Always on lookout for partners who make us future-ready: GroupM CEO
GroupM CEO C.V.L. Srinivas on the launch of its digital agency in India, slump in TV ad spending and the challenges media agencies face
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How do agencies and brands face challenges in the age of disruption? According to C.V.L. Srinivas, chief executive of media agency GroupM South Asia, the answer lies in modernizing traditional agency models, adapting technology and investing in diverse talent.
On the sidelines of Zee Melt 2016, a media and marketing event held in Delhi on 26-27 August, where he spoke about Agencies of the Future, Srinivas narrates the launch of Essence, GroupM’s digital agency in India, slump in television ad spends and the challenges that media agencies face today.
Edited excerpts from an interview:
GroupM acquired global digital agency Essence last year. Why did it take time for it to launch in India?
Given that India is opening up a lot more to digital advertising, it was the right time to launch the agency now.
GroupM acquired Essence last year, making it the fifth agency of the group globally. Essence is a pure-play digital agency with focus on performance marketing, an area we wanted to get into. It complements the strength and skills, as a group, we already have. Together with Essence, GroupM will have the most complete suite of digital services under one roof.
Are there more acquisitions in the pipeline?
We are always on the lookout for partners who make us future-ready. There are few other discussions which are in the play in the areas of data analytics and digital media. However, nothing is concrete yet.
Television advertising has slowed down this year. Do you think there will be a correction in GroupM’s forecast ‘This Year Next Year’ report?
Post-April, we’ve seen a sudden drop in the spend of the e-commerce sector. Frankly, it happened much sooner than we expected. We predicted 15.5% growth rate, while several other studies predicted a much higher number.
Since we were more realistic in our prediction, we don’t see a major drop from 15.5%, but we may be a percentage or so lower.
While e-commerce firms are a big contributing factor in overall slowdown in the growth of traditional media spends, some other sectors are also being cautious; FMCG, for instance, has been relatively more cautious.
Auto, on the other hand, has bucked the trend with decent ad spends across media platforms. Banking, financial services and insurance and government also continue to spend.
However, the upcoming festive season, a steady monsoon and few state elections slated for next year will see a spurt in advertising later this year.
There are enough reasons for us to hope for a good year. I think the Indian adex (advertising expenditure) is like Indian cricket team: there’s always someone who stands up and fires if several others flop.
How has digital media performed so far?
We put out our forecast This Year, Next Year report in January this year, basis which we said the digital would grow between 45-50%. The figure was for January-December 2016 versus the same period last year.
Digital medium has not disappointed with the data for the first six months being broadly in line with our projections. We are optimistic that we will end the year on a high in terms of digital ad spends growth.
Has traditional media spend moved to digital?
In certain cases, it has and in others, digital is just helping to expand the advertising market.
We are not seeing large scale shifts; digital in India is still less than 12-13% of the total adex.
Television will continue to be a strong medium in the foreseeable future given that it is still a cost-effective medium to reach out to mass scale audience.
Print, on the other hand, continues to grow except a certain section which is under pressure due to digital. It is largely led by the growth of regional dailies which is in double digits. It is also because of innovations they have done with their product and marketing strategies extending value to brands in the form of local events and activations. Other media like radio, outdoor and cinema are growing as well.
A lot of these mediums are getting on the digital. The print publishers are extending their brand on digital; television is already there with the over the top (OTT) platform, digital audio is taking off in a big way. Soon, it will be difficult to draw a line between traditional and digital spends. As a media owner, if you build a strong brand with a loyal following of readers or viewers, the brand can become format neutral.
Mobile is being touted as the next big thing in advertising. How is GroupM beefing up its capabilities for the medium?
Digital today is almost all mobile. India has become a mobile-first economy and at GroupM, our planning and strategy is mobile-first. We had set up a mobile marketing division in collaboration with MadHouse in China along with a Centre of Excellence in mobile marketing more than six years ago in India. This has helped in gaining insight and understanding in the space. Last year, GroupM also helped incubate Mobile Marketing Association (MMA) - a global body which evangelizes mobile medium in India. MMA India board is being headed by D. Shivakumar chairman and CEO, PepsiCo India with a representation of advertisers, digital media and content companies and agencies.
Are the ad spends on the mobile medium still minuscule?
As per our estimate, about half of the spends in digital media are going in mobile. The growth rate of mobile is also 2X of overall growth rate of digital medium. We see mobile becoming 70-80% of the total spend on digital.
There is a lot of innovation in mobile be it in terms of content, technology or measurement. However, the challenge is we have a very fragmented ecosystem with many players coming in. We are trying our bit to streamline things for our clients. Apart from MMA, we also have our partner ecosystem to take cutting edge solutions to our clients.
What are the key challenges that media agencies face?
First and foremost, there is still a mindset among most advertisers that they need to evaluate their agencies basis the cost efficiency of their media plans. There seems to be over-emphasis on media efficiency often at the cost of brand value. There is a danger of operating with mental models of past.
A great example of how brands are going beyond traditional ways of creating value is Hindustan Unilever and Mindshare branded content campaign ‘Six Pack Band’ for Brooke Bond Tea which also won Grand Prix at Cannes, the highest recognition in advertising. It was a fantastic amalgamation of creative, planning, production and media strategy.
Talent is another challenge - even though we are a media agency we need creative minds, people who understand content, data and analytic resources.
Any interesting advertising media trends that you can share with us?
The first is mobile gaining prominence in media strategy discussions and ways to build effective campaigns for the medium. Building a strong feedback loop in this day and age of strong accountability, clients are pushing us to evaluate campaigns in real time so that course correction can be taken.