2012 : A year of agency consolidation
Anita Nayyar, CEO, Havas Media India and South Asia
(15 January 2013)
India because it is English speaking, in addition to all the other factors, has every global brand, executive and company vying for a place in the sun. Exchange rates and need of funds coupled with the revered Silicon Valley philosophy of getting bought has made buying of media assets, namely smaller agencies, very lucrative. They called it ‘Consolidation’ and this phenomenon was big in 2012.
Consolidation seems to be the name of the game with agencies today and has caused a lot of excitement with the media too. It signifies growth, scale, of having arrived, of expansion - resources, fresh finance, services, markets, leverage and professional management, for the partners. Sure, it includes all of it and monopolistic rates for the biggies.
With a sluggish global economy, emerging markets are havens for international companies, advertising having dried in their primary markets. This environment has been great for a bear run to pick up preferred stocks -- digital is A list -- at the best price to scale up the
portfolio and create volume. Economies of scale drive this from all sides – agency, client, target audience, brand and along with the online ad world being truly flat, it makes perfect business value for groups with deep pockets or who wish to be right at the top.
Customers want it too, more so planning and buying over creative as did Marriott International. With global presence it needs a global agency from the ‘best’ aspect of brand understanding and inventory.
These are the Pros and they are far more. It builds market share, creates brand opportunities, allows buying options and deals, has finance and human resource, markets and clients can be leveraged, knowledge and systems are at the core and so on.
However the Cons part is not without its challenges – internal and external.
The acquisition culture shock has far reaching effects on work output, people morale and also unknowingly to their client . The essential attractive part that defines them comes from their environment. Chances are this could get lost with the change of culture.
- Independent or smaller agencies are more nimble having fewer or no bureaucratic networks of process, reporting and structure.
- Competitive and enterprising they go to the client with a ‘less is more‘ approach; redefine the brief and some come up with radical solutions.
- For their survival they are democratic and encourage creativity from across the board.
- Opposition to mandated thoughts is not career suicide.
- There is more focus on ideas over targets, while targets never lose sight
- There is more interaction and integration with the boss and across teams.
- Even smaller clients get the attention of the boss.
The adjustment factor takes place from both parent and network, working fruitfully only when financial and human value is accrued.
The other aspect is monopoly and stifling of competition.
Also talent moves to the highest bidder. They cut their teeth and shift; which can lead to boxed horizons right in formative years, as agencies get more specialised and the ‘gurus’ do not really interact with them.
As business increasingly goes to the behemoths that command better rates, use their network and media relations; small and medium sized agencies are restrained from delivering their best work. In the long term this does not auger well for client or industry and certainly not for the agencies who put their best foot forward.
2012 in many ways was a landmark year of endurance for media in India, in yet another dismal twelve months of depressed global and local economy.
Traditionally, when markets do not perform the first thing that gets cut is secondary expenditure, marketing and adverting first. The overall growth from 2011 was about 8 per cent; even the festive seasons did not see the spurt of good times as also the duration of activity which was more curtailed.
To note is that from this 8 per cent not more than about 2 per cent would be new advertisers or channels, attributed towards new brands or media vehicles. The major share is rate increase in cost of purchase.
“It is not the strongest of species that survive, nor the most intelligent, but the one most responsive to change.” – Charles Darwin
2012 taught agencies yet again to be more responsive to change:
Advertisers with their experience of recessionary years have learnt to deliver more with less. But 2012 brought to the fore that this might be here to stay for a longer time and have learnt to work around the client within their budgets and deliver.
- New Media and Clients
Digital and mobile are now an essential part of a clients marketing plan. They ask for it directly or need to be led towards it. Most have already been approached by at least 2-3 agencies or are already being serviced. They know they want to be up there but many are either not savvy enough or not sure exactly what should be done. Agencies, who force too detailed a brief and asking the client what exactly they want, stand to lose the business to a smaller incumbent.
Performance, frequency capping and changing of creative’s, altering the ad in real time; alternate ad formats using content and sponsorship have gained prevalence for clients especially those focused on digital; and all are learning fast.
- Working without TAM
For the first time since its inception almost a decade ago, TAM stopped, chaos was anticipated but clients trusted their agencies and agencies did their job. Advertising continued, inventories were bought, plans were auctioned and the results after the data was released justified that TAM was a report card for good performance not the sole reference point of disbursement of client investment. The "GUT" did return.
Finally, the much awaited digitisation set in and 2012 will be a milestone year for TV in India. While it is not complete it moved at a faster pace than people actually expected. Viewers have been sensitised to ‘pay’. It will open alternate revenue streams, create new and differentiated content as also patterns of viewing and grow the platform.
- Integration & Specialisation
Integrated & Innovative solutions are the flavour of the season. Agencies are positioning themselves as integration specialists along with dedicated teams for clients to become their extended marketing arm in the true sense. Different communication touch points impacting the different stages of the purchase funnel are being looked at as key differentiators.
- Agency Marketing
More agencies are coming to the fore and marketing themselves, availing the opportunity the industry media and marketing associations afford them. They are more present, more vocal with a shifting mindset from even the more restrained ones.
2013 is not going to change the economic or advertising scenario. We should see an overall growth of about 9 per cent but when you break it, it shows how lean advertising break-even is and the positives and negatives of economies of scale.
However, these are realities the industry must contend with. Given its past record, agencies large and small will deliver some great work and value to most of their clients.
Though what will not change are the growth targets both for top-line and bottom-line.
Lets wish for happier times going forward. As they say there is no harm in wishing for the best!!