Digital Marketing Services: WPP buys 20% stake in Globant for US $70 million

WPP is acquiring a 20% stake in Globant S.A., a Buenos Aires, Argentina, headquartered  technology services provider focused on delivering innovative software solutions. WPP bought the stake  for US $70 million.  Last year not-for-profit Endeavor Foundation‘s Catalyst Program invested US $2 million in the company.

WPP’s strategic move is aimed at augmenting its digital capabilities, besides enabling it to target fast-growing geographic markets and emerging sectors. Headquartered in Buenos Aires, Globant has a strong presence in Argentina, Brazil, GlobantUruguay, Colombia, the United States, and the United Kingdom. Globant works with  companies like Zynga, Google and JWT.  LinkedIn co-founder Reid Hoffman recently joined Globant’s Advisory Board.

Latam – Brazil push

According to WPP, Globant’s  geographic diversity, particularly in the Latin American countries, is likely to benefit WPP with the FIFA World Cup 2014 and the Summer Olympics 2016 both taking place in Brazil. In addition, Globant is among a select few companies that offer both technical and creative expertise on a global scale. Globant has a core competency in some of the state-of-the-art digital marketing spaces such as mobile, social networks, cloud computing, big data and e-commerce sites. This would enable WPP to extend its product portfolio and gain a footprint in the faster-growing sectors like digital, data, and application of technology. Over the next five-year period, WPP expects digital revenues to account for 35%-40% of its total revenue. In 2013, the company expects its digital revenues to exceed $6 billion, representing over 33% of its total revenue.

Trend: Major Firms buying Digital Marketing Service Providers

There is a strong demand for digital marketing services by major advertising agencies conglomerates and media companies. This has increased M&A activity with major companies often buying smaller digital marketing services startups. Late last year, Accenture bought digital marketing services firm avVenta Worldwide. With more than 600 employees, avVenta has headquarters   in New York, a digital production fulfillment  center in San Jose, Costa  Rica,  and an office in Charleston, S.C.  In 2011 Hearst bought digital agency iCrossing, which has a strong presence in Latin America and also plans to expand into the U.S. Hispanic market.