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Market watch: ‘Ad’vantage India

india Updated: Jul 27, 2007 13:02 IST
Saurabh Turakhia
Saurabh Turakhia
Hindustan Times
Highlight Story

Multinationals across the globe are buying the India story and the communications industry is no exception. All major players, including WPP, Omnicom, IPG and Publicis, among others, are upbeat about the Asian and in particular, the Indian surge. In evidence is the spate of consolidations and acquisitions that these majors are effecting in India.

Recently IPG carried out the consolidation of Lintas by buying the balance 51 per cent stake. Now, it also bought out the balance 49 per cent stake in FCB Ulka. According to Prem Mehta, chairman & managing director, Lintas India Private Limited, “It’s all about the India story and all eyes are set on the fast growing market place.”

The Publicis group has also decided to go ahead with the buyout of Saatchi & Saatchi, where it held 80 per cent of the stake till now.

WPP brought about the merger of two group agencies, Bates and David, in India recently. The amalgamation was seen as a combining of creative and business efficiencies. A peek into WPP’s annual report indicates that revenue contribution from Asia Pacific, Latin America, Africa and the Middle East in 2006 is 21 per cent. The markets contributed an equal percentage of the PBIT for 2006. WPP's revenues for 2006 stood at 11 billion dollars.

The figure representing the Indian advertising industry may be a modest one at US $3.5 billion or a mere 0.4 per cent of the GDP, but optimists see it as a scope for immense growth. Says MG Parameswaran, executive director, FCB Ulka, “India is possibly the fastest growing economy in the world; the last three years have proved that the economy has long term growth momentum. Advertising is still only about 0.4 per cent of the GDP as against 1.0 per cent and more for our SE Asian neighbours. So most companies are bullish on India. Advertising agency groups are no exception.”

Mehta feels that sectors such as telecom, automobile and more recently educational institutions and real estate, have been driving a robust growth for the advertising industry. Going ahead, he feels that the retail and foods businesses will extensively contribute to the growth of the advertising discipline. Parameswaran adds that the utilities sector and IT services may also boost advertising growth.

The Indian advertising industry is growing at 20 per cent, which is twice the GDP rate and reason enough for a serious look. In addition, there is something peculiar about the Indian market. Sir Martin Sorrell, group chief of WPP, who was in India recently, remarked about India, “India is a market where while new media are growing, even traditional media are growing.” He added that the mobile revolution in India has taken off excellently, with close to 180 million subscribers already. Certainly, the numbers point to the green avenues for advertising through new media.

With a lot of consolidations happening here, is there a concern for employee turnover? Mehta denies saying, “I don’t think that consolidations result in attrition.” Parameswaran adds there might be some positives as well: “Consolidation and a wholly owned structure helps employees to move seamlessly across geographies and companies to invest aggressively. Employee turnover is a long-term problem and opening the windows of the company to global opportunities will undoubtedly ease turnover to some extent.”

Nirvik Singh, president of Grey Group, South/South East Asia, who has been recently appointed as regional CEO for G2, agrees, “ I think for people in the industry, globalisation offers a huge opportunity to work on cross border businesses and of course to work in different cultures.”

India and China, along with other Asian markets, are definitely on the radar of big communications groups. India has its share of problems in poor infrastructure and bureaucracy. However, Mehta lays his bets on India: “The India story will emerge stronger in the long run as all our problems are in the open and we are more transparent.” As far as advertising is concerned, he cautions that the real problem is talent crunch and prescribes more investment of resources into grooming and retaining talent.