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Whither Advertising Agency?

The unfortunate erosion of advertising agencies in India


AS a college student at the University of Delhi, I always looked at the world of advertising as a factory for building dreams. Ads fascinated me and hence I had a curiosity to know more about the people who created them and ensured that they were seen by many. I also was one of the fortunate ones to have joined the profession in the late1980s. This was after spending close to five years at an esteemed media organisation, which also is an important stakeholder.

My joining an advertising agency did not please my father. He was a pathologist by profession and felt that agencies were dependent on their clients for growth and, hence, would always be dependent on the client’s growth curve. In his definition, it was the life of a parasite which always depended on the living body for its survival. He strongly felt that an agent’s job was not for the educated and thus would always lack respect. It would be the first profession to get negatively affected in trying times. He could not have been more right, as I learnt in the coming two decades.

However, then, neither did I like this description nor did I acknowledge this reality till the turn of the millennium and till we hit the 21st century. This is my story of the profession that has moved from centrestage to dimly-lit backroom.

The 1980s
It was the golden period of the advertising business. There were iconic advertising companies, like HTA, Clarion, RK Swamy, Chaitra and OBM. These were most sought-after destinations for the youngster with integrity and ability. As a result, most of them landed up at the prestigious business schools like IIMs, FMS, and XLRI on Day One to hire the brightest. Clients listened and respected the agency as a communications specialist. All these agencies had managers of Indian origin
heading them.

The Business Model
It was clean and transparent. There were three stakeholders—the advertiser, the agency and the media house. The formula was simple. The client paid for the media space, and the agency’s entitlement was a clear 15 per cent of that media space. This too was doomed to change for the worse, as only then could the West benefit.

Market size

ALL government businesses put together should constitute almost half of the advertising business in the country. Last year, estimates of media investments alone would be greater than Rs. 35,000 crore. If the paid media investments are included, along with the investments needed to create these, the figure would be close to Rs. 50,000 crore.

Advertising benchmark

THE normal benchmark of advertising investments in any developing economy is around 0.5 per cent of the certified GDP of the economy. Any figure higher than this indicates an emphasis of communication in persuasion. This year sees the ‘Olympics of Democracy’—with Lok Sabha elections being held this year, the figure should be significantly higher.

Top mergers and collaborations in the last two decades

  1. HTA with J Walter Thompson
  2. TSA with McCann Erickson
  3. Mudra Communications with DDB
  4. RK Swamy with BBDO
  5. Anthem Communications with TBWA
  6. OBM became Ogilvy
  7. Chaitra with Leo Burnett
  8. MAA Communications with Bozell group
  9. Everest with DYR (Denstu Young and Rubicam)
  10. Capital Advertising with Publicis Group Worldwide
  11. Rediffusion Advertising with DYR (Denstu Young and Rubicam)
  12. Trikaya Grey with Grey International
  13. 13. Ambience with Publicis Group

Brand Building
The 1980s and the 1990s saw iconic work on building brands. This resulted in advertising agencies being identified as brand custodians. Many brands were built from the stable of Hindustan Lever, Food Specialities, Reckitt Colman, ITC, GTC, VST and Guest Keen Williams. Brands like Liril, Dettol, Pepsodent, Close Up, Wills Navy Cut, Vimal, Bombay Dyeing, and so on had their heydays in
luring customers logically.

Once the financial wizards took over, they divided the agency departments andmade them independent profit centres. The media department became a separate company and the creative department a separate entity. This was the worst thing that could happen to a creative profession

The Millennium Nightmare
The 1990s saw economic liberalisation and the upsurge in the Indian economy. We were not alone in spotting the light at the end of the tunnel. There were these fair-skinned gentlemen who also saw paradise, as their markets were stagnating for long. These European and American luminaries came with a big reputation. They smelled this big market of close to a billion, which was going to eat, sleep, wear and live a good life. To do this, they would consume products and, hence, there was a mammoth opportunity to make these products and services into brands.

The Modern Mahmud of Ghaznis
History has seen one Ghazni plunder India many times in the past. The difference this time was that there was more than one plunderer. The formula was a time-tested one—create a few privileged ones, divide and rule. Then, showcase the big share of the future and the investments needed for it. This was when the Indian CEO became helpless in dishing out heavy investments in technology and getting quality manpower from abroad. This was the hook used to get big companies and their brands, who were to enter the shores of India.

Changing attitude of MNC agencies towards government businesses

GOVERNMENT advertising was earlier considered monotonous and boring by advertising specialists working in blue-chip companies. The reason: the key decision-maker was a bureaucrat, or a technocrat, and they felt that he neither had the skill-set for understanding consumer minds nor did he have a creative bent of mind. Also, the bureaucrat never had to look at a balance sheet and, hence, was not accountable. But this has changed in the last decade and all top advertising agencies today bend backwards to solicit government business. This has resulted in smaller agencies losing their government clients and many of them shutting shop.

Key questions on government advertising

DO oil and power companies need to advertise other than tender notices? Do nationalised banks need to advertise? Have they been persuasive in selling any of their services? Can one call them competitive? Is any nationalised bank chairman responsible for a balance sheet? If you look at these 4-5 categories alone, the media spends today would be to the tune of thousands of crores of rupees.

The Financial Wizards
Every good agency worth its salt had an expatriate on its payroll. This gentleman had always flower petals thrown at his feet, wherever he went. He was the one with deep pockets and was also full of authority and no responsibility. This resulted in the financial minds from across the Pacific working out stakes in the Indian agency for them to invest. In most cases, the Indian CEO got less than 5 per cent and the original stakeholders were eased out with nominal amounts.
I saw this transition at two agencies in the 1990s who sold out and became American companies. I worked at these agencies before and after the sale.

The elite, pedigreed interms of education, try the multinational company, or a financial consultancy, ora foreign bank as their priorities. When they fail in each one of them, they are welcomed with open arms in an advertising agency

The Final Divorce
ONCE the financial wizards took over, they divided the agency departments and made them independent profit centres. The media department became a separate company and the creative department a separate entity. This was the worst thing that could happen to a creative profession. Just imagine, in a multi-specialty hospital, if pathology and cardiology departments were separate companies! Imagine what would happen to the patient whose bypass cannot happen as the pathology report has not arrived. This is precisely what happened to the advertising patient, the brand. This brand that was paying our salaries had become unhealthy, or was dying. The left arm did not know what the right arm was up to and, hence, the dissonance and dissatisfaction for the client. This resulted in clients being unhappy with the campaigns and their delivery and thus they moved on to seek better service. This kind of service did not exist and therefore the natural move was to reduce price for the service. Reduction in service made the agency less and less profitable and soon many agencies started to have bleeding balance sheets. This is what the investors were waiting for as the buying price was very low. The sellers sold and the buyers happily bought and this happy marriage resulting out of a divorce was a unique phenomenon.

IN the next span of few years, all advertising agencies known for communication skills had changed ownership. With this came a change of character and other traits. Many Indians in the agencies in the early 2000s lost their jobs as cost-cutting was a norm. All this resulted in the biggest loss that advertising agencies were proud of—the happiness quotient.

No happiness, no quality talent; advertising was no longer a desired destination for the youngsters anymore. The business schools never gave advertising agencies time on the first 2-3 days and thus they ceased getting the best talent.

Now a Default Profession
This has been the final blow. The elite, pedigreed in terms of education, try a multinational company, or a financial consultancy, or a foreign bank as their priorities. When they fail in each one of them, they are welcomed with open arms in an advertising agency. The reason is simple; advertising, sadly, has become a business of perception and content seldom matters.

Who Lost Out?
All the significant agencies worth their salt have been sold. So, almost three-fourths of our advertising is owned by the western world.

From a profession with a halo and pride to a business with heartaches and headaches…It is imperative that the professional and the profession understand their real worth when setting a price for self

The ones that have not been bought, will never be bought as they are the suitcase agencies—the agency created by the owner-driven client, who believes in the in-house agency so that advertising investments stay at home.

The last would be the agency that only has government clients and no one has any control on them as they are headed by bureaucrats who move every two years.

The Learning
So, where has this brought us? From a profession with a halo and pride to a business with heartaches and headaches. In hindsight, it has not been a pleasant journey. So what is the lesson? There are many—be careful of the growing gross domestic product; controlling one’s greed is essential, else there will be many likely to exploit this trait. It is imperative that the professional and the profession understand their real worth when setting a price for itself in the mandi. Lastly, and most important, always listen to your father. Sadly, we realise the pearls of wisdom when they are no longer relevant in our lives.

The writer is a seasoned advertising professional and currently Business Adviser, Melon Media