Call it the great awakening. After decades of the WPP Group ruling the roost with a near 50% share of India’s advertising market, rival global marketing communications holding companies, such as the Interpublic Group (IPG) Omnicom Group, Publicis Groupe and Aegis Group are scurrying to beef up their relatively modest presence, revenues and market share in the world’s second fastest growing major economy.
They’re trying just about everything, including hiking their equity stakes in their local advertising agencies; setting up or buying full-service and specialized communications agencies; getting their companies, which do not already have a presence in the country, to enter it; and rolling in consolidated media-buying units under global banners. Omnicom, for instance, recently set up media company Optimum Media Direction (OMD) to consolidate its media buying operations here.
According to estimates by people in the advertising business, WPP commands about 50% of ad billings in India; IPG, 18%; Omnicom, 12%; Publicis, 5%; and the rest, 15%. The holding companies themselves do not publish such details and did not provide any numbers.
These firms are attracted to India by a market that just cannot be ignored any more. Advertising billings in India are estimated at around Rs20,000 crore a year—and growing at 15%—by people in the business. And, the market looks set to grow. Spends on advertising in India are barely 0.5% of gross domestic product (GDP), compared to 1-1.3% in mature markets. “As India actively integrates with global markets, there will be phenomenal growth opportunities in revenue and profit. This is, perhaps, why so many global advertising networks are investing in India, either organically or through acquisitions,” says Pranesh Misra, COO, Lowe Lintas India Pvt. Ltd, an IPG agency.
Pranesh Misra, COO, Lowe Lintas India Pvt. Ltd, an IPG agency.
“There’s a chance to invest right now in Russia and Brazil, China, India (BRIC), which will pay off big over the next five years,” Publicis CEO Maurice Levy recently told international media.
“India is a high growth market for Omnicom. We are very much in an investment frame of mind,” adds Michael Birkin, president, Omnicom Asia Pacific.
Holding companies and their member advertising networks have been in the news in India recently, with aggressive plays for acquisitions and announcements of expansion plans. Media reports have said that Publicis Groupe is buying the New Delhi-based Capital Advertising Pvt. Ltd. Capital was earlier courted by rival groups such as Omnicom and WPP, say people familiar with the matter. Media reports also say that Publicis islooking to raise its equity stake in Saatchi & Saatchi India Pvt. Ltd from 80% to 100% by buying the Indian partners’ shares.
Mudra Communications Ltd, in which Omnicom has a minority stake through DDB Worldwide, is starting an ad agency called DDB Mudra (till now functioning as a separate unit in Mudra) which should have a minority DDB equity stake. They hope to win all the global DDB network business that comes in. It will primarily handle DDB business such as the Wrigley Co., Johnson & Johnson Ltd and Hindustan Unilever Ltd, which were handled out of Mumbai, in addition to businesses such as the Anil Dhirubhai Ambani Group.
IPG recently upped its equity stake in member agencies Lowe Worldwide and FCB-Ulka Advertising Pvt. Ltd to 100%. And Aegis (the holding company of Carat Media Services India) is scouting for digital and specialized communications companies and will even look at joint ventures, says Richard Halmarick, Asia-Pacific CEO, Aegis Group.
Richard Halmarick, Asia-Pacific CEO, Aegis Group.
Keki Dadiseth, non-executive chairman of Omnicom India, and Ranjan Kapur, country manager (India) for the WPP Group, are taking forward their best-of-breed strategies. This involves establishing brands across functions, so multinational advertisers can use different agencies under the same holding group for mainstream advertising, digital, events, outdoor and media-buying services, rather than going to the competition for some functions.
Holding companies are actually following the geographical trail of their global, big-spending advertisers. “WPP, like other holding companies, came in following multinational brands into South-East Asia. They achieved what they have in this market primarily due to first-mover advantage,” says Ashok Kurien, adviser, Publicis Groupe.
The accounts of many multinationals are being pitched for at the holding company level, rather than at the advertising network level.The groups need to demonstrate an impressive India presence to win such accounts.
They also need to have the ability to call the shots in their local operations—something that can explain the spate of deals, stake sales, and acquisitions. After the government started lifting restrictions on foreign direct investment in advertising from the mid-1990s, Sir Martin Sorrell’s WPP Group picked up majority stakes in its agencies. Today, it has a 74% stake in JWT India and Ogilvy & Mather India Ltd and 81% in Contract Advertising India Ltd.
In contrast, rivals such as IPG and Publicis may have come into the game late, but now have 100% stakes in member brands, say advertising chiefs. “WPP would aspire for full stake in agencies like JWT and Ogilvy only if they felt that the management was toothless or the agency needed revival. In any case, they already have controlling stake,” says Kapur.
Michael Birkin, president, Omnicom Asia Pacific.
Local agency owners have, however, proved the biggest impediment to many groups achieving majority or total equity control. Omnicom may be facing the toughest odds here. Its member ad network, DDB, still has a mere 10% stake in Mudra Communications—the rest is held by the Anil Dhirubhai Ambani Group. And, while media reports have said that TBWA India chairman George John and his partners want to sell their 49% stake in the agency to Omnicom, which currently holds the remaining 51%, the deal is yet to be closed.
Reports have also said that WPP has been wooing Diwan Arun Nanda, co-founder of Rediffusion DY&R Pvt. Ltd, to get majority or total equity control in the agency, which is already part of the WPP network.
It’s always faster to buy than grow business. WPP bought agency networks such as Grey Worldwide and Bates Worldwide globally, and Enterprise Nexus Communications Ltd locally. In a ‘flank-all’ strategy, it also bought specialized companies such as Genesis (public relations), and Ray & Keshavan (design) locally, and is reportedly scouting for other acquisitions.
Many of the new acquisitions on the radar of holding companies are specialized communications firms. These account for almost 50% of the advertising and communications spend of advertisers. “Besides, there are not many full-service agencies left for acquisition. The future is in specialized units,” says Publicis’ Kurien.
Publicis’ strategy, which is not very different from that of other holding companies, is three-fold: consolidation, creation and acquisition. It acquired a 60% stake in Solutions Integrated Marketing Services in 2005.
V. Shantakumar, CEO, Saatchi & Saatchi
“On Publicis’ radar are small and big agencies. Marketing services is growing at 25-40% y-o-y; media is growing at 20-25%; traditional advertising 10-15%,” says V. Shantakumar, CEO, Saatchi & Saatchi, a Publicis Groupe agency. In the case of Omincom, with operational issues with existing partners, its acquisition strategy is clearly in the non-advertising space, says Kapur.
Omnicom will acquire these units locally and import global units. It has already acquired 60% of Gotocustomer Services India, a retail marketing services firm. “We have got a good start with OMD, 100% owned by Omnicom. It is our intention to be the best provider of media services. We have plans of launching our other media brand PhD too,” says Birkin.
Meanwhile, digital communications is witnessing 25% growth in the country and everyone wants a piece of the action. IPG plans to bring in its unit Ansible for mobile marketing; Publicis has Digitas globally; WPP will import 24/7 Real Media, a digital marketing solutions company; Aegis has Isobar (digital media network) in India and will bring in I-Prospect (a search marketing firm).
Gaps in vision
Overall, the going has not been easy for most holding firms here. “The trouble with Publicis is that it bids tremendous amounts of money for acquisitions that aren’t worth that much, such as Capital,” says the chief executive of an advertising firm who did not wish to be identified.
IPG’s expansion strategy is “distracted” owing to problems globally, says Santosh Desai, former president at McCann Erickson India Ltd, an IPG agency, and CEO, Future Brands. “Its agencies like Lowe, McCann and FCB offer both size and scalability. While the first part of the strategy is neatly executed, the big question for IPG is ‘What’s next?’”
Ranjan Kapur, country manager (India) for the WPP Group.
“I don’t think that IPG has any fixed strategy for this market. They are led by their individual brands,” says the chief executive of another advertising agency who, too, did not wish to be identified.
And a recent top-level spat at Lowe India has dented the agency’s image, say ad executives.
Omnicom faces its own challenges here. “Omnicom has a strong clutch of clients globally. In India, they are struggling to get off the ground. The intent is evident but they suffer from operational issues. Big questions: What do they activate in India? And how? It has been over a year since they announced some plans but they are still searching for the right platform,” says Desai.
And Omnicom’s Birkin seems to have his reservations on DDB Mudra, the new agency set up by Mudra. He says that he isn’t sure if a separate agency should be set up to handle international accounts (that were until now handled by the first agency).
“I am not necessarily in favour of this kind of an activity. It’s a short-term tactic and certainly not a strategy that’s going to prevail in the long run,” Birkin adds.
The world’s second-largest holding company. Was founded in 1985 by Sir Martin Sorrell, who took a stake in Wire and Plastic Products Plc. , a UK wire baskets manufacturer, after a search for a public entity through which to build a worldwide marketing services company. Today, it has a presence in all areas of marketing communications.
Full service agencies: Ogilvy & Mather, JWT, Grey, Contract, Bates David Enterprise Ltd
Media companies: GroupM
Recent initiatives: Merged Bates Enterprise and David; integrated Mediacom under the GroupM umbrella; acquired Genesis PR and design agency Ray & Keshavan
Global revenues (approx.) of companies, 2006: $10.9 billion
In 1926, 20-year-old Marcel Bleustein started a modest office in Paris, the first step to a global communications holding company across disciplines. Publicite is the modern French word for advertising. In 1951, he created the New-York based Publicis Corp. and in 1984, Publicis united its agencies across the US and Europe under a single Publicis banner.
Full service agencies: Leo Burnett, Saatchi & Saatchi, Ambience Publicis, Publicis India
Media companies: Starcom MediaVest, Zenith Optimedia
Recent initiatives: Reportedly acquiring Capital Advertising; created a centralized buying unit by merging media brands Starcom MediaVest and Zenith Optimedia
Global revenues (approx.) of companies, 2006: $6 billion
A global media and market research holding group, it’s the parent company of Aegis Media and Synovate (research). Aegis Media owns media specialist brand Carat Media Services, which was created in 1968 in Paris as Carat Espace to become the world’s first independent media agency. Carat stands for Centre achete radio et television (Centre buys radio and television)
Full service agencies: Not applicable
Media companies: Carat Media Services
Recent initiatives: Began Isobar in India; will launch search marketing company IProspect
Global revenues (approx.) of companies, 2006: $ 1.9 billion
Was founded in 1986 after what was called a ‘Big Bang’ merger between ad agency networks DDB Needham and BBDO, spearheaded by BBDO Worldwide CEO Allen Rosenshine. It is the world’s largest marketing communications holding company, with companies in advertising, marketing services and speciality communications, etc.
Full service agencies: RK Swamy BBDO, TBWA, Mudra Communications
Media companies: OMD—Optimum Media Direction, OMS-Optimum Media Solutions
Recent initiatives: Establishing OMD; acquired a stake in Gotocustomer Services India
Global revenues (approx.) of companies, 2006: $11.4 billion
Founded in 1961, Interpublic Group comprises hundreds of communication agencies around the world. In 1954, Marion Harper, CEO of McCann Erickson Ltd, acquired the Marschalk and Pratt Agency to handle competing accounts outside the McCann banner. This was the first visible step in the formation of the first marketing services management holding company—Interpublic
Full service agencies: Lowe, McCann Erickson, FCB-Ulka
Media companies: Lodestar-Universal, Lintas Media Group
Recent initiatives: Hiked shareholding to 100% in agencies Lowe, FCB-Ulka; merged media brands Lodestar and Universal McCann
Global revenues (approx.) of companies, 2006: $6.2 billion