Iris retrenches in China – already

Word has reached me that Iris, the ever-expansive integrated marketing services micro-network, is closing its Beijing office.

That might (to mix my sub-continents) sound like a small earthquake in Chile. Until you realise that the agency group only opened in Beijing about 18 months ago. Isn’t the Chinese economy still going gangbusters? And did Iris chief executive and founder Ian Millner not say, only a year ago: “Our intent is to become the leading integrated marketing agency worldwide and we see China as a key market for our growth and development.”?

Suspicions about the company’s health might be further confirmed by exploring some of its recent history. Iris has been struggling, no doubt about it. In the summer, it closed down its German office, put its Spanish office on notice and was then forced to make a number of redundancies back at London HQ. Later, last November, UK chief executive Steve Bell was moved sideways to joint ceo, and agency chairman Drew Thomson stepped down. European chief executive Paul Bainsfair, meanwhile, was handed a more “client-focused” role and – proof of the urgency of matters – Millner and fellow-founder Stewart Shanley were called back from the China and US stations respectively to take the troubled ship’s helm.

So, just what is going on in China? I caught up with Millner who, for a man recently under some strain, seems chipper and friendly enough. Technically, it would appear the Beijing office will retain a ghostly presence as a client services office, but to all intents and purposes Iris’s China operations will now be regrouped in Shanghai – which Millner set up as an office only a year ago. Apparently, most international clients find it easier to operate out of Shanghai than Beijing. Be that as it may, one particularly large client – Sony Ericsson, with Iris since it set up in 1999 and still accounting for about 20% of revenue – obviously thought differently. Reading between the lines, it was Sony Ericsson, long the backbone of Iris international expansion plans, which drove the network to China in general and Beijing in particular. But ambitions to crack the smartphone market there (it is the fourth-largest player) do not seem to have gone entirely to plan.

Millner admits that China has been a steep learning curve (expensive as well, I imagine). “We need to be more focused and less expansionist. It’s now about making the network work and being profitable on a global scale,” he tells me. Luckily for him, his is still a privately-owned company, so we’re never likely to learn just how much this experiment has cost him and his fellow directors.

Note: Iris has grown like Topsy. It has offices in London, Manchester, Paris, Amsterdam, Singapore, Sydney, Melbourne, New York, Miami, Portland, Atlanta and Delhi. It also had plans to open up in Russia, Indonesia, Vietnam, Cambodia, Laos and Sweden. At one point, it employed 750 people worldwide, over half of them in the UK. What began as a sales promotion and direct marketing outfit has now branched out into experiential, digital, PR, sponsorship and even management consultancy. Its biggest clients after Sony Ericsson are Orange, VW and Barclaycard, none of which account for more than 10% of revenue. Its second biggest client was COI (know what I mean?). Total revenue is £48m, according to Millner – up from about £27m 3 years ago. But pre-tax profit is reported to be about £2m, according to a well-placed source; and debt is a sizeable £10m.

Iris has a well-deserved reputation for creativity and was recently voted one of the UK’s top creative agencies in a YouGov survey commissioned by Pitch.

UPDATE 3/3/11: No wonder there was a spring in Millner’s step. What he knew, but I didn’t when I talked to him back in January, was that Iris was about to land an enormous US account. No less, in fact, than all of Reckitt Benckiser’s North American digital business, formerly handled by Euro RSCG, and worth about $20m (it already handles digital in Europe). It also explains a mysterious ad appearing on LinkedIn, trawling for two senior suits. That should help to tidy up the bottom line a bit. My thanks to Angie Dean for bringing the win to my attention.

PS. Whatever is going on at Euro RSCG, which seems to have received the celebrated three phone calls recently?