Ad business worth Rs 1,500 cr changed hands this year

Advertisers' demand for more efficiency, tighter budgets prompt frantic reviews, pitches

Need for fresh perspective and tighter budgets have forced advertisers to seek newer agencies in the first half of this year like never before. From January to May, advertising businesses worth Rs 1,500-2,000 crore changed hands.

In the first half of 2016, business worth Rs 1,000 crore had changed hands, according to industry estimates. This means, this year, the jumps in changes has been 50 per cent to 100 per cent.

One of the reasons for this, suggest sources, is demonetisation — banning of the old Rs 500 and Rs 1,000 notes by the Centre in November last year. 

In the past five months, some of the biggest spenders on advertising have appointed new agencies. The list includes Maruti Suzuki, the largest carmaker in the country; Titan, the fifth largest watchmaker in the world; Sony; ITC; ZTE Mobiles; Singapore Tourism; and handset maker Nokia Mobiles, among others.

Maruti Suzuki appointed Dentsu Aegis Network (DAN), Titan brought Madison on board, the Sony Electronics account went to Initiative — IPG Mediabrands, ZTE Mobiles and Singapore Tourism have appointed Publicis Media, and ITC and Nokia Mobiles have sought the services of GroupM.

“The duration of the relationship between clients and agencies is shrinking. This is fueling pitching activity,” said Ashish Bhasin, chairman and chief executive, South Asia, DAN. 

“Clients are also demanding greater efficiencies for the money spent, which is prompting them to put businesses up for review quickly,” he added.

Some accounts up for review are Tata Global Beverages, L’Oréal, Perfetti, the Godrej Group, Bajaj and BMW. 

There is speculation over Nestlé and Mondelez also looking at a possible review of their media businesses. Bhasin, whose agency DAN has the Mondelez media business, denied there was any review process in the offing. 

Sources in the sector, however, said if a few key advertisers start reviews, there is usually a domino effect.

“When a leader in a sector goes for a review of their agency, others follow. This puts pressure on the agencies, but also makes the sector more competitive,” said the chief executive officer (CEO) of a top agency, which is also defending an account.

A number of factors can trigger a review.

Vikram Sakhuja, group CEO, Madison Media and OOH, had earlier said, “One [reason for review] is the need for best service and price. The other is a desire to seek a fresh point of view. Some may want a new agency in a new financial year.” 

Both GroupM and Madison have pegged advertising expenditure growth in 2017 to be at 10 per cent and 13.5 per cent, respectively.

India’s adex, according to GroupM, would touch Rs 61,204 crore this year. Television would, however, have a lower growth (eight per cent vis-a-vis 10 per cent last year), C V L Srinivas, CEO, GroupM, South Asia, had said when releasing the report earlier this year.

The Pitch Madison report said television, print and digital would grow at 13 per cent, 9.5 per cent and 25 per cent, respectively, touching Rs 21,296 crore, Rs 19,869 crore and Rs 9,144 crore respectively in 2017.