Following the Interpublic Group’s (IPG) successful acquisition of the 51% stake in Lintas India Pvt. Ltd it didn’t already own, and announcements about its desire to increase its stake in FCB Ulka Advertising Pvt. Ltd, Stephen Gatfield, executive vice-president, network operations of IPG, and CEO of Lowe Worldwide (the communications conglomerate’s advertising business), spoke to Mint on why India is an important market for the group. Edited excerpts:
IPG has been in India for over a decade, why consolidate your presence now?
The local stake (in Lintas) was essentially held by a trust. And the trustees are people that are independent of the organization and their main prerogative is to ensure that the trust works for the benefit of the employees of Lintas India Pvt. Ltd. In order to satisfy the trust’s willingness to sell that stake, we had to develop a very comprehensive plan about how we would expand on that opportunity that we saw, that would come with outright ownership of Lintas India (which also owns advertising agency Lowe India).
The reason we are doing this now... is that a lot of things have converged at the same time. First of all, take Unilever (Lintas’ top client) as a case in point. Unilever’s own global market organization has changed dramatically over the last two years. And so the use of hubs and leadership centres is a key part of the way Unilever is now organized. And India is an essential ingredient to that. Again, the rapid rise of communications technology has given rise to more and more data.
This means that the management of data in support of marketing decision making is increasingly important. As a consequence of which, working with a country that is rich in people who are at ease with statistics, with manipulation of data, who understand information, makes perfect sense. You have all of those considerations in play, allied to fact that development of India’s own domestic market place means that some of the inbound capabilities that we could bring to India are going to be fundamentally important for Indian clients.
So it may be fair to say that IPG could have done the deal with strategic rationale anytime in the last two years, but that is certainly not true to have done it with strategic rationale anytime in the last 10 years.
You have announced a decision to invest in a 24-hour set-up in Mumbai? Why?
The extraordinary reality of the world that we are in today is that there is just more media, an awful lot of media putting (out) a vast amount of content to be consumed. The most important challenge for an organization like Lowe to take on is the ability to produce content in long form, short form and in all the variants and platforms required.
To do that and to do that in a cost-effective manner, and efficiently and at the level of creativity we have started, we need to build infrastructure which is different from the infrastructure you would have created when you were simply producing analogue advertising and placing it in the published and broadcast media.
To us, 24-hour studios are one way to ensuring that we can operate with the velocity as well as the capacity to create, and create affordably in the world we are addressing today. Obviously, both the skill set we have got here and the capabilities that surround the technologies we need in that area drive this decision.
There has been a slowdown in the overall growth (of advertising) in mature markets such as the US and Europe. Which regions will emerge as the new growth drivers and why?
You have to make a distinction between the mix of media and the market developments that are driving media consumption. What you most certainly are seeing in mature markets is low growth in the traditional broadcast and display media, but rapid expansion in Internet and mobile advertising. In developing markets such as India, we are seeing media consumption rise with the gross domestic product and per capita growth. This growth is reflected in a more traditional mix that includes print and broadcast. For instance, there has been an explosive growth in the print media in India. But as technology penetration increases, we fully expect to see similar growth levels in technology-enabled media as well. Especially in a country such as India, we expect the mobile, Web and location-specific communication you can do using mobiles to be particularly powerful, partly because of the sheer vastness of the geography of India.
Where does India figure in the global scheme of things for IPG?
India, firstly, is a very important growth market in its own right and clearly, if you believe the projections for it and its rankings in terms of world GDP over the next 30 years, it is going to be a very important top 10 global market. The other thing that is critically important about India is that it is a unique developing market. Because unlike China, unlike Russia and unlike Brazil, it has a rich and sophisticated history of advertising, of technology, of management science education—some of the world’s best educators are Indian.
For those reasons, India is much more than just a big growth market—it is also a very high competence market and one that really has a richness of talent that you simply don’t find in many places.
I do think what is interesting, when you think globally about an organization, is that you start wanting to use inherent strengths of particular countries as you deploy your capabilities.
So if you look at analytics in India, if you look at technology sophistication in India, that is what companies should, quite naturally, be doing here.
Much as when you would go to Scandinavia—home to some of the most successful advanced companies such as Nokia—you would be surprised that people there are very fluent in those sorts of applications. If you go to Brazil, they are the most active users of community and one-to-one interactive communication, so the level of social networking in Brazil is vastly higher than anywhere else in the world. So unsurprisingly, when it comes to social network understanding, the Brazilians have a great deal to offer.
If you start thinking of the world as a palette, you can use the colours intelligently to create one canvas.
Is IPG planning any more acquisitions? If yes, in what areas?
We are fortunate in India to have companies that already have an extensive network of what we describe as marketing services, we try not to use the word below the line as it suggests some sort of hierarchy which isn’t true. If you look at FCB Ulka and Lintas Group, what you will see within those two companies is some very sophisticated and well-developed marketing services competencies and our intent in the first instance is to build on those. I think we will, if we need to, acquire businesses in India, but our first prerogative is to build on what we have. You will also see a much broader representation of our other brands (such as Momentum, Initiative, Rivet, MAP, Futurebrand and R/GA) as we develop here in India.
We are also entering a technology venture, where we will have our own applications for use of technologies. The important thing to understand about mobile marketing is that unlike Internet protocol, the technology platforms it has to live on are really very diverse. So we are in the process of converging but not yet converged, and to be fully effective on a global basis, you need to fully understand the technology fairly deeply. And the idea of partnering with a technology partner is to ensure that we have that level of understanding.