfish was riding the crest of the wave.

Dachis became one of the burgeoning industry's most vocal, and by many accounts most arrogant, figureheads. He established Razorfish as the most fashionable of the big five interactive agencies, with lavish offices in New York. (Among other perks, staff were given free massages and bagels every day). Dachis also had few concerns about upsetting potential clients by telling them what was wrong with their business. But since big corporations were generally baffled and dazzled by the fast-moving new world of the internet, most were prepared to put up with Dachis' brash attitude. In 1997, the company extended its operations with the launch of Razorfish Studios to produce art, books and computer software. The spinoff also launched RSUB, or the Razorfish subnetwork, a web channel for avant-garde music, animation and short movies.

A year later the company moved into Europe, acquiring London-based digital agency CHBI, originally launched in 1995 by Mark Curtis and Mike Beeston. At the end of the year, CHBI Razorfish absorbed another local agency, Sunbather, and rebranded under the main Razorfish name. Having carved itself a big chunk of the British interactive market, Razorfish moved on into continental Europe, buying out Swedish agency Spray, followed by other agencies in Netherlands and Germany. In 1999, Razorfish issued an IPO in New York. Dachis's stake in the company was valued at $77m. "There are sheep and there are shepherds, and I fancy myself to be the latter,'' he told The New York Times. At the end of the year Razorfish established a joint venture in Japan with Sony's inhouse ad agency Intervision. In the US it acquired smaller rivals such as Plastic and I-Cube. By the end of the year, Razorfish had 15 offices on three continents.

By late 1999, Razorfish had pushed its way, along with the other big digital agencies, into management consultancy, advising corporations how to change their working practices to take advantage of the digital era. Here they began to compete with more established companies such as IBM, Accenture and McKinsey, themselves also active in the digital marketplace. In Spring 2000, when the internet bubble finally burst, Razorfish was suddenly left a fish out of water. Despite the fact that the company was still profitable, investors rushed for the exit. All the e-services companies were hit, but Razorfish suffered more than many, possibly because its role as the most fashionable of the agencies left it looking most out of date in the new environment. But the thing that worried investors most was a series of staff defections as high-level employees jumped ship after cashing in their share options. During the course of 2000, the Razorfish share price plummeted from $90 to less than $10.

In the last quarter of 2000, the group reported it had slipped into losses. Meanwhile revenues fell away, dropping by 75%. The share price followed suit, plummeting to under $1 by May 2001. That month Jeff Dachis and Craif Kanarick left the company. New CEO Jean-Philippe Maheu, previously the COO, began cutting back on operations in a bid to stay afloat. During 2001, one after another, the agency's international offices were either sold to management or closed. That year the company announced full year sales of $104m, down dramatically from a high of $267m in 2000. Net losses exceeded revenues at $184m.

The benefits of the restructure began to show in the first quarter of 2002, when the company reported its first net profit for two years. The position slipped however in the second quarter, and a few months later the agency agreed to be acquired for around $8.2m by digital management consultancy SBI & Company. It was merged with the remaining assets of two other former giants of the first web bubble, Scient and Lante, and spent the next two years under the new name of SBI Razorfish. The Japanese joint venture with Sony's Intervision was later absorbed into Frontage, co-owned by Dentsu and Sony Corporation. The German office continued to operate under the Razorfish name for a while after it was sold to management, before being acquired by teleservices company Xtend.

It was all-change once again in June 2004 when SBI sold on its agency division to digital media specialist aQuantive for $160m in cash and shares. The core business within aQuantive at the time was Avenue A, founded in 1997 in Seattle by Mike Galgon and Scott Lipsky, the latter a former VP of Amazon.com. It launched as an online media agency, handling digital advertising strategy and buying for clients such as Microsoft, uBid and Gateway. Because the company initially relied on third-party agencies to serve its ads, it developed sophisticated proprietary software that allowed it to monitor performance of its campaigns. Lipsky had previously developed data-mining software for Amazon, used to analyze customers' online behaviour and offer them suggestions for other purchases. He began developing a similar system for Avenue A which would analyze user behaviour by monitoring "action tags", single-pixel invisible markers scattered throughout clients' sites. That system was widely copied by other publishers, but at the time it was a real breakthrough. Other methodologies pioneered by Avenue A, such as tools to evaluate return on investment from campaigns, were already in use among traditional media shops, but they were brand new on the wild west frontier of the online sector.

Avenue A's first year billings totalled around $3.7m, and the company gradually expanded, recruiting venture capital from Oak Investment Partners in 1998 before launching a successful IPO in 2000. Brian McAndrews, who had joined the company a year earlier from ABC Television, was appointed as president & CEO. The group opened an office in London that year, only to close it in 2001 following the sharp downturn in the market. Also in 2001 Avenue A spun out Atlas DMT as a separate unit to market a version of its much-admired software to competitors. Having successfully weathered the downturn in the sector, the group was well-positioned to take full advantage of the upswing which followed. In 2002 it snapped up i-Frontier, a Philadelphia-based creative agency with a strong portfolio of pharmaceutical clients including Novartis and AstraZeneca. It also established offices in New York and Chicago, and created holding company aQuantive in 2003 to serve as the parent to its three digital brands. Later that year the group acquired search optimization company Go Toast, followed by NetConversions, a company providing Web site usability and optimization and services, in early 2004.

Following the acquisition of Razorfish, aQuantive merged the previously standalone i-Frontier into the new subsidiary to form what was then the largest digital agency in the US, with offices in 11 US cities. After doubling in 2005, aQuantive's group revenues rose 43% in 2006 to $443m, although less than 10% of revenues were generated outside the US. Net income was up by 53% to $54m. By this time, a new internet boom had begun as more established companies cast around to add younger upstarts to their portfolio. As a result, in May 2007, Microsoft agreed to acquire aQuantive for an astonishing $6bn, an 85% premium to the group's share price and equivalent to more than 13 times 2006 revenues. The handsome premium was clearly designed to blow the possibility of any rival offers out of the water. The only immediate client loss prompted by the Microsoft takeover was Apple.

aQuantive was absorbed into a new division of Microsoft, entitled the Advertiser & Publisher Solutions (APS) Group, and Brian McAndrews, previously aQuantive's president & CEO, was named president of that division. He left just over a year later at the end of 2008. However, by this time Razorfish had begun to feel pressure from other clients uncomfortable with the conflicts between the creative agency and parent Microsoft's other roles as a major advertiser in its own right, as well as an online mediaowner. In 2009, Microsoft began canvassing potential buyers for the business. A deal was agreed with Publicis Groupe in August 2009 and completed in October. Longtime CEO Clark Kokich moved up to the role of chairman and was replaced as global CEO by Bob Lord, previously head of the agency's Eastern US region.

During this process, Razorfish was also steadily expanding its global footprint through acquisition. Australian agency Amnesia, German web shop Neue Digitale, and e-Crusade in Hong Kong were added during 2006. The group established its presence in France for the first time in 2007 with the purchase of local shop Duke. However that unit was later merged instead into the French outpost of sister network Saatchi & Saatchi. Razorfish arrived in Spain with the acquisition of Wysiwyg in 2008, but that unit too was spun off again in 2012. An office in Brazil opened in 2010 but it too was shuttered in 2013.

An outpost in Japan left the network in 2015. In 2007, prior to the Publicis buyout, Razorfish had agreed to form a joint venture in that country with local giant Dentsu. The latter's interactive shop Digital Web adopted the new name Dentsu/Avenue A/Razorfish, later Dentsu Razorfish. It continued to operate under that name until 2015 when Dentsu bought out Publicis Groupe's remaining 20% stake and rebranded the agency as Dentsu iX.

Last full revision 8th November 2017

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