Irvine-based ad firm Rhythm launched as a digital-first agency in 1996—a time when consumers paid for the internet by the hour, unless they owned one of AOL’s ubiquitous CDs promising “200 hours free!”
The boutique agency has since grown over the years, now working with clients such as Acura and Irvine Co., and has seen a recent spurt of activity. With 26% growth between 2016 and 2018, it ranked No. 42 among Orange County’s fastest-growing small companies last year, according to Business Journal records.
Now the company, which reported $9.2 million in revenue last year, has even bigger designs after a sale to New York-based digital agency Code and Theory, known as the go-to agency for media giants like Hearst Communications Inc. and Bloomberg Media Group.
The deal closed in the beginning of this year; financial terms were undisclosed.
Rhythm founder and Chief Executive Craig Cooke said last week he realized the company—which employs 33 people at its Spectrum-area headquarters, all of whom will remain in their roles—would need a partner if it wanted to scale the business, hence the sale to Code and Theory.
“On our 20th anniversary we were like, well, we achieved a lot and we have a strong client base … but in order to really take things to another level we really need to look for the right strategic partner that can help us get into bigger markets, bigger brands, bigger budgets,” Cooke said, adding that it spent the past three years preparing the business for a sale.
The common thread spun by many boutique agencies is their ability to be a nimble partner for potential clients, but their smaller size can make it a challenge when looking to snag larger clients, who prefer big teams backing their campaigns.
Rhythm saw its revenue climb 13% last year. It ranked No. 23 on the Business Journal’s latest list of OC’s largest ad agencies.
Similar to its parent company, the agency has helped clients like Segway Inc. and Kaiser Southern California Permanente Medical Group with a range of digital work from website design to rebranding and online campaigns.
“It’s great having Acura as a client, but we want more of those,” Cooke said.
Wider Net
Cooke said “nothing felt right” when he met with at least six other agencies prior to talking with Code and Theory late last year, recalling how their first meeting was on his birthday.
Code and Theory Chief Executive Dan Gardner said it was impressed with the agency’s operations, as well as its work.
“Rhythm was a special find for us as their underlying philosophies and culture match well with our own,” he said in a statement. “The team at Rhythm will bring a lot of value to our organization and for me, that’s extremely exciting.”
Code and Theory has 500 employees across five offices, not counting the Irvine location. It has helped firms such as BBC, Maybelline, NBC News and the Council on Foreign Relations redesign their website. It also designed and developed NBC’s Olympics website for the 2014 Sochi games saying “with over 70 million unique visitors [it] was the second largest media website in the world for 16 days.”
As of 2016, the company reported annual revenue of more than $50 million, according to a Wall Street Journal report, at the time a majority stake in the company was sold to Washington, D.C.-based investment firm Stagwell Group.
Cooke said the backing of a large agency has already paid off.
“There’s a lot of opportunities that come across their desk that’s just too small for them,” he added. “They’ve been sending opportunities our way that they would normally just pass on.”
To that point, he said that one client was hesitant to choose Rhythm because its services were pricier than a runner-up agency but changed its mind last month after learning of its ties to Code and Theory.
“This partnership will accelerate our growth and continue to expand our digital capabilities in the years to come,” said Rhythm President Peter Bohenek.
The next challenge for the Irvine office will be recruitment.
Landing new businesses and additional services for existing clients has so far proven successful, according to Cooke, but the next phase will be finding the right talent.
“We’ve been in such a mode of operating very efficiently,” he said. “It’s not really getting the clients and the work. The number one challenge is recruiting and searching for talent [and] forget about other agencies, it’s all these other brands that are soaking up talent as well. We’ve made some offers but if we wait too long they’re gone—that’s been a challenge.”
The company’s website currently lists six open positions, including an account director opening, in addition to design and technology positions.
