How legacy advertising agencies are struggling in the digital era

The change of ownership at Rediffusion, the country’s oldest ad­v­ertising agency, last week, did not take many industry observers by surprise. Founded by Arun Nanda, Ajit Balakrishnan and Mohammed Khan, all veterans in the field, in 1973, the agency had a solid brand-building and advertising history but had been struggling to adapt to the digital era in recent years. Khan ex­ited the agency in 1983 to start his own shop called Enterprise, which became En­t­erprise Nexus and then Bates Enterprise after it was acquired by WPP in 2013.

Rediffusion, on the other hand, had long associations with WPP and Dentsu, which exited the agency in 2018. By his own admission, adman Sandeep Goyal, who has picked up controlling stake in the agency, said there were gaps to be filled in Rediffusion’s portfolio. This inc­luded mobile and social media capabilities, apart from a digital-first mindset.

Rediffusion isn’t the only legacy brand to transition to a new generation of leaders. In the past, homegrown names have all attached themselves to international advertising groups. That includes Chaitra, now Leo Burnett; Ambience, part of Publicis; Ulka, now FCB; Trikaya, now Grey; Mudra, now part of the DDB group; Lintas, now Lowe, and HTA, now Wunderman Thomson.

K V Sridhar, veteran advertising professional, who is the global chief creative officer of Nihilent Hypercollective, a consulting and services company, said even second-generation ad entrepreneurs and their agencies have been acquired by glo­bal ad networks. For instance, Mumbai-based Taproot, co-founded by Agnello Dias and Santosh Padhi in 2009, and Bengaluru-based Happy Creative Servi­ces, co-founded by Kartik Iyer and Pra­veen Das in 2007, best known for its work on Flipkart, have each been acq­uired by Dentsu in 2012 and 2016, respectively. M&C Saatchi acquired Mumbai-based Scarecrow Comm­uni­cations — co-foun­ded by Manish Bhatt, Raghu Bhat and Arunava Sengupta in 2010 — in 2018.

“I see this as a process of evolution, where local names rise and eventually sell out to investors or large networks in a bid to scale up. Sometimes, agency pro­m­oters may want to step back, which is what happened in the case of Rediffusion. Both ways, the legacy brand being ac­­quired could recede into the backg­r­o­und as the new leadership takes over and brings fresh perspective to the business,” he said.

While ups and downs in an agency’s life are par for the course, given that the business has traditionally thrived on the cult of personality revolving around its leader, the process of globalisation of the domestic ad industry has not escaped it. If anything, it has acquired pace.

As K S Chakravarthy, co-founder and chief creative officer, Tidal7 Brand & Digital, a digital agency, said, there is no concept of “absentee landlordism” in advertising. “The leader becomes the agency and if he decides to retire or move on, then the baton has to be handed over to someone. This could result in an internal elevation or a new partner or a tie-up with an international group. With every change in leadership, the agency brand could undergo a change,” he said.

For instance, when Bal Mundkur, who founded Ulka in 1961, stepped back from day-to-day operations in the 1980s, he handed over the reins to Anil “Billy” Kapoor, who brought strong account planning and management skills to support the agency’s creative abilities.

Over time, Mundkur’s Ulka metamorphosed into Kapoor’s agency, with a strong emphasis on strategic planning and thinking. Clients such as Amul have stuck with it for years. FCB acquired a majority stake in 1997 and by 2007 had fully acquired the agency.

The past 10-15 years, however, have seen advertisers turn their attention to new media aggressively to tell brand stor­ies using a combination of AI, technology and data analytics. That has meant that ad agencies have had to transform fast. “Each era comes with its own set of opp­ortunities and challenges. The ones, who can make the shift, survive, the ones, who can’t, fade away,” said Chakravarthy.

In the case of the ad industry, especially international, advertisers are increasingly turning to consultancies such as Accenture and tech giants such as Facebook and Google for their creative needs. Some are even opting to outsource work to specialised digital shops or hire talent in-house for their advertising needs. This trend is also beginning to show in legacy creative markets such as India, where ad agencies have traditionally enjoyed high profile.

The tendency, said Sridhar, to bypass traditional ad agencies is therefore leading to an existential crisis, causing their overall diminution. “If you look at the growth of digital advertising over the years, it should give you an idea about the evolution of the domestic advertising market. Having said that, the rise of digital is not just visible in India, but also in markets such as Brazil, which have a strong legacy advertising agency culture like India,” he said.

A look at the advertising forecast for 2021 by media agencies such as GroupM offers a clear picture of the future of adv­ertising. It is also about digital, social me­dia, mobile marketing and the use of ad tech to convey the advertising message.

A recent GroupM outlook said that after a sharp decline in 2020, the domestic ad market would grow by 23.2 per cent in 2021. Its “This Year, Next Year” re­port for 2021 said that the domestic advertising market would touch Rs 80,122 crore in terms of size, below 2019’s Rs 82,905 crore, but ahead of 2020’s Rs 65,053 crore.

More importantly, the share of digital in overall ad spends for 2021 would stand at 35 per cent, behind TV at 45 per cent and ahead of print at 16 per cent. While the second Covid-19 wave could result in some rat­ionalisation of ad spends, the re­p­ort said fast-moving consumer goods, e-commerce, auto, telecom, smartphones, retail and digital services such as fintech, gaming and edtech would be key drivers this year.