In March this year, the Competition Commission of India (CCI) carried out raids on major advertising agencies like GroupM, Dentsu, Publicis, and Interpublic Group (IPG) and associations like Indian Broadcasting and Digital Foundation (IBDF), and Advertising Agencies Association of India (AAAI) over cartelisation and price collusion allegations. The $16-billion ad industry has since come under intense regulatory scrutiny. Srinivasan K. Swamy, the newly-elected president of AAAI, spoke to Manu Kaushik on the ongoing CCI investigations and the challenges ahead for the industry. Edited excerpts:
Q. What’s your take on the ongoing CCI probe against ad agencies and associations?
CCI received a complaint from one of the members of AAAI, and ordered an investigation. Their prima facie view was that some AAAI members had colluded on pricing. I think it is a very narrow and simplistic conclusion by the CCI. Collusion on pricing is not a major decision-making point for advertisers. Advertisers pick agencies based on several factors such as strategy, team composition and the ability to do creative stuff. If at all, some negotiations do happen, there would be only marginal differences in the pricing between one agency and the another.
There’s no price fixation that can materially affect the advertiser. The decision of an advertiser is based on a variety of factors. Price is an important factor, but not the only factor. In this business, the price difference is so insignificant that on the basis of prices alone, clients rarely decide to choose an agency.
Q. But there are charges of cartelisation and price undercutting by ad agencies.
Swamy: The bulk of the value is based on what campaign strategy an agency puts on the table. Suppose I buy ad space of Rs 100, I only get to make 2.5%. It is an issue that I think CCI has not fully understood. The investigation is still ongoing; they have not concluded anything. I’m sure that they are going to ask our point of view at some point during the probe.
Q. Audience measurement surveys like BARC are subject to credibility issues. How are you going to deal with it? Also, what’s your plan to revive the Indian Readership Survey (IRS)?
Swamy: IRS pilot study will start soon. Hopefully, once the pilot gets done, the main IRS also will continue. BARC is an ongoing rating system. If there’s something that needs to be fixed, the BARC board is competent to deal with them. Whether we need another rating agency, that is something for the government to decide. It is a very expensive process to have two studies. It is not going to be easy to have people buy two different products in today’s world. It is easy to fix the current issues with BARC. Unless the government chips in to bear the cost of a new measurement tool, I don’t see it succeeding.
Q. How do you plan to deal with talent shortage in the advertising industry?
Swamy: All agencies have their own methods to get good talent. The problem is that we are losing talent to other industries. People who have put in 3 to 5 years in the (ad) business, they get picked up because they are well-known professionals in marketing and communication. They find that the career progression is faster elsewhere. Also, money is a big motivator for young people. Digital companies, broadcast companies, data analytics and AI companies etc. are offering jobs to ad agency professionals. We need to make sure that their career plan is well laid out.
Q. What is the top agenda for you as you take over this new position?
Swamy: AAAI is a matured institution which is about 78 years old. It’s not that I’m going to be looking at fresh issues. Most of the key issues have been dealt with by past presidents. Plus, we have a strong board, and it considers all the priority areas. My role is that of a gatekeeper, and to make sure that we don’t do something stupid to get on the wrong side of the law.
Q. AI is disrupting the ad industry. What’s your association doing to help members stay ahead of the curve?
Swamy: People in the ad world have now woken up to the fact that AI is crucial, and they are using that as a friendly tool. In my own company, we use AI in a big way. There are multiple AI products available in the market which agencies can plug and play. AI is no longer to be feared, it is a friend to be taken on board.