The sudden demise of Australia’s biggest content business, King Content, stunned the industry. Here are the lessons and what agencies need to do to survive.
The marketing world was amazed when Isentia bought Australia’s global content agency King Content for $48 million in August 2015. The purchase price at the time sent shivers of awe and excitement through the content community. It appeared to benchmark the value of successful Australian content marketing agencies.
King Content was the biggest player in the emerging content agency field. It attracted some of the best content minds and some of the most talented and experienced strategists. It had expanded rapidly and globally, and secured lucrative deals with some of the country’s biggest companies, converting many senior executives from content marketing sceptics to believers.
News that King Content has been bought by Isentia, an established media monitoring and brand intelligence company, appeared to show that content marketing was emerging as a force: not just for clients but for those wanting to build businesses on the back of it. Although using content to attract and retain an audience is an ancient marketing practice, many saw the Isentia/King Content deal as a breakthrough that “legitimised” its resurgence in the digital age.
David Pembroke, an industry leader and founder of the respected contentgroup business, hoped it would prove a “muzzle” for content marketing’s critics. “Here in one eye watering, jaw dropping announcement, this was the market’s validation of content marketing,” Pembroke wrote at the time. “It’s not a trend, it’s not a buzzword and it’s not a waste of time. It’s a thing. And as luck would have it, a very valuable thing.”
Isentia CEO John Croll said at the announcement that he saw many similarities between his company and King Content. “It is an Australian-born business that has become a world leader in a dynamic and exciting industry with a total focus on the client and their needs, providing comprehensive and fully supported content solutions,” he said. “This acquisition provides a great fit for our existing clients, with further opportunities to extend our relationships into the marketing channel and access new clients across the region and globe.”
For many working in content marketing, the price Isentia paid was incredible – perhaps even unrealistic. By August 2017 – not quite two years after the deal was struck – Isentia divested itself of King Content entirely. For the content world, shock quickly turned to disbelief.
Isentia was formed from what was Media Monitors, which began as a press-clippings service in 1982. After it was bought by equity company Quadrant in 2011, it was renamed Sentia Media, then Isentia. By then the company had a significant presence in the Asia-Pacific region and it was floated on the Australian Securities Exchange in June 2014.
King Content, which Craig Hodges founded in just 2010, grew spectacularly. By 2015 it had six offices (Sydney, Melbourne, Singapore, Hong Kong, London and New York) and employed 100 in-house content, social and digital specialists and thousands of freelancers across the world. High-profile clients included Bupa, Canon, Intel, GE Capital and McDonald’s. It created a software program called Communiqué that businesses integrated with their content management systems to monitor and manage their content requirements, workflows and effectiveness. It won the global Content Marketing Institute’s Agency of the Year … twice.
Isentia planned to integrate King Content to provide more value for clients of both businesses. Isentia’s managers saw the chance to make content marketing a bigger part of its operations. According to an investor presentation from October 2015, King Content’s services would be a key offering for Isentia’s customers. “We see an opportunity to engage and upskill Isentia’s client base, to allow them to take a more decisive role within their organisations.”
It would do this by: “Offering content strategy development to [Isentia’s] Insights clients, particularly those who are commissioning intelligence to support new products/services; using Insights as an input to quarterly client reviews to bring together marketing and PR performance indicators; upselling existing King Content clients to Insights projects and ongoing analytics, delivered through Communiqué.”
But within two years, the marriage was over. The King Content brand disappeared and its offices in New York and Hong Kong closed immediately. Isentia’s content clients were handed to other companies while it helped staff find new employment. Isentia, which announced at the same time that it was issuing a negative profit warning, reported the full value of its King Content writedown at $37.8 million.
In one corporate swoosh, Australian content marketing royalty was marched to the gallows.
Much of the commentary following the failure concentrated on the original sale price – that Isentia paid far too much for King Content in 2015. Croll doesn’t agree, saying his company did its due diligence.
“We saw a business going from about $2 million in revenue to $7 million in revenue to $15 million in revenue to $20-odd million in revenue for the first year that we had it,” he told a media briefing following the King Content announcement. “So there was a good strong growth profile there.”
In the end, Isentia itself fell into the red last year, but only partly because of the unexpectedly poor performance of its content marketing division. In the year ending June 30, King Content’s revenue fell 30 per cent to $14.4 million.
“There’s always volatility as [big online marketing] phases grow and feed into the next.”Todd Wheatland
Croll believed the businesses just didn’t align: while Isentia always had a very solid client base, most of King Content’s revenue opportunities were “very short-term and quite campaign based”.
“Content marketing was going through a little bit of a transition period at that point in time where a number of large clients – like ANZ bank – were starting to hire their own in-house journalists so they didn’t need us to build their content for them going forward.”
Publisher of media and marketing site Mumbrella, Tim Burrowes, agreed. “While it doesn’t prove that content marketing is worthless, it does rather suggest that Isentia bought a future number that wasn’t achievable once brands started doing their own content marketing,” he wrote on LinkedIn.
Others have suggested that King Content was always better at getting business than retaining it. One insider told Brand Tales that some of its clients became impatient for quick results from their content marketing activities and became disillusioned: “Maybe they viewed it in a different time frame, or they went down a certain tactic when tactics are always changing in this space”.
King Content’s former head of strategy Phil Brown said the deal was doomed because of a fundamental “cultural collision”.
“King Content had a startup culture,” Brown told Rakhal Ebeli on Newsmodo’s Brand Storytelling podcast. “It still had the vibrancy, the energy, the agility that startup businesses have. Bringing that inside a big old business, Isentia, there was really a clash of cultures – a clash of fit.
“Startups don’t work inside big businesses. There was probably a lack of focus on having the right people to bring the businesses together, but in the end it didn’t work. Being an ASX-listed company, there were shareholders [to satisfy] and budgets to meet, so they made some rapid, hard decisions.”
What now for content agencies?
Todd Wheatland was managing director and shareholder of King Content prior to its sale to Isentia. Despite the setback, he remains optimistic about content marketing’s broader prospects.
Wheatland says content clients will continue to achieve results by bringing together the right strategy, execution and distribution plans. The issue right now, he believes, is about perception.
“If you think of the big online marketing phases – search, social, content, AI – there’s always volatility as those phases grow and feed into the next,” he says. “The opportunities in agencies aren’t the same shape as they were two years ago, but there are people building great content agencies in Australia right now.”
Wheatland feels Isentia was correct to act in the way it did and that its actions say nothing about the future of content marketing. “Isentia took the right step in re-focusing on their core business, and that’s been reflected in the way the market has responded to their decision to divest out of content marketing,” he says. “I definitely wouldn’t take that as a judgement call on the potential for content marketing itself – you don’t have to look too widely to see successes, and each business should be viewed on its own merits.
“I don’t think the future of a great content agency is in more volume production, whether that’s words or video or audio. It’s not about more; it’s definitely about being able to orchestrate an outcome.”
Links & references
Brand Tales’ Q&A with Craig Hodges