The question the headline raises is being increasingly asked. Not because the trend is new, but because it is now more than eight years old. Across a range of segments from broadcasting (radio or TV), publishing or others, media companies that have got into the events business have seen somewhat disappointing results. The 4-10 per cent of topline brought in by the events doesn’t justify the effort put in by media companies. Think of it this way — selling a double-spread ad in a magazine or a half-page one in a newspaper gets better margins than the sponsorship for an event.
For instance, take Jagran Prakashan. It publishes Dainik Jagran, among other brands. Typically, throwing in an activation deal along with a print ad could bring in 30-40 per cent more in topline from its large advertisers, says Basant Rathore, Vice President, Strategy and Brand. (Activation is an event through which a brand is ‘activated’ on the ground in marketing parlance. This means a promotion or some sort of brand activity in real-time).
So a client who has been spending Rs 1 crore for an ad campaign may end up spending say Rs 1.4 crore or so, if an event is thrown in. At the end of several years of doing that, events bring in just over 4 per cent of Jagran’s revenues. On being asked if it’s worth it, Rathore says, “The most important thing that offering events does is to lock advertisers in to volume deals.”
Yet, as almost all media companies start offering activation, it has become a tool for rate-maintenance or hanging on to advertisers rather than improving profit margins. A stand-alone event company usually works on an operating margin of anywhere between 20-40 per cent. When media companies get into events, “they bundle their media and discount the event or activation,” says Roshan Abbas, Managing Director and Chairman, Encompass, an event firm (acquired by WPP in 2008).
This means that the events companies, too, have to cut rates. So it spoils the margins in the events business and reduces the value of the media they (media companies) are selling. Most media managers shrug that off. “We would have never got that additional money if we did not offer activation,” says the COO of a business-to-business media firm. Clearly the rationale, therefore, is more strategic than it is financial.
Eventually, will it reach a stage where advertisers start discounting rates by 30-40 per cent if there is no activation? Maybe. The slowdown has already ensured that almost every media company has reduced rates or bundled the main media with an event of some sort or the other. That is the bad part.
The good thing about the coming of media companies into events is “the application of marketing and research to evaluate events and activations,” says Abbas.
It is clear that media companies will continue to double up as event managers. This is because marketing budgets are going that way. Almost a decade ago, marketers started looking at communication holistically, rather than just as a print or TV thing. This meant they wanted to reach consumers wherever they were — inside or outside their house, irrespective of what they were doing. So you could see the Hutch (now Vodafone) pugmarks in lifts or a demo of a washing powder in a theatre in Andhra Pradesh. This is what is called 360 degree communication.
Over the years, marketing spends going to non-mass media activities have increased from from 5-10 per cent to roughly 40-50 per cent. In marketing parlance, many of them are called below-the-line or BTL, advertising being above-the-line. The rise in the need for BTL coincided with the rise in the number and type of advertisers who needed a specific and focused reach that a direct marketing campaign or a local event could give — such advertisers include education, telecom and financial services.
For many media companies, therefore, offering activation or events is not just about an extra buck, but about remaining relevant to the marketer’s needs.
The writer is a media consultant.
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