By Sushma Ramachandran, IANS
The advertising scenario in the country came into sharp focus with the visit of Martin Sorrell, head of one of the world’s largest advertising agencies, WPP. His agency also has a large footprint in India, having bought a stake in the major agencies like Rediffusion DY&R, Grey, and Ogilvy and Mather. During his visit, he made it clear that emerging markets like India and China are becoming increasingly important for multinational giants.
In fact, most major Indian agencies now have MNC stakeholders. However, it is interesting that Rediffusion has turned down WPP’s offer to up its stake in the Indian concern. It seems to be the first case of the tide turning with Indian agencies trying to retain their indigenous edge.
Rediff chief Diwan Arun Nanda is reported to have said that the revenue stream from global accounts is not as high as it used to be. So clearly Indian clients are assuming greater importance. In fact, he went so far as to say that the 60 percent majority stake would be retained by Indian promoters and it was not for sale – “not now, not ever”. This firm statement notwithstanding, the trend of the global biggies virtually taking over the Indian advertising industry is continuing unabated.
There has already been a spate of acquisitions and buyouts as MNC majors like WPP, Omnicom, IPG and Publicis are trying to get a larger presence in this country. Recently, for instance, IPG bought out the balance 51 percent stake in Lintas and has now bought out the balance 49 percent stake in FCB Ulka. The Publicis group is also expected to buy out Saatchi and Saatchi where it held 80 percent stake till recently. In addition, WPP has merged its two group agencies, Bates and David, in India. In fact, it looks as if the era of wholly owned or majority-owned Indian agencies may soon be over if these acquisitions and mergers continue in the medium term.
The question is: is this such a positive development for the Indian ad scene? On the plus side, most ad agencies expect revenues from global accounts to expand in the coming years. On the other hand, Rediff has argued that the big revenue streams from international accounts are now decreasing and revenues from Indian clients are on the rise. Ad agency insiders feel that being completely dominated by the MNC ad agencies could well spell the death knell for desi-style creativity. Though even global agencies give a great deal of creative freedom to their regional subsidiaries, there are many areas where ads are virtually clones of the ones devised by the parent concern.
Besides, there is an increasing feeling that the competitive edge of Indian companies will gradually decline as most agencies virtually become sister companies. WPP, for instance, has a stake of about 50 percent of the Indian advertising industry. There is thus a virtual monopolistic situation and the essential element of competition is slowly being removed from the Indian ad scene.
These issues are rising to the fore even as the Indian advertising industry is growing rapidly at 20 percent annually. Estimates are that the average ad expenditure by the top 10 firms listed in the stock exchanges has risen by 10 percent. WPP alone, according to Sorrell, has a turnover of Rs.10 billion in India and employs over 6,000 people. Even so, advertising remains at only 0.4 percent of GDP compared to other fast growing Asian economies.
Sorrell, however, concedes that the rapid growth of Indian industry is really by Indian companies, be it the Tatas and Ambanis or Infosys and Wipro. In fact, educational institutions and real estate are considered to be among the drivers along with telecom and automobiles for robust growth in the advertising industry.
Rediffusion’s turning down a stake hike by its MNC partners comes at a time when the indigenous industry has virtually disappeared under the onslaught of global players. There was a time when most Indian agencies were owned by the promoters but this situation has now completely changed. Does Rediff’s attitude spell the beginning of a new trend? Difficult to say but there is no doubt that it is high time that ad agencies recognised that Indian clients are growing increasingly global and it may be worthwhile to retain their intrinsic indigenous character.
(Sushma Ramachandran is an economic and corporate analyst. She can be reached at [email protected])