Ad-dendum by Mukul Shrivastava: Is your brand out-of-home?

Published: January 19, 2016 12:28 AM

Incorrect and unethical practices in the M&E industry have resulted in inflated costs and caused significant loss of profits as well

Out-of-home (OOH) is one of the four key pillars of the advertising market. Given the superfluous budgets brands allocate for visibility through this avenue, there is a thriving market sustaining these spends. This has created a complex supply chain which is quite fragmented in India. This could pose a huge threat, as it creates a lack of accountability for the funds being pumped into this medium. Furthermore, with the infuse of digital coming into the fray, this market is bound to see an upsurge with newer models of display and technology.

A differentiated business model

Creative fields such as advertising are distinguished by a slightly different business model due to the sheer fact that deliverables, as well as talent, cannot be standardised. The demand and supply dynamics in creative services would vary depending on the requirements of the brand. This is because it needs to have the right fit and apt messaging to attract a specific audience, as opposed to picking the most cost effective option in other sectors.

While this may be a good justification, any sector may struggle to function appropriately without suitable controls in place. This is particularly important as the chain between brands to their targeted audience is peppered with other stakeholders, including third parties and/or middlemen. The fast-paced nature of business, demand for prime coverage areas for targeted outdoor display, coupled with limited available options, can inadvertently allow third parties involved to misuse their power. Such a scenario can lead to the rest of the stakeholders taking a similar approach while conducting business.

According to a survey conducted by the EY Fraud Investigation & Dispute Services on fraud in the M&E space, 98% of respondents believe that incorrect and unethical practices in the M&E industry have resulted in significant loss of profits and/or inflated costs. To avert several layers of negotiations and potential roadblocks, agencies can end up resorting to layered agreements with these third parties who possess the requisite expertise. In many cases, there are little checks to evaluate the ethicality of the entity being roped in. These gaps can lead to cases of irregularities such as bribery, corruption, kickbacks and illegal payments.

To curb the menace of corruption in the industry, some states in India have stopped giving fresh permits for outdoor advertising. This has resulted in an increase in the number of illegal hoardings and billboards, and the state thereby ends up receiving lower revenue. Such actions only result in a loss of opportunity for both the state and the industry.

Learning lessons from the global landscape

Globally, the outdoor advertising space has also fallen prey to the dubious activities witnessed by brands. In an effort to mitigate the growing risk of corruption and illegal advertising, there have been several measures undertaken to arrest such instances. In South Africa, the city of Johannesburg has made outdoor advertising rules more stringent with a view to prevent loss of revenue which has occurred due to illegal outdoor advertising. They have initiated criminal charges against the owners of the premises, the advertising agency, the advertised company and key individuals for instances of illegal advertising. They have classified this modus as ‘building hijacking’.

In the US, California has begun responding to complaints of illegal outdoor displays, by designing a law to track down illegal advertisers. These include those who potentially evade obtaining licenses or paying rent to premise owners or the authorities, to reach out to the general public. The state subsequently imposes additional penalties.

The path ahead

In India, outdoor advertising has been seeing an interesting run, with some of the best displays of creativity. With the next wave of growth set to come from digital, it is expected to scale up significantly in its new avatar. From a business perspective though, this sector needs to be more regulated as it has many opportunities waiting to be explored. In 2014, the Punjab cabinet approved the Punjab Municipal Outdoor Advertisement Policy–2012 to ensure
that outdoor advertisements do not create any traffic problems. The policy also tried to ensure more transparency in the auction of spaces pertaining to outdoor advertisements.

In the national capital, the Delhi High Court has directed municipal authorities of the state to remove illegal structures that display political and commercial advertisements. The court said that it was a violation of the state’s outdoor policy. In 2015, the Delhi Municipal Corporation introduced the Outdoor Advertising policy of 2015, with the aim to boost revenue and curb the losses borne by the state’s civic agencies that amounted to over Rs 100 crore. This was all a result of illegal advertising.

While these changes are taking place sporadically, there needs to be a more holistic approach for ethical conduct to echo through the outdoor advertising industry.

The author is partner, fraud investigation & dispute services, EY

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