Within a span of around 11 years, GroupM has emerged as one of the strongest agency networks in India. Its growth story in terms of scale and size is nothing less than enviable. The latest RECMA suggests that GroupM holds as much as 40% of the Indian agency market. Currently, it has 10 units operational under its umbrella in India. These include five distinctive agency brands, namely, Mindshare, Maxus, MEC, Mediacom and Motivator and five specialist units n the areas of trading, digital, content (entertainment, sports and partnerships), experiential marketing (Dialogue Factory) and analytics (a unit called Meritus). In a conversation with FE Brandwagon?s Anindita Sarkar and Anushree Chandran, CVL Srinivas, CEO, South Asia, GroupM, talks about how GroupM is shaping up as a network and its plans ahead. Edited excerpts:
Could you talk about GroupM?s India operations?
Right up to last year, we divided our business into the core unit (planning and buying through the agencies) and the non-core unit which included digital, trading, content, experiential marketing and analytics. But since each of these units have acquired immense scale, wherein our revenue from the non-core is expected to be greater than from the core business this year, we have decided to make a significant shift, in terms of terminology as well as focus. The non-core is now called the new core because this is the new core of the agency. I think this is the single biggest differentiator between GroupM as a network and all other media agency networks.
What is the biggest focus for GroupM now?
The media industry is extremely dynamic. We have seen a lot of change in the last couple of years wherein the emergence of digital stands as the single biggest change so far. Digital is many ways is taking us back to the early ?90s or even the late ?80s when advertising and communication worked as an integrated business.
A global web index study conducted in March this year shows that those who have access to digital media spend 6 hours a day on digital media versus just three hours a day on offline or traditional media. Now if you look at the increase in advertising spend across different media platforms between 2012 and 2011, obviously the highest increase has flowed into digital. For the FMCG category alone, digital increase was about 43% in 2012 over 2011 while on TV it had increased spend by only 11%. So while the base of digital is very small, the numbers are very significant. One cannot ignore the fact that digital is growing at a rate of 40-50% year-on-year and TV is growing barely at about double digits and print is probably growing in single digits. This trend is obviously going to continue for the next 2-3 years. Digital today is accounting for already 7% of the total AdEx. Very soon it will probably account for 15-18% of the total AdEx.
Consequently, if there is a lot more digital consumption happening, then advertising dollars will also slowly start flowing towards this medium. What this means for our business, therefore, is that we need to start making that shift before it even happens.
Any media agency which has been in this market for 12-15 years, having grown up on doing media planning and buying for TV and print, the single biggest shift in our business is to try and re-skill ourselves and adapt ourselves to the changing environment; to make digital really the focus of the agency going forward. That?s what we have done this year, at least in GroupM.
But are the traditional media planners and buyers trained well enough to handle and integrate the digital service? Could digital work better as an independent service?
There has been an ongoing debate that digital is best understood by the specialists and that digital standalone agencies probably understand and do digital better than any large agency which are more into traditional media. However, the sooner clients realise that digital is not a standalone service but needs to get integrated into the whole, the better it is for them. This is because only then will the overall marketing investments get much better return on investment (ROI). The big advantage that agencies bring to the table is that they provide a completely integrated end-to-end media product to the client. We are already beginning to see a lot of our clients preferring to see digital in-house with their traditional media agencies because it gets a lot more integrated.
Are you looking at mergers and acquisitions?
Globally, WPP has been extremely consistent in its view on acquisitions and mergers. Sir Martin Sorrell too said that if anything is available at the right price, WPP would be interested in it. I think the areas would be the areas of the future ?whether it is in digital or data. In this part of the world, we already have a very decent scale. Most of our competitors are acquiring companies to add to their scale. We do not need acquisitions for scale. If and when we do acquire, it will be to broadbase our skill-sets.
Probably, we have had more partnerships than any other agency over the last 10 years. WPP acquired Quasar and Blazar, the two digital brands which are now managed by GroupM. We also have our partnership with Optimystix which is called MashUp in the content space. We are extremely bullish on mobile. So we have formed a 50:50 partnership with the Chinese mobile marketing company to launch Madhouse in India.
How has the slowdown sentiment influenced media spends?
In the last couple of months, there has been a bit of a negative sentiment in the market across sectors. So, much so that we had recently revised our forecast downwards. The second half of the year, which is July onwards, has definitely seen a slowdown. We had earlier projected a growth of over 7.5% or near-about in the six months from July to December versus the same period last year. But we have revised our forecast now to about 4.5% for this period. The first thing that happens when there is a slowdown is that clients tend to keep themselves away from inflationary media. The other is, there are a lot of other media options which off-late have started delivering and are doing very well for clients. With the negative sentiment here to stay for sometime, a lot more spends will get skewed toward digital because clients now are a lot more comfortable spending in media where they are able to monitor the returns; where the absolute sums of money are not very high.
Additionally, we are also seeing a lot of activity in regional print. A lot of the regional print players are being extremely innovative in term of their offerings ?the value that they are able to provide to their advertisers with the way they are bundling a lot of activations and solutions. Hence, overall it is a good sign because it shows that as a medium, print overall continues to be healthy in this market.
What are the big things that you expect will happen to the various media platforms in the next few years?
Directionally, it would be what?s happening in the global markets. The pace of change, however, would be quite different in India. The rate of growth of mobile and digital is going to be much higher in India than even some of the more mature markets.
On television, there has already been a lot of change in policies ? whether it is on the digitisation front or the regulation of the ad inventory. So, the sector is getting a lot more organised and regulated. Eventually, it will start mirroring TV as it operates in the more mature markets. The benefits of digitisation need to be accruing faster than they are. Hopefully this should happen over the next two years or so which will bring in a lot more robustness in the TV business.
As far as print is concerned, India has been bucking the trend for many years and I think that will continue for some years. The regional print industry is extremely robust. Even for the English press, while the growth numbers are not as healthy as they used to be, the marketing prowess of the players in the English press will keep the medium alive for some more time. Also, it is the bundling of digital solutions with print solutions that will help.
For radio, the phase III licensing brings in a lot more option to stations thereby bringing in a lot more innovations.
Will the 10+2 ad cap bring in a new thrust to branded content?
I do not think there will be a dramatic increase. It would be one of the ways in which both advertisers and channels will be a bit more inventive in looking at opportunities. The challenge of the Telecom Regulatory Authority of India (Trai) ruling is that there is a reduction in inventory and hence, one needs to re-optimise the media investments and budgets within television itself. But the opportunity is to look at other media. There are a lot of media platforms in India which are under-leveraged such as digital, cinema, radio, outdoor and print. So it is a huge opportunity for them.