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The cautionary tale of a marketing agency that ad giant WPP acquired for $300 million and shut down 4 years later

Sherry Smith, CEO of Triad Retail
  • Ad agency giant WPP announced plans to shut down shopper marketing firm Triad Retail, following the loss of big clients Walmart and Sam's Club over the past year.
  • Recently departed employees said that the firm was slow to diversify its business as more retailers took their advertising business in-house, causing layoffs and concerns from WPP about its $300 million acquisition.
  • The firm tried to branch out with products like a programmatic advertising tool and a digital agency.
  • WPP shopped around Triad, according to sources, ultimately selling part of it to Sam's Club in December. 
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This past December, employees of St. Petersburg, Fla.-based Triad Retail celebrated their annual holiday party at a Great Gatsby-themed event, complete with flapper dresses, feather headbands, and dancing.
The firm's holiday party was based off of the famous F. Scott Fitzgerald novel that chronicles the roaring '20s leading up to the Great Depression. Some saw the theme as a sign that the end was near for the 15-year-old marketing agency, which lost its biggest client Walmart in February of that year.
"We all knew that it was going away — it was like a rockstar event," said a former employee.
The giant ad holding company WPP had acquired Triad for $300 million in 2016, one of dozens of acquisitions under former WPP CEO Martin Sorrell.
But in mid April of this year, Brian Gleason, global chief commercial officer for WPP's media-buying arm GroupM, and Triad CEO Sherry Smith told Triad's employees that it was shutting down the 100-person firm, according to two former employees.
Triad had lost big contracts with Walmart, Sam's Club, and eBay as more retailers built their advertising businesses in-house and axed so-called shopper marketing agencies like Triad. WPP has also been on a cost-cutting spree under now-CEO Mark Read, including selling some assets and merging agencies.
At the same time, Triad's core retail clients — like other large advertisers — have slashed spending as the coronavirus ground many retailers to a halt. Among Triad's recent clients were Bed Bath & Beyond, Kohl's, and Staples.
GroupM reiterated a previous statement, saying it closed Triad due to new retail models and economic impact from the coronavirus.
"The dramatic changes in the retail industry, coupled with the economic conditions triggered by the global pandemic, have brought us to the difficult decision to close Triad, a retail media business based in St. Petersburg, Fla.," GroupM said in a statement. "We are proud of Triad's role as an early retail media pioneer, as evident in the successful sale of its proprietary technology and engineering team to Sam's Club in fall of 2019. Our heartfelt gratitude to Triad for its leadership, customer innovations, and retail media inventions."
Business Insider spoke to four recently laid-off Triad employees who cited the Walmart loss, an ongoing lawsuit between WPP and private-equity groups that previously owned Triad, and challenges with retailers as factors in the shutdown. The former employees' identities are known to Business Insider but they requested anonymity to protect their severance packages.
"We kind of became a dinosaur," said a second employee. "We took too long sticking to the same business plan and didn't diversify — COVID-19 was like the nail in the coffin for the company."

Walmart's decision to pull the plug sent ripples through Triad

Triad was founded in 2004 as a shopping marketing agency dedicated to Walmart, which remained its biggest client up until 2019. The firm helped run Walmart Media Group, which tries to get brands like packaged goods makers Procter & Gamble and Unilever to run ads on Walmart's website, app, and in stores using Walmart's shopper data.
Two sources estimated that Walmart made up 70% to 80% of Triad's business. Triad's second-biggest client was Walmart-owned Sam's Club.
But rumors starting circulating a few years ago that Walmart was considering cutting its ties with Triad and building its own ad business in-house.
Early last year, Walmart formally cut its ties with the agency, and a group of Triad employees moved to work with Walmart. According to one employee, Triad employees who were not transferred to Walmart were given non-compete agreements but Triad did not enforce them, leading more people to join Walmart.
In January of this year, Walmart formally launched its self-serve ad business.
"I had always suspected that Walmart was going to be taking the business in-house. I just didn't realize that it was going to be so fast," said the third employee.
Walmart did not respond to a request for comment from Business Insider.
Sam's Club also cut its contract with Triad last year to bring its advertising business in-house, as did eBay and CVS.
Triad went through two rounds of layoffs, dwindling in size from 500 people in 2017 to 100 people by April, according to two sources.

The firm didn't diversify quick enough

Triad still had other clients, but one source expressed concern that the company was too reliant on retailers like Toys R Us and Bed Bath & Beyond that faced financial problems of their own.
"I said to someone that there's no way that we can continue if we're hanging our hopes on companies that are already struggling," said one of the former employees, who worked across several departments.
The person said that there were also concerns that Triad wasn't diversifying its business fast enough as more retailers were taking their ad sales programs in-house.
Triad tried to branch out by getting ad revenue directly from brands and agencies instead of retailers. Last year, the firm started pitching a programmatic product that uses retail data and artificial intelligence to target and serve ads.
Triad also launched an arm called The Market that was positioned as a digital agency that specialized in creative, data, and media work for advertisers. One source described The Market as a competitor to Geometry, WPP's other notable shopper marketing agency.

A lawsuit between WPP and Triad Retail's old owners hangs above the firm

Rumors had regularly swirled inside the company that WPP was trying to sell Triad. Three of the four sources said that they also heard that Triad held talks with Target. Two of those people who heard about the rumors also said that management told employees that they were in talks with Office Depot, Costco, and CVS.
An ongoing lawsuit alleges that Triad had financial trouble as far back as 2016.
In November, WPP sued RB/TDM Investors and Falcon Investments, two private-equity firms that formerly owned Triad Retail, as well as former Triad Retail execs. The lawsuit alleged that the former owners and leadership team inflated the firm's value by more than 40%.
The suit also alleged that Triad's estimated EBITDA (earnings before interest, depreciation, and amortization) in 2016 was $13.3 million, not $31.6 million as the firm claimed. That revenue mostly came from Walmart, according to the complaint.
"At a company with the sophistication of Triad, its management team, and its top clients, which included major retailers such as Walmart and eBay, shortfalls of this magnitude do not simply happen without advance notice or intelligence," reads the complaint. "Triad's shortfall was so large, and came so soon after the closing, that it is implausible that Triad's executives did not see the shortfall coming, and the evidence demonstrates that they did."
To some former employees, Triad's story is a cautionary tale for agencies that are overly reliant on one client and business line.
"If you distill everything that Triad did down, it was really only one thing, and that's the thing that companies are discovering anyone can do," said the former employee who worked across multiple departments.
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Source
https://www.businessinsider.com/inside-triad-retail-walmarts-longtime-agency-2020-4?IR=T

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