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BW Businessworld

Madmen Invade India

Say hello to Madison Avenue as advertising and marketing’s giants march in to meet a high-growth economy head-on

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To connect the world, you need to connect India.” Facebook CEO Mark Zuckerberg unwittingly pointed to a shift in the larger global mindset when he said this to an enthralled audience of students in New Delhi. He was, of course, talking about Free Basics or, Facebook’s bid to bring in its next billion users, giving advertisers an even more massive playing field.

Zuckerberg and other tech majors aren’t the only ones who have been heading to India. Global marketing behemoths are flocking to the country and spending more time here than ever before. WPP’s CEO, Martin Sorrell, for one, spent over a week here last month. Publicis Groupe’s CEO Maurice Lévy and Interpublic Group’s chief, Michael Roth are both gearing up for India visits in 2016 with a single-minded agenda — carve out a large piece of the Indian pie.

Gunning For Growth
India’s marketing industry is a modest one at Rs 40,658 crores, going by the Pitch-Madison Advertising Outlook 2015. That doesn’t detract a bit from its sexiness however, and the bigger picture indicates that many aspects are coming together to set the stage for the rise of a high-growth sector.

Indian advertising currently is dominated by global players and is slated to grow at 10 per cent. But the kingpins of the business — the holding companies — are eyeing India for more than mere conventional advertising. And they’re thinking big.

Unlike some businesses, advertising relies on scale. That’s the reason there’s been a consolidation in the past two and half decades, concentrating all power in the hands of six major players — UK-based WPP, US-headquartered Interpublic Group (IPG), French company Publicis Groupe, US-based Omnicom, France’s Havas and Japan’s Dentsu Aegis Network.

It is these ‘holding companies’ and the Dentsu Aegis network that control nearly 90 per cent of the advertising and marketing business, as estimates go.

The leftover 10 per cent is controlled by other agencies independent of this group of big players. In India, Sam Balsara-owned Madison World is perhaps the only prominent independent despite the presence of younger players, most of which are arguably still in a startup phase.

Many acquisitions have happened in India in the past few years, including of creative independents, digital agencies, event specialists, PR firms and healthcare companies to name a few. The last noteworthy Indian independent to be acquired though would be Anil Ambani’s Mudra, by Omnicom in 2011, given the sheer deal-size of a reported Rs 750 crore. The year 2015 may have been quieter but with changing market dynamics, the expectations from India have changed.

Charging Ahead
India’s economy, seen as a high growth one as it is, is an obvious draw attracting global dollars. “India is an exception to the slowdown and this can be seen both in the health of the economy and the relative stability of the currency,” says Maurice Lévy. He explains that there are various reasons for this difference. The other BRIC countries (Brazil, Russia, India, and China) are dependent on exporting commodities whose prices have declined. India is a big importer, particularly of oil. “The oil price decline has actually been good for India, bringing inflation down and enabling interest rate cuts,” says Lévy. “India has a pro-business government. It is home to a young population empowered by, and comfortable with, technology, and has a democracy that countries want to partner with.”

Add to these advantages, the fact that the fabric of entrepreneurship is changing in India and the rise of startups has an overall positive effect on the economy. As these young companies gear up, they look to marketing for creating awareness and demand. Industry surveys indicate that e-commerce companies are already the second largest advertising spenders on mainstream media.

In addition to the initiatives within the country including government-led Digital India, India is the centre of attention of global organisations that are looking to grow connectivity. This will boost young, local entrepreneurs bringing in new ad dollars. “As more engaging ways to reach consumers come into play, advertisers will spend in newer kinds of media. In all, India may be under-branded right now but we are seeing all the makings of change, indicating high growth potential ahead,” says Jasmin Sohrabji, CEO, Omnicom Media Group India and Southeast Asia.

On High Octane
With the increasing brand awareness among Indian youth and the swelling purchasing power of the upper class in Tier II and III cities, Indian consumer spending is expected to quadruple to $4.2 trillion by 2017, according to an ASSOCHAM-Yes Bank joint study. By any international comparison, the gap between the ad spend and consumer spend is too wide in India.

The only way from here, according to business leaders in India, is to bridge the gap by increasing ad spends.

Hewlett Packard’s Lloyd Mathias, marketing director, Consumer PCs, Asia Pacific & Japan says, “HP has always viewed India as a strategic market and will continue to do so. Given that HP’s offerings straddle PCs and printers, the low penetration of these products in India presents a huge opportunity to grow its business.” For him, India is rapidly getting up to speed in increasing ad dollars. An opinion echoed by Shashi Sinha, CEO, IPG Mediabrands India, who says, “You can already see the change happening with e-commerce and auto companies showing the way. The manner in which AdEx (advertising expenditure) is increasing this festive season is an early indicator of the shape of things to come. This will have a cascading effect on all media.”

The onus of galvanising the industry is on agencies and some of the players are already taking key steps in that direction. “We have expanded our client outreach beyond the big cities,” says C.V.L. Srini, CEO, GroupM South Asia, the largest media holding company in India. “We work with partners to help brands in smaller towns have access to professional media planning and buying services. We have conducted numerous road shows for SMEs to help them understand the benefits of brand building. We still have a long way to go as a market.

I see the growth of digital, especially mobile, helping expand the pie as we go forward.”

Digital Frontier
While the ad pie on the whole is growing, digital advertising spends record fastest growth. “There is a big deficit of where we are, and that is reflected in India’s total ad spends. Total digital spends of established markets is to the tune of $16-18 billion, and India it is at $400 million. But it is growing at about 35-40 per cent,” says Umang Bedi, managing director, Adobe South Asia.

An Invasion Of Technology
All holding companies have different strategies that are defining their way forward in India. However, there are a few focal points that they unanimously deemed as growth drivers. Practically every company is investing in content, data and talent — but the top answer to where they have pinned their hopes, is technology.

“Investment in talent, supplemented by strategic acquisitions, should ensure we maintain the high level of our professional offerings. Our budget for 2016 acquisitions is in the $150-200 million range and our deal pipeline for next year is robust. We focus on high-growth disciplines, like marketing services and mobile,” states Michael Roth, chairman and CEO, Interpublic Group.

Content has become an important area more so in a world where technology is creating routes to block out commercial messaging through ad blocking or creating issues such as bot viewing or ad fraud. As it becomes incumbent on media companies and agencies to marry commercial messaging with content, holding companies are looking at investing in content sources to craft the best brand solutions. Globally, WPP has done so by investing in content companies including the likes of Vice Media. WPP is the only holding company to have directly invested in content.

The other examples are more of partnerships, such as that of Havas Media Group and NewsCred. On a side note, Havas did raise a few eyebrows earlier this year when Vivendi’s Vincent Bolloré acquired Canal Plus in France raising the question of a potential conflict even though it is Vincent Bolloré’s son Yannick Bolloré who is independently tasked with the Havas mandate. While that may be an area open for debate, all these developments signify the extreme interest in content. India has many examples where the likes of GroupM and IPG Mediabrands have aligned with sports and entertainment content, but a deeper relationship with content creators is on the horizon.

Digital To The Core
For a good part of the last decade, no advertising and media conversation could happen without the emphasis on the growth of digital. Today however, digital has evolved to a place where its components — social media, mobile, video, search and the likes — are seeing special attention. A large part of acquisitions in India are in these specific areas.

“The IPG is already very strong in digital but we’re opportunistic and always on the hunt for great talent. To consistently stay at the forefront of change, we embed digital expertise throughout our portfolio. Some of our peers have approached digital through headline-grabbing acquisitions, which have often stayed in silos within holding companies. By growing digital competencies organically within each of our agencies, our integrated marketing solutions are placed at the center of a connected world,” says Roth.

“For us, 35 per cent of revenues are already coming from digital,” says Ashish Bhasin, chairman and CEO, Dentsu Aegis Network South Asia. Dentsu Aegis Network has been on a furious growth streak. In India, the company has acquired agencies in the out of home, search, and experiential and events marketing domains as part of its growth strategy. “To a large extent, I would disagree that 2015 was a slow acquisitions year in India. We had three under our belt. That said, it is difficult to do acquisitions at present largely due to the lack of options. We approach acquisitions when it makes strategic sense. Digital, and I would single out mobile, will lead the business for the foreseeable future,” Bhasin said.

The approach is a popular one among agencies at the moment. “We have always kept digital at the core of our offering. Omnicom Media Group is a young entity in India, and that was probably an advantage of being born into the digital age. Our people understand digital like they understand any other media. We have only grown the offer with technology playing a crucial role and this year, all our tech-driven marketing solution platforms are poised to further grow their presence,” says Sohrabji.

Calling All Tech Giants
Data has become the other critical word for transformational growth in businesses. If there was one trend in advertising creativity that signified 2015, it was ‘data meets creativity’. While that is a space that is lagging significantly behind the potential it promises, holding companies have gone all guns blazing on data. “Earlier this year, we folded our existing analytics practice into a global analytics company set up by WPP — Gain Theory. We continue to invest in Xaxis and have introduced a slew of initiatives in collaboration with Kantar,” says GroupM’s Srini.

“There is going to be a convergence of mobile, social and cloud. We will see almost a third, if not half of the brand marketing budgets, being spent on digital. We already use the power of digital content marketing, 51 per cent of marketers use blogs and newsletters, 92 per cent use email marketing, education is at 63 per cent, retail and e-commerce at 71 per cent and travel at 55 per cent,” informs Bedi.

Digital, data, the rise of social, mobile or e-commerce have all been possible because of the manner in which technology, at its base form, has grown and impacted media. With a population of 1.3 billion, India is a market of extreme interest to global tech giants. or the likes of Microsoft, Intel and Cisco joining in government-led Digital India are very strong steps in achieving the target of connecting the next billion.

Indian media companies are adding to the momentum by launching their own offerings to convert connected users into engaged audiences. Whether it is established players such as STAR India, Zee, Viacom18 or new companies like Arré led by Ronnie Screwvala or Quintillion headed by Raghav Bahl, there are focused efforts in growing the digital consumption patterns and hence creating more reasons for people to spend time online.

Mission Disruption
Holding companies are constantly awaiting the idea that will disrupt their business — mostly hoping that the ideas come from them rather than being imposed on them. Much like technology enabled disruption in the services business, whether it is in the way people order food or book cabs or reserve rooms, it is making a dent in the advertising business as well.

In the future, Vishnu Mohan, CEO, Havas Media Group Asia Pacific sees a scenario in which technology splits the already broken service model and leaves the ad world into two parts ‘platforms’ and ‘instincts’. “Marketers, publishers, regulators plug into platforms independently making most of advertising, algorithmic. Breakthrough creativity will remain the domain of creative geniuses who produce ideas that out-do platforms,” he says. “That genius may be an agency or simply a world of creative geniuses floating online, waiting to respond to a brief in the air,” he adds.

The agency model has already got disrupted and will continue to evolve. “We moved from media de-bundling to emergence of creative hot-shops to now newer tech platforms. Clients need partners who can help defragment the services and simplify things for them. The more disruption there is, the more relevant we become provided we have focused on the right areas and have the ability to help clients make sense out of all the chaos,” says Srini.

For now, it is largely the big global players that are finding any order in the chaos. India is perhaps one of the few rare scenarios of a rich creative market that is low on independents. Balsara’s Madison World has survived the onslaught of the large networks and holding companies but examples such as these are very few and far in between.

As advertising and marketing becomes an industry in its own right in India, it is creating a growth structure that has place for both Davids and Goliaths, for the old and the new, for the homegrown and the international. There is evidence of change where the absolute niche forms of advertising, whether it is behavioural targeting or neuroscience, are coexisting with the good old fashioned film and copy.

The gap between consumer spending and ad spending or between the top holding company and the others or the scope for fresher options or the rise of content, tech, data and such future readying domains all contribute to reasons on why this sector will continue to attract millions of dollars for the next few years.

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(This story was published in BW | Businessworld Issue Dated 30-11-2015)