Digital marketing firms strategise to take on MNCs

With new policies supporting foreign investments and provision of fiscal incentives, the influx of multinational companies (MNCs) in the country is increasing by the day. But this does not seem to deter Indian digital marketing players.

Instead, Indian companies such as Pinstrom, Ybrant Technologies and Communicate2 are firming up strategic plans to take on the competition.

In India, according to Zenith Optimedia, the digital market is expected to grow from Rs 210 crore in 2006 to Rs 2,250 crore by 2008.

Given the huge potential, global digital marketing companies such as WPP, Euro RSCG and Publicis Groupe are planning to aggressively tap the Indian market through acquisitions. The global digital marketing spends are over $40 billion.

While WPP has already acquired a 75 per cent stake in Delhi-based digital marketing and web solutions company Quasar Media early this year, French advertising agency Publicis Groupe and Euro RSCG too are looking at acquiring companies here.

Says Mahesh Murthy, founder and CEO of Mumbai-based search engine marketing company, Pinstrom, "The launch of digital arms of WPP, Publicis, Euro, etc will have little or no impact in the Indian market, as these firms traditionally have little or no digital competence anywhere else in the world. Hence, we don't see any challenge from non-Indian MNCs as yet. At best, their arrival will grow the markets."

As far as acquisitions go, he says, the weaker firms in the country have already been acquired and there aren't very many left.

"When we pitch for clients, whether we do so from our offices in Beijing or San Francisco or Singapore or India, we almost never see these MNCs as finalists or even contenders. They are not even known or visible to the serious spenders there and the clients feel that they are not being adequately served in their markets. They may start turning up in future and we will be ready for them by growing organically and through acquisitions, to fulfil our clients' needs," he says.

Pinstorm has six offices in five countries, and it plans to double this number in the next two years. "We also have a slew of in-house technologies that few others in the world possess. That coupled with our pay-for-performance focus will continue to help us lead against old-world MNCs in this new age of marketing," Murthy adds.

Echoing his views is M Suresh Reddy, chairman and managing director of Hyderabad-based emarketing solutions company, Ybrant Technologies, who believes that having more players in the space would help increase awareness about the potential of digital marketing.

Ybrant already competes with a number of global players in various markets, and a major portion of its revenues comes from outside of India. It had acquired three companies "� US-based MediosOne and AdDynamix, and VoloMP, the flagship product of Serbia-based Seenietix.

It is in the process of completing the acquisition of Israel-based Ordian, even as it is in the advanced stages of discussion with four other companies for acquisition. At least, three deals are expected to be seized in the next six months.

"Ybrant has strategic business reasons for making these acquisitions across the world. There are two main drivers behind our inorganic growth strategy "� capability and geography. We are looking for strategic fits that enable us to be the end-to-end digital marketing solutions provider. We are also looking for companies that have strong sales presence in various markets in the world," he says.

Vivek Bhargava, founder and managing director of Mumbai-based SEM firm Communicate2, feels that it makes sense for the global majors to acquire local digital agencies that have expertise in the domain.

"In most of the world markets, either the local digital marketing agencies have been acquired or they still continue to dominate their local markets. To be able to do so, the biggest strength would be the execution ability of a company, besides technologies and its team size. Over the last four years, Communicate2 has built tens of search applications that are geared to operate in the Indian environment. We have built a team size of nearly 125 people, and our aim is to be a 1,000-people search firm in the next two to three years. All this would help us dominate the market place in India and give a competitive edge over MNCs," he says.

Communicate2 acquired a minority stake in a company that focuses on search technologies.

"We will continue to look for companies that are focused in the search space. We are also looking for companies in the US and the UK markets who have a large SME customer base," Bhargava adds.