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ADVERTISING Where Have All The Start-Ups Gone? Advertising isn't the first domain that comes to mind when the word start-up is mentioned. That wasn't always the case, but things are different now. Abir Pal finds out why. The Rime of The Ancient Advertiser It's is only appropriate that the most significant start-up activity in the advertising domain in the last two years came from an agency called The Hive. Sushil Pandit, then the National Media Director at Contract, started the agency with an investment of Rs 1,000,000 in 1999. Today, The Hive boasts billings of Rs 6 crore, and lists blue-chip names like Alcatel among its clients. Pandit can afford to be cheery about the future of advertising: ''The market is opening up; consumers are still waiting to see new products; the economy will offer room for start-ups.'' Going purely by The Hive's experience, it should, but, alas, the agency is likely an exception, not the norm. That's a change from the 1980s, when defection capital fuelled the birth of nearly 35 agencies that went on to become big names in the business like McCann (then Tara Sinha Associates), Maa, Percept, and Ambience. Or the first half of the nineties, when it did 19 including IB&W, Triton, Equus. Things were fun. ''Advertising was far more colourful then; it's drearier today,'' says Santosh Desai, Executive Vice-President, McCann-Erickson India. Sorry, Santosh, but it looks like things will get drearier still. The Genesis Of A Widespread Malaise
Circa 2001, TNCs (TransNational Companies) account for over 60 per cent of the Rs 8,000 crore advertising industry. Expectedly, most prefer to work with agencies with which they have relationships in other parts of the world. That, says Bunty Peerbhoy, Chairman of Maa Bozell, will make things difficult for start-ups. ''All major foreign agencies have partners in India. A new agency will have to restrict itself to small Indian companies.'' Transnational companies can't be faulted for preferring their global partners to Indian agencies. Bharat Dhabolkar started his own hotshop Zen in 1991, and sold it to French advertising conglomerate Publicis in 2000. Today, as CEO of Publicis India, he is Mr Pragmatism himself: ''We (the Indian agencies) didn't lose out because we were doing bad work; it's just that the client wanted a lot more-a global network, an integrated strategy, dazzling insights, sparkling media models.'' That desire for more won't vanish anytime soon, and that's bad news for new-born agencies. Human capital is also at a premium. As an industry, advertising has been unable to attract the best and the brightest. ''The industry is no longer as glamorous and inviting as it used to be,'' rues Sandeep Goyal, himself a defector, having moved from Rediffusion DY&R where he was President, to Zee Networks where he is the CEO. The costs associated with running an agency only serve to exacerbate things. Advertising salaries have increased by over 20 per cent over the past decade. And agencies now have to get used to either sharing their 15 per cent commission with specialised media-buying units, or living with a fee-based system. Says Ashok Kurien, Managing Director, Ambience D'arcy: ''Costs in the 1980s were just 5 per cent of what they are today. And the media-income belonged to the agency.''
The costs of starting-up are high, and the returns, not encouraging. ''To succeed you need a well-oiled machinery, not a couple of bright guys working out of a garage,'' says Ujjal Sinha, CEO, Genesis, a Kolkata-based agency with billings of around Rs 20 crore. The start-ups of the past two decades have now become part of the establishment-crowd. Entrepreneurs who built agencies in the 90s, like Suhel Seth of Equus, prefer to think there was a difference between those that were born in the 1980s and those that were, in the 1990s. ''The start-ups of the 80s were built on passion. Those of the 90s also had passion, but they also had a keen eye for finance and strategy,'' says Seth. Still, that didn't stop both sets of entrepreneurs from selling all or part of their agencies to global heavyweights. Seth, for instance, sold a 40 per cent stake in Equus to WPP; Dabholkar a 60 per cent stake in Zen to Publicis. The Art Of Survival The eternal optimists believe there is room in niche specialisations where advertising start-ups can survive. They point to Preeti Vyas Giannetti's brand communications hotshop, Vyas Giannetti Creative (VGC), which was set up in 1997 (last year's billings-Rs 24 crore), and Kiran Khalap's brand advisory Chlorophyll set up in 1999. ''There will emerge two kinds of advertising shops: large full service agencies and smaller outfits that specialise in a specific aspect,'' says Sanjay Sipahimalani, Creative Director, Grey Worldwide.
The actual evolutionary process in the domain will likely be a trifle more complex. Large marketing communications conglomerates are the most dominant species in the advertising-kingdom. These own companies that operate in almost all viable niches in the market. WPP, for instance, has seven strategic marketing consultancies in its stable. Companies like VGC and Chlorophyll may thrive on their own in the short-term, but eventually they will have to ally themselves with one global partner or another. For entrepreneurs like Giannetti who aren't keen on selling a controlling stake to the conglos, there is always the strategic alliance route. VGC has already loosely allied itself with the Indian arm of the BBDO worldwide Network, RK Swamy-BBDO. The fact that there is still some competitive space in the markets for these specialised services-the advertising domain is already over-crowded-should, in theory, catalyse the creation of start-ups. If it hasn't, one reason could be that the business of advertising has changed so much that people no longer wish to start out on their own. Says Mohammed Khan, Chairman, Enterprise Nexus: ''Where is the advertising in advertising? It's more about deals, marketing, and negotiations than the actual creative process.'' Khan, for the record, was part of the start-up team at three agencies, Rediffusion in 1973, Contract in 1978, and Enterprise (now Enterprise Nexus) in 1983. And if it doesn't, it could be because advertising doesn't boast of too many of the start-up types anymore (infotech does; so does WWW). It did in the 1980s, when advertising was the profession to be in; it did, to a lesser extent in the first half of the nineties, when there was still room for small, independent creative hotshops; but it doesn't now. Don't expect to see more Hives or Equuses in the future. -With
additional reporting by Aparna Ramalingam, |
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