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Indian agencies under foreign invasion

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MUMBAI: Indian agencies will continue to be gobbled by their multinational counterparts, senior executives in the industry said.

"The acquisition of Sandeep Goyal‘s stake by Dentsu was inevitable," said Triton Communications director Munawar Syed, "When foreign agencies form a joint venture, it eventually concludes with the complete takeover of the Indian partner."

A wave of acquisitions over the years has only meant that a few Indian agencies like Madison, Mudra and Triton have survived the onslaught of international groups like WPP and Interpublic as they vie to augment their clout over the Indian market.

According to Aegis Media India chairman and CEO Ashish Bhasin, nearly 75 to 80 per cent of the global ad market is controlled by WPP, IPG, Omnicom, Publicis and Aegis.

"Dentsu buying out its partner‘s share is just a part of this trend. India is a growing market with immense opportunities and everyone wants to take advantage of this," Bhasin said.

According to a recent forecast by ZenithOptimedia, India‘s advertising market, which grew slightly in 2009 to $4,463 million, is expected to grow 13 per cent in 2010 and 13-15 per cent in 2011-2013, year on year. The total projected market size of $7,548 million in 2013, an increase of 69 per cent when compared to the 2009 figure, will make India one of the world‘s leading advertising markets.

The world‘s largest advertising agency, WPP, is recognising India‘s rapid emergence as a growth powerhouse. In his visit to India in 2010, WPP chief executive Sir Martin Sorrell had said that ‘the delta is very much driven by India and China". Incidentally in the WPP universe, India is the fourth largest.

The global downturn has made foreign agencies search for growth markets such as India. While Indian companies have nurtured global ambitions, in the advertising world it is the foreign agencies who are either increasing their shares or buying out the local joint venture partners in India.

Bhasin explained this anti-clock process. "The advertising sector is in a different stage of evolution as compared to other sectors in the country. Many foreign advertising companies were present in India even before liberalisation. Hence, it is no surprise to see almost the whole industry being controlled by foreign players."

Havas Media India and South Asia CEO Anita Nayyar termed this a "two-way process" as India is on the radar of all big business houses.

"Foreign companies want to have a share in the booming Indian market, and Indian companies want to exploit international expertise and experience. This trend is to be seen across the World and not just in India," Nayyar said.

Talking about the local agencies, she added: "According to INS, there are at least 500 small agencies in the country who don‘t have any foreign affiliation. So the changes are happening mostly amongst the top-rung players."

Nayyar said that the Rs 22 billion industry is mainly dominated by foreign players. "In India, GroupM is number one, followed by Madison, Lodestar Universal, Lintas, ZenithOptimedia and Havas Media in that pecking order," she elaborated.

Among the big-sized Indian agencies who have maintained control are Reliance ADAG-controlled Mudra Group, Triton Advertising and Madison.

Asserted Syed, "Not aligning with the foreign group has a disadvantage as well. When we want an international business, they want to know whether we have an alignment with a foreign group or not. Triton is completely focused on the Indian market and wants to explore every possible opportunity. However, one should always be open to positive change."

Displaying its local strength, Madison launched an equal joint venture with Trevor Beattie‘s BMB in 2010 to launch BMB in India. Earlier in 2008, Madison acquired a majority stake in WPP‘s Mediacom operations in India.

Percept has also held its ground while striking partnerships with foreign agencies. It parted ways with Aegis in 2006. The company continues with a 50:50 joint venture with Japanese major Hakuhodo.

"The merger and acquisition activities in the agency world is interestingly poised as there is a move towards consolidation of businesses and clients," said the head of a mid-sized agency who did not want his name to be revealed.

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