MDC Partners Inc., the New York advertising holding company run by Canadian Miles Nadal, has soared 240 percent in the past year by helping clients like Burger King sell more hamburgers using Facebook and other social media.
“We’re always trying new things to improve the effectiveness of the advertising we do,” Nadal, chief executive officer of MDC, said in a phone interview from Toronto. “That is a competitive advantage, being aggressive in new technologies.”
MDC’s focus on digital media is paying off as advertising revenue climbs at companies such as Facebook Inc. and Twitter Inc. Facebook, the world’s biggest social network, reported Oct. 30 revenue rose 60 percent to $2.02 billion in the third quarter. The social-media advertising market is projected to surge to $11 billion in the U.S. by 2017 from $4.7 billion last year, according to researcher BIA/Kelsey.
In the 2009 campaign for Burger King Worldwide Inc., one of MDC’s advertising agencies asked people to delete 10 friends from their Facebook pages in exchange for a free hamburger. After customers deleted more than 233,000 friends in 10 days, Facebook asked Burger King to shut the ad down, according to a video from Miami-based agency Crispin Porter & Bogusky, the MDC unit that created the campaign.
Elisabeth Diana, a Facebook spokeswoman, declined to comment yesterday and phone calls to representatives of Burger King weren’t returned.
“These are guys that really get it,” said Rich Tullo, director of research with Albert Fried & Co. LLC in New York. Nadal “realized the print business would be obsolete. It’s acquiring critical businesses that integrate well with the collective they have.”
Nadal’s past ventures included Canadian money manager First Asset Management Inc., which was sold to Affiliated Managers Group Inc. in 2005, as well as Peerage Capital Inc., a private equity firm, and Peerage Realty Partners, which operates in the residential real estate industry. Nadal owns about 20 percent of MDC, which has a market value of C$1.05 billion ($990 million), according to data compiled by Bloomberg.
Nadal, 55, attributes his success with MDC to a “10-year bet on America,” made during the financial crisis in 2008 similar to the “Buy American” strategy advocated by investor Warren Buffett. MDC spent C$341.7 million from 2010 to 2012 buying stakes in more than a dozen advertising agencies, company filings show.
Alexandra Delanghe Ewing, a spokeswoman with MDC, said the company owns more than 50 firms, including sub-brands within some agencies.
MDC is the ninth-largest agency holding company in the world, Daniel Salmon, an analyst with BMO Capital Markets, said in a Oct. 29 note.
MDC generates about 85 percent of its business in the U.S., where it has about 2.5 percent market share, Nadal said. It’s “realistic” to push that to about 5 percent in the next five years, he said.
MDC rose 1.1 percent to C$33.42 at 4 p.m. in Toronto today after saying it will add $100 million to an offering of senior notes due in 2020. The company will use the cash raised for general corporate purposes. The company climbed to a record C$33.97 on Oct. 29, a day after reporting record results in its third quarter. The company also boosted 2013 full-year guidance, announced a three-for-two stock split and raised its dividend 41 percent.
Nadal’s company posted third-quarter earnings before interest, taxes, depreciation and amortization of $39.4 million, ahead of analysts’ forecasts for $38.1 million, data show. In a statement, MDC revised its guidance for 2013 Ebitda to $158 million to $160 million, from $152 million to $157 million.
Gains in advertising firms such as MDC may have run their course, said Philip Petursson, director of institutional equities with Manulife Asset Management Ltd. in a phone interview from Toronto.
“The risk is the big moves in these stocks have happened already,” Petursson said on Nov. 7. He doesn’t own any MDC shares.
A big part of MDC’s future business will be in mobile, Nadal said.
“How you deliver messages and the message itself go hand-in-hand,” Nadal said. “We’ve been on the leading edge of really innovative marketing activities through both the technology and distribution channels, in addition to the creativity itself.”
About three-fourths of Twitter’s more than 231.7 million monthly active users accessed the microblogging website via mobile devices in the three months ended in September, compared with 69 percent in the year-earlier period, according to the San Francisco-based company’s filings. Twitter’s stock soared 73 percent in its trading debut on Nov. 7 for the biggest one-day increase for an initial offering of more than $1 billion since 2007.
By contrast, “advertising continues to present challenges for newspapers,” said Geetha Ranganathan, a media analyst with Bloomberg Industries, in a Nov. 5 report. Advertising revenue among local newspaper publishers including New York Times Co., McClatchy Co. and Gannett Co. U.S. has declined for eight straight years.
MDC’s roster of ad agencies includes New York-based Kirshenbaum Bond Senecal + Partners, which created a 2012 ad for Bayerische Motoren Werke AG, the world’s biggest maker of premium cars, which attracted almost 409,000 viewers on YouTube.
KBS+ used digital cameras and projection screens to replace, in real-time, all the cars on a busy New York street with BMW’s concept electric cars.
The best years are still ahead for MDC, Nadal said.
“We’re just hitting our stride,” he said. “I don’t think you’ll see our stock triple next year, but we have a three-year plan and we could see our stock increase 75 percent to 100 percent,” Nadal said.