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Top ad agencies buck slowdown, see double-digit growth this year

Source : BUSINESS_STANDARD
Last Updated: Fri, Jun 08, 2012 20:40 hrs

Bucking the slowdown trend impacting broad swathes of the industry, top advertising agencies say they are likely to close the calendar year with 15-20 per cent revenue growth — much better than the seven per cent estimated industry average.

Bearing the brunt of the slowdown will be smaller regional or city-based agencies. Unlike the big boys like Ogilvy, JWT, Lowe Lintas, DDB Mudra, McCann-Erickson and Leo Burnett, the smaller players (revenues below Rs 50 crore) have already seen business fall 50 per cent, as clients slash ad budgets significantly. Last year, these agencies, which constitute nearly 40 per cent of the industry, grew about 10 per cent — in line with the industry average. The big players grew 25 per cent last year.

A key factor behind the top-ranked agencies doing better is they earn 50-80 per cent revenues from sectors that have also bucked the slowdown or have kept ad spends intact due to various reasons. This makes a big difference when the times are not good, say industry experts.

Arvind Sharma, chairman, India Sub-Continent of Leo Burnett, says, “About 50-60 per cent of our business comes from FMCG, consumer electronics, auto and telecom. These categories continue to advertise despite the slowdown. FMCG and consumer electronics have seen high sales growth, spurred by rural demand. So, that has helped us.”

Endorsing the view, JWT India CEO Colvyn Harris says, “In our case, almost 80 per cent of our business comes from categories like FMCG, consumer electronics, auto and telecom. In the auto sector, new launches have led companies to continue to advertise cars as well as two-wheelers. In telecom, operators have to maintain their brand visibility to combat cut-throat competition. So, they have not dropped their budgets.”

That is why Harris expects double-digit growth this year. “Last year, our revenue growth was about 12-13 per cent. We are hoping to maintain this pace of growth this year, too,” he says. Prasoon Joshi, executive chairman & CEO, McCann Worldgroup, is more ambitious and says his agency is eyeing 15-20 per cent revenue growth this calendar year.

The big boys also say they are offering more services to clients, which was not an area of focus earlier. Says Madhukar Kamath, group CEO and managing director, DDB Mudra Group, “We operate as an integrated marketing services group. Hence, we cannot speak about traditional advertising alone.”

Joseph George, CEO, Lowe Lintas & Partners, says, "We are also using an integrated approach to pitch, which goes beyond just advertising. In times of a slowdown, clients typically want to work with those who can give more bang for the buck.” But for smaller agencies, the story is different. Gita Manian, owner, Maxigen Communications, a Mumbai-based agency, says her clients include those from consumer products, engineering and information technology. “But, consumer products does not constitute more than 5-10 per cent of our business,” she says.

The same story is narrated by Sanjeev Gupta, managing director of Global Advertisers, a small agency that has seen its billings go down 60 per cent in the past six months. “We have a mix of retail, real estate, banking and finance clients. Most of them are not advertising much. Retail and real estate, in particular, are not doing well at all. This is taking a toll on our business,” says a worried Gupta.

According to TAM Adex, an advertising monitoring service by TAM Media Research, the top five sectors advertising on television for the March 2012 quarter included food & beverages, personal care and hygiene, services (hospitality, travel & tourism, aviation, internet services, beauty services, etc), auto and hair care. In print, the top five sectors included services, auto, education, banking & finance and personal accessories.



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