HOT COMPANY PROFILE: Social media agency Punktilio

By George Mitton

Wed Aug 11 2010, 09:08 AM

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Brands are eager to invest in social media marketing, but many don't know how best to spend their money. Can the established agencies handle social media or do clients need a specialist? Punktilio managing director Hal Stokes thinks many non-specialist agencies fail to see that social media marketing requires a different approach: it's a "consistent conversation" not a series of independent campaigns. Punktilio already has high-profile clients such as the BBC and Arsenal football club and is profitable and boasts healthy revenues. But if it is to continue growing it must convince new clients that social media is a distinct ad format that requires special skills.

>What makes Punktilio different from other social media agencies?

Punktilio is an absolutely specialist social media agency. In a nutshell it's strategy, media planning and buying, community management, content creation and buzz monitoring. We all come from social media, we're not a media agency that's trying to understand social - I used to be global head of music at Bebo. A lot of our guys are from digital content backgrounds so they make content specifically for the digital space, not for TV. That's a big differentiator in comparison to different media companies.

The current client base includes Phones 4 U, Syco Music - which is Simon Cowell's record label - HarperCollins, MySpace, BBC and EZ Pay. We do Arsenal football club and Koko, which is a music venue in London. We also provide white-label solutions for media agencies. For some of the larger companies, we'll build apps and create strategies for their social media clients.

>What is your business model?

The idea is that community management sits in the middle. It's not a great revenue stream, it's a tick-over revenue stream. But that allows us to tie in the other parts of the puzzle which is content creation, media buying and planning in the social space, consultancy, buzz monitoring and development. We feel that by putting community management at the heart of it, we understand everything as well as we can. We understand how an app works for a community because we manage that community on a day-to-day basis. They're all priced separately so we bill them out either at an hourly rate or as a retainer, and we'll work out different costs within that for how much [clients] want.

We're very profitable, we've always been careful to make sure we scale accordingly with the jobs we've won. We haven't come out of the block with a million staff, we've scaled up as we've won jobs. We're very methodical about our growth, when we win new jobs we bring new staff in. We've not lost a client yet. Turnover is about GBP2m (USD3.1m) now.

>Who are your main competitors?

We Are Social and a company called Nudge know what they're doing. Jam are good, they were I-level's social media department and they were acquired by Engine. All those three companies understand social. I don't think any of the big media agencies are a threat at all, in terms of their skill sets. What they're doing is adding a bolt-on service called social media to their existing services. I'm not sure it's enough of a revenue stream for them right now for it to be hugely serious. They're also playing catch up, they're coming into the space as opposed to already being in it. They're more campaign-led, whereas we're more of a consistent conversation.

>What is the biggest challenge you currently face?

Though I've just said the big media agencies aren't a threat, the biggest challenge we've got is that they have the client base. When they speak to their clients they say they offer social media. Their clients don't really know if the service they're getting is great or not. Because they have that relationship it's very hard for companies like us to break in as a specialist agency. The barrier to entry is the difficult part.

Clients are cautious about accepting the new medium of social media. They're trying to apply old logic and old theories to this new space. It's not campaign-led, it's a consistent conversation, there's no point in building up 100,000 fans on a profile and neglecting them until the next promotion comes round. Just the value of fans is also something that's hard for them to grasp. If you do a press campaign or a TV campaign you have one or two impacts with the viewer, whereas if you get them on the social space you have a lifelong relationship as long as you manage it correctly.

>What do you think is the hottest trend in digital media?

Not so much geo-location, but what that's opening up: the fusion of real world with the digital world. That's when social media is really going to come into its own, when people are using social tools in the real world and relating them back to the digital world. The social media world will become an intrinsic part of daily life, not just when people log on. To that extent, smartphones are the biggest driver in that social media is now mobile and it's real-time.

VERDICT

Social media marketing involves a consistent conversation, as Punktilio understands. Punktilio calls its revenues from community management its "tick-over stream". Combined with additional revenues from content creation, media buying, consultancy and social intelligence services, the company is making GBP2m (USD3.1m) a year. It is profitable, claims it has never lost a client and has grown in a sensible strategic manner.

The firm's biggest challenge remains convincing big advertisers that they need a specialist to handle their social media campaigns. Punktilio and its rivals are hoping to benefit as brands become more comfortable with the idea of social media advertising and techniques for measuring the impact of social media become more common. Facebook has a huge incentive to aid the process and has already chosen one of Punktilio's campaigns for Phones4U to be a case study in Facebook advertising . Many clients aren't yet aware what separates a good social media strategy from a mediocre one. By the time this situation changes the larger agencies may be able to offer similarly slick and targeted campaigns as Punktilio. But crucially these could be more integrated and suited to what Stokes calls "the fusion of real world with the digital world", which he sees developing. But even before this happens, in the current climate there is still a risk that big contracts will go to the established agencies rather than the upstart social media specialists, and this is Punktilio's greatest obstacle

AT A GLANCE:

Managing director: Hal Stokes

HQ: London

Founded: April 2008

Commercial launch: April 2009

Number of employees: 20

Investors: Michael Birch (founder of Bebo)

Funding to date: Undisclosed

COMPETITORS:

we are social

Nudge

Jam