Last year, career music biz and brand man Steve Stoute and rap entrepreneur Jay-Z, aka Shawn Carter, formed Translation Advertising, a New York firm that helps Corporate America advertise with a multicultural sensibility. Both men are self-made, successful, and connected to youth culture, despite being on the cusp of 40. Stoute has managed singer Mary J. Blige and the rapper Nas, and produced records for acts ranging from Eminem to U2. In November, the American Advertising Federation inducted Stoute into its Hall of Achievement. At 39, Carter has long worked at the forefront of the hip-hop music scene. Besides the wealth and fame he accumulated from the music business, he also owns a stake in the New Jersey Nets basketball franchise, and the 40/40 chain of nightclubs.
Translation Advertising grew out of Translation Consultation & Brand Imaging, which Stoute started in 2004 and sold to the Interpublic Group (IPG) three years later. Before that, he worked on Madison Avenue, and was an executive at Sony (SNE) and Interscope Records for several years. Stoute and Carter own 51% of the new agency, which employs 50. Film director Spike Lee has a similar relationship with SpikeDDB, a partnership with Omnicom Group's (OMC) DDB Worldwide Communications, which has handled ads for Pepsi (PEP), Budweiser, and Nokia (NOK).
A Recession-Proof Demographic?
But starting an ad agency amid a brutal recession? Some might say such a venture sounds a bit like opening a condo firm in South Florida these days. Ad agency Magna Group forecasts a 4.5% decline in domestic advertising this year, following a 3.2% drop in 2008—a year that included a lucrative Olympics and the most expensive Presidential campaign in history. Magna's parent company, Interpublic, announced in December it would cut 2,000 jobs, while rival Omnicom laid off 5%, or 3,500, of its workers the same month.
Translation, however, has a strong foundation, built on its connection to one of the most lucrative demographics in the U.S. consumer market: educated, urban youth with earning potential. African American and Hispanic buying power each hover at $1 trillion, according to the University of Georgia's Selig Center for Economic Growth. Johnson & Johnson (JNJ) spent $77.2 million on Spanish-language advertisements and $33.9 million on ads targeted to African Americans through the first three quarters of 2008, second only to Procter & Gamble (PG). J&J increased its 2008 spending aimed at both groups from that of 2007.
Regardless of how long or deep the current recession bites, advertisers are not likely to minimize their efforts with educated, urban youth. Stoute says Translation is "getting out of ideas that are more branding and fluff" and trying to focus on efforts that drive sales for a client. "It's not a trick, but if there's been a trick, it's focusing more on a call to action," he said.
Hip-Hop Flava for Mainstream Brands
The advertising trade is, of course, a business whose health correlates to the state of consumer spending and sentiment. Yet, as the U.S. economy deteriorated rapidly last year, Translation closed deals with Johnson & Johnson and helped give Wrigley—virtually an ancient brand among younger people—a fresher breath. The agency also positioned the Sean John brand with Estée Lauder (EL), and worked with plain-as-wheat State Farm to challenge insurance rival Geico. "They have an incredibly strong creative team," says John Demsey, brand president for Estée Lauder Global. "And they liaise with a lot of media partners."
Stoute says he "dovetails" his strategy with direct market agencies that negotiate long-term, global campaigns with brands. In 2007, General Motors' (GM) Chevy brand hired Translation to complement a larger campaign by Campbell-Ewald (also an Interpublic subsidiary). "We wanted to reach a youthful, diverse, and higher-educated consumer," says Terry Rhadigan, Chevrolet's director of communications, "something that we felt played naturally into Translation's hands." Feeling this market's pulse isn't the result of focus groups or third-person studies, but rather "being a member subscriber of the culture," Stoute says.
The same urban and multicultural influence that turned Timberland (TBL) from a sleepy Vermont shoe company into a footwear and apparel powerhouse is driving dollars to agencies like Translation. The "talk value" generated by recommendations from influential cultural figures can catapult goods from obscurity to mass appeal. Of the 10 most highly regarded public personalities in the U.S., eight are African American, according to the Davie Brown Index. That index, by a division of Omnicom agency Davie Brown Entertainment, determines a celebrity's ability to influence brand affinity and consumer purchase intent. President Obama tops the list.