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Good morning! It's Tuesday, December 12th. Today, we’re unpacking Mekanism, a creative agency that hit $50M in annual revenue in 2021!

THE FEATURE

Inside Mekanism: Crafting Creativity and $50M Success

You likely don't know the creative agency Mekanism, but you may remember that a controversial advertisement they created for Peloton caused the fitness company's stock to drop 10% back in 2019! 

While that wasn't ideal for Peleton, any publicity for a marketing firm like Mekanism is good publicity.

Today, Mekanism makes advertisements for major companies like Charles Schwab and Ben & Jerry's, generating $50M+ in annual revenue!

So, What's the Business?

After a decade of working in the advertising industry, Jason Harris set out to create a company that wasn't afraid to push creative boundaries.

Mekanism was incorporated in 2003 after Harris recruited co-founders Peter Caban, Ian Kovalik, and Tomy Means. Each of the founders felt restricted in the advertising industry. In their mid-20s, they envisioned their new company as akin to famous rock bands that went in as four equal partners and stayed together because of it.

That early vision for the company was a success; the four co-founders still run Mekanism today, growing the company to 180 employees and hitting $50M in annual revenue in 2021. 

Interestingly, the rock groups U2 and the Red Hot Chilli Peppers were among Mekanism's first clients. The co-founders were happy to work for free for brands they loved, providing them with a major reputation boost. Plus, U2 and the Red Hot Chilli Peppers still use Mekanism and are now paying clients. 

Long-term clients are the foundation of Mekanism's business model. They only work with about 25 brands at any given time, favoring quality over quantity. Their work ranges from creating ads for Biden's 2020 campaign to launching Jose Cuervo's UFC sponsorship. 

By combining what they call "Soul & Science," Mekanism differentiates itself from competitors with its creative ad production paired with cutting-edge market data analysis and performance optimization. For that reason, most of their revenue comes from multi-year contracts with happy clients. 

Another benefit to long-term clients is the ability to upsell them on additional services, such as social media management, digital analytics, ad production, and brand architecture. Harris has stated that their business model is to "land big clients for long-term retainers and sell them in multiple revenue streams."

How They Win: Pivot to Find Growth

Mekanism began as a digital production company and stayed that way for 10 years. Initially, a single firm doing the filming and digital work was revolutionary, but the company needed to innovate to stay ahead. 

Pivot #1: Mekanism transitioned into a creative agency to sell project-based work for multi-year contracts. The goal was to create recurring revenue they could count on to hire employees and grow the company. 

Pivot #2: In 2017, Mekanism reinvented itself as a full-service agency that assisted clients with media buying, planning, and all production services. They also acquired a social media company to begin celebrity account management and influencer marketing.

Pivot #3: The latest pivot came last June when Mekanism was acquired by private holding corporation Plus Company, which came with backing from private equity firm CVS. 

Up until Plus Company acquired Mekanism, the creative agency had been entirely bootstrapped. However, the founders saw another period of stagnation and needed to pivot once again to become something bigger. 

Mekanism's founders have yet to disclose the total value of the acquisition, but their ultimate goal was to get support from a strong VC firm that could acquire other marketing firms and put them under Mekanism's control. 

Harris believes this final pivot will be successful if Mekanism becomes a global creative agency that triples revenue in the next four years. 

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