What happens when the chiefs of the country?s biggest media buying agencies become journalists for a day? Following the Ad Club of Bombay anchored Emvies 2010, which named MindShare, Maxus and Mudra as the top three media buying agencies, BrandWagon got R Gowthaman, leader, MindShare Asia, Ajit Verghese, MD, Maxus and Pratap Bose, CEO, Mudra Max together on a rainy evening. And the atmosphere suddenly changed. The three men have been interviewed many times but this is the first time they have put questions to each other. And we put in a few queries of our own. The end result is a perfect medley of serious brainstorm-ing and high jinks. We hope you enjoy reading it as much as we enjoyed putting this edition together. Edited excerpts:
Ajit Verghese: Pratap, you have seen both sides of the advertising business. How different or similar are the challenges in both creative and media?
Pratap Bose: I am going to talk from a client’s perspective. The accountability of media agencies is far greater than it used to be some years ago. Once, a client told us who the brand custodian is. And that’s the problem. Not because the monies are being handled by the media agencies. I think clients want creative agencies to deliver just a creative solution. Because if you ask a creative guy about his opinion on a media plan or media schedule or where his spots are going to come from, he has absolutely no clue. The onus for accountability, ROI, market share, in some cases distribution, has shifted to the media fraternity and not the creative agencies anymore. But again, agencies like Ogilvy & Mather are on the other end of the spectrum. But largely there is a shift in balance. I don?t know if it would correct to say that media agencies have become more powerful but definitely they have become more important in the marketing objective.
R Gowthaman: Ajit, you say that Maxus is positioned to do creative work in the media space. Where do you find the talent?
Verghese: I I think creativity is nobody’s arena. Every human being can be creative. For example, people who are actually making creatives in a creative agency are probably engineers, MBAs. I think over conditioning of our minds in terms of business planning, strategising, actually let the creativity go. I think we should let go off too much thinking and pick up insights from things around us. I was reading about Piyush Pandey and his clients say that the ads he has made are experiences or incidents that have happened in his family or friends circle. And there is not too much brand thinking. That is what Maxus is trying to encourage. There are enough chances that we can challenge creative agencies and think of ideas that can become media neutral.
Bose: What’s next for MindShare? Do you think you are hitting the limit?
Gowthaman: The challenge for MindShare is uniquely different. Every single category is blocked. We have pretty much filled up all the categories in which we could have won businesses. One is organic growth in some of the categories. But MindShare’s journey is more in the up-the-value chain segment. We have invested in ROI (return on investment) and high-end analytics for our clients. That may not reflect in the billings but definitely that is one route of growth. Also, because those research reports are extremely confidential for clients. So we can?t even talk about them. The second area of focus is digital. We are ahead of the industry in this space and have done some good work. So we have invested in analytics and digital in the last 18 months.
BrandWagon: Since you are talking about digital, do you think the pace of growth of digital marketing in India is not fast enough?
Gowthaman: There are two fallacies here. One, nobody knows the real base. There is a base in television which is billings. What is the billing equivalent in the digital space? Nobody knows it. And before you realise that you have to do search, social media, display, some 14 more other initiatives have come in. Suddenly you are talking about Twitter, suddenly you are talking about something else. So there is no base for you to even compare and say there is growth. So I don?t think we can look at digital as one of those tools where I can show growth year on year. Second fallacy is digital is an optical medium. It is not a medium like print or anything else, unless the client believes in the medium as ‘through the line’ and not ‘above the line’ or ‘below the line’, because the money is not coming in lieu of TV or print. It is coming from the overall marketing budget.
Verghese: At a lot of these forums people talk about digital being the next big thing. Some of it is true. But people who say that digital will kill traditional media like print or television are being fanciful. Digital will grow. But we need to understand two things. One is the different Indian consumer segments. Look at SEC A, A1. They are behaving like a UK or a US market where digital is 40-45% penetrated. You can reach out to the audience. There is a whole middle segment and a rural segment where traditional media itself is finding it difficult to reach. You can?t even reach rural India fully through TV.
Gowthaman: True. There are 50 million homes which don?t have television.
Verghese: So that’s part of the metrics by which everyone keep saying that digital will grow. But one must also consider that there are markets where TV has not even reached, how will digital reach? The other part, like UK and US, is where digital is anywhere between 37-50% in terms of ad expenditure. Please understand it is actually a uniform language in English. So if you look at things happening in the US digitally, that can?t happen to India also. Here there are 27 languages. So unless we go to that vernacular segment, reach will always be an issue. Even in China the penetration is higher because their biggest search engine is not Google and it’s in Chinese and not in English. I believe with 3G and other technologies coming, we will cross that gap in 2-3 years time. And we will see a bigger leap.
Bose: My sense is it will always be a minimum spend in India and is never going to become 30-40% of the media budget, at least, not in my lifetime for sure. I think it will take at least another 4 years for it to become 10% of the client’s spend.
Verghese: Gowthaman, with an immediate competitor within the group and with so many agencies to compete with in the industry, what is MindShare’s biggest challenge?
Gowthaman: I think everyone is competition. I keep telling my team members that we have everything to lose and nothing to gain. Both Ajit and Pratap can give me a good run for my money. Therefore our strategy is uniquely different. A significant amount of effort goes in defending the businesses, but not in a defensive way! It’s not that I am not scared of losing a business. We have to make sure that the exit barriers and the entry barriers are so strong which essentially means that our approach is to become the trusted business partner to our clients. Secondly, if I slightly open up the canvas, MindShare has got competition in multiple sectors. The competition is not only with media agencies. We are now competing with analytics companies. I feel that even agencies like Naked Communications and Strawberry Frog are our competition. Therefore the best way is not to get paranoid by the 30-40 competitors around you. Keep your house in order. Ensure that you are the best servicing agency so that the benchmark is not other agencies. Benchmark has to be your own self.
Verghese: How do you see it then, Pratap?
Bose: For us everything is diametrically opposite to that of MindShare. We have everything to gain and nothing to lose. Mudra Max is structured very differently from most media agencies. It’s not as big as other agencies. Our format encapsulates the entire gamut of servicing. We are more profitable than most agencies. Our margins are much higher than the media business. We have at least 30% margin. The critical issue is the mainline media business. Our biggest problem is that we are winning but we are winning small. We are not winning the Rs 40-50 crore accounts.
We have been winning Rs 5-15 crore accounts at regular intervals. I think the problem is a sense of perception about the agency. My boss keeps telling me that we need to compete with GroupM and I keep telling him they have a 10-12 year head-start. Also, we are not a part of any global network and that is an issue. Madison might disagree. But I believe that in the future, buying will become a commoditised business. And clients would have no hesitation in outsourcing buying, because that will become a common denominator or a common factor. I believe most of the big agencies will consolidate. I think in the next 4-5 years the market will evolve.
Bose: I have a GroupM question here. Do you think cartelization is possible in India? There is a lot of talk in the market on how do you capitalise on the lion?s share of the digital market. Even I have got offers saying let six of us come together and do a deal. Now if they can do it for digital, they can do it for other media. So does something like that worry you?
Gowthaman: There will be an attempt. Because there is nothing wrong in coming together in a form like GroupM is today. We are always ready for any such challenges in the market. At the same time it’s not just about ‘six of us coming together’. It is a lot difficult to execute. Strategically it’s very easy to put numbers but execution will be a huge issue. I think execution of this kind will take at least another 5-6 years. But I don?t think that will be the focus going forward. I think focus will be on individual alignments. Look at MindShare. It has 14 teams and they are competing with each other as well.
Verghese: I don?t think there is any point in spending sleepless nights about what others are doing. If you see the way GroupM is managed, the agencies under it collaborate where it can be done. Like finance, admin, incubating new practices and stuff like that. And on the frontline we are actually competition. So there is a combination of collaboration cum competition. And I am surprised that it has not happened in the existing groups. Therefore, I do not know how feasible it will be for individual agencies to come together and form another group.
Bose: But is there any other market where you have as high as 45% market share like in India?
Ajit: While you might think 45% is high, Martin Sorell must be thinking of how to make that 70%.
BW: Since Emvies is the trigger for this interaction, tell us how you all managed to keep it clean? No scams, no controversies, only genuine work.
Ajit: I think we are not giving enough masala (fodder) to the print and TV industry to create controversies (laughs). I think the only competition we have is about the work. And the kind of presentations agencies make. And I think that is enough masala for us to fight.
Gowthaman: We are extremely proud of this fact. We are lot more closely knit amongst ourselves. Despite all the contro-versies and leaks around Goafest, we were clean. We are considerably a serious bunch of people. Not a bunch of kids for sure.
Bose: I think the problem with creative awards is that there are too many people judging it. If you look at creative Abbys there were about 200 judges. And it sort of becomes fashionable to tell your friends about the winners. I think people should get more serious about it and stick to the rules.
BW:Which one is a bigger award? Media Abbys or Emvies?
Bose: I think Emvies is bigger in terms of stature. For Media Abbys, a bit of sheen is taken away because it’s clubbed with the Creative Abbys.
Gowthaman: I think the structure of the two awards is very different. It’s built on the Cannes Lions model. The primary thing is creativity. Emvies is different. It’s lot more rigorous. To that extent, yes Emvies will take lot more pride. Look at Media Abbys, there is no media agency of the year award. At MindShare, we take them as two different awards. At Goafest, we enter every single piece of good work. But for Emvies, internally we do a lot of filtering before sending the entries.
Verghese: I feel ideally they should have just one media award. I think they should just combine effectiveness, scale, rigour, strategy, creativity, all, in one award. Because I think the amount of time and effort we spend in entering for these awards are a wastage of energy.
Gowthaman: Adding to what Ajit just said, next year Emvies will happen in March and Goafest in April. So it won?t be interesting. Both awards will be back-to-back.
BW: Last year, Emvies received a whopping 450 entries despite it being an economically rough year. This year it was down to 397. What is the reason?
Bose: If you want an honest answer, then for bigger agencies it?s been a year of stress. The question is whether you go for a Rs 300 crore pitch or make arrangements for an award show. So some agencies have put business in the front row. And there has been a lot of account movements in the last 5-6 months. However, the quality of entries were at par.
BW: Are you happy with the current metric system available for the media industry? There are hundreds of smaller markets which no one is measuring and interestingly TV is the only source of entertainment in these homes. How are you addressing this issue?
Verghese: We are finding it difficult to measure TV. Though I must say that digital is better suited for measurement. Yet we don?t have web analytics or web measurements coming in. And India is going very slow on web measurement. We have some responses, we have CPM (cost per thousand impressions), CPC (cost per click), etc., but there is no metric to do a comparision with multi media. Today for television, we are 7000 metres, going to 17000 or maybe 27000 metres. It’s a big dilemma that marketers or agency people in India today are facing. India is one of the cheapest media markets in the world. And you are getting good returns because of the absolute population. Costs are going to increase for research and marketing and reasonable amount of growth needs to happen with that. But cost will increase much more than the growth that is going to happen because we are the cheapest market in every which way.
Gowthaman: I think clients need to spend more on research. Look at any other developed market ?the amount of money clients spend on research is huge. Here it is not even 0.2-0.3% of the GDP. I think the time has come for us to redo the whole thing. Bring in some more clients and advertisers onboard to invest in research. But we will always struggle to find a head way in this.
Pratap: If you go back to the old days, when media used to be with creative agencies, servicing people used to study smaller markets by staying there or spending time there. Unless you study the pulse by being on the ground it is quite difficult. We are not doing that anymore. We are just sitting in our offices and relying so heavily on data which is collected any which way.
BW: Do you support the idea of the information and broadcast ministry coming up with its own metric system?
Gowthaman: It has to be a neutral body because there are multiple stake holders. And it has to be distinct from any broadcaster and that includes Doordarshan as well. It should have representation from all the stakeholders and only then it can work.
Bose: Any research today has to be made neutral. So like Gowthaman said that if all the stakeholders are involved and the metric is accepted not just by the media but by the clients as well, only then it will hold any substance.
Verghese: I completely agree with this. We are seeing how the Commonwealth Games are being held, how sports bodies are being run. These are all run by institutions set up by the government of India. It has to be professionally led. It has to be transparent. I don?t know if it will work if it?s solely run by the government of India without including all the stakeholders.
BW: Finally, what are the challenges?
Bose: The canvas is changing. I think the industry will evolve. My worry is how can media extricate itself from its position as an industry. It’s very difficult to pull away from the whirlpool that it’s already got into. The margins are coming down. We are working under one per cent commission. How low can you go on? The biggest challenge is the paucity of generalists. Going forward, and I am taking a 3-4 year perspective, nothing prevents a creative agency from running the media buying operations if they want to do it. Because data is available, the prices are all available, but hopefully pricing will become more regularised. The future of media agencies will depend on their ability to offer business solutions to clients. And therefore media people will have to become generalists.
Gowthaman: People are our assets. I don?t think we have more than 2000 people in this industry today. The inflow of talent is not proportionate to the growth of business. For every sector, there is a governing body. They are there to promote the sector and the companies have an agreement among themselves regarding things like rates, pricing, etc. Somewhere down the line we need to have a media industry body that promotes the business, brings in talent, which will have rules of engaging. And if we do not attract talent collectively then all of us will suffer two years down the line.
Verghese: I believe the biggest challenge for us as an industry is moving up the value chain. And yes, the talent needs to be there, the investments need to be there. Focus on business solutions needs to be there. If media does not move up the value chain to CEO level discussions to address issues like whether they are willing to pay the price for a special service, if they are willing to invest more on talent, etc., then it will affect their businesses also in the long term.