By Mukta Malhotra

Indian advertising industry is alive, kicking and growing. Forget the head-banging growth of 49.5 per cent logged during 1995. That growth was after all triggered off by fresh waves of liberalisation. Even the current growth rate of 18 to 20 per cent is okay considering the fact that it is thrice our GDP growth rate. There are more reasons to cheer about. The Indian advertising industry is turning globally competitive, Indian advertising agencies account for more than 33 per cent of the Asia-Pacific profits and rank the seventh highest profit-contributors in the global advertising world.

That is why so many global players straddle across the Indian advertising scene. Sample this data: the share of global agencies in Indian advertising is nearly 47.4 per cent. These global advertising agencies in India are clamouring for higher returns from their activities in India. And Indian advertising skills are considered the best by world standards. Agrees Vijay Varma, chief operating officer of Mudra Communications: "Advertising is an intellectual-oriented business and the analytical skills of Indian advertising agencies are among the best in the world."

True. Media and account planning tools and skills in India are far superior and rank only next to America's and China's. Commendable. More so because Indian account and media planners are working in a market stacked with odds: the market is complex and the culture diverse. "In India, there must be at least 100-odd channels and around 400 publications covered by the Audit Bureau of Circulation," says Apurva Purohit, media director with the Mumbai-based FCB Ulka.

Despite this diversity, the advertising industry is set to grow. Emerging e-initiatives, mushrooming of dot-coms and rising rural spending are only a few of the many bullish factors that are promising great times ahead for the Indian adworld. Says Ramesh Narayan, president of the Mumbai-based Advertising Agencies Association of India (AAAI): "The advertising industry is set to grow healthily. For, consumerism is rising and India is opening its markets for more global competition. The rule of the thumb is that greater the competition and greater the consumerism, higher will be the growth in advertising."

And new opportunities are opening up for the Indian advertising industry. These opportunities are: insurance, healthcare, dot-coms, direct marketing and financial advertising on the Net.

Rising defaults
It is not hunky-dory all the way, however. There are quite a few irritants on the ground. One of them is the rising incidence of client defaults. Agency clients are not only delaying payments, they are defaulting as well. This is putting pressure on advertising agencies which are already surviving on wafer-thin margins. For, despite client defaults, advertising agencies have to pay media houses on time.

How about going to courts? That is ruled out because litigation involves a lot of time, energy and money. Going to AAAI could be a last recourse. Alas, AAAI has no teeth. At the most, what AAAI can do is to send letters to all advertising agencies imploring them not to accept any advertisements from the defaulting clients. But, any action taken normally works against the advertising agency which has lodged a complaint with AAAI. As soon as other advertising agencies realise that there is a problem between a client and his advertising agency, there is a mad rush to grab that client. So, in most cases the agency just prefers to wait. And the wait sometimes get stretched interminably.

Such functioning exerts tremendous pressure on the margins of an advertising agency. Smaller agencies which do not have floats have to turn to banks and financial institutions to borrow money. So, margins get whittled down depending upon the time the clients take to pay up and whittled down margins mean cashflow problems.

What needs to be done now? INS members should take the initiative and refrain from accepting advertisements from defaulting clients. However, at the end of the day, it is a problem that advertising agencies have to deal with. Of late, INS has taken one major step though. It has ensured that all payments relating to dot-com advertisements should be made in advance.

One-stop solutions
Rising incidence of defaults is just one of the problems. Client-servicing today calls for more effective inputs, changing market dynamics is demanding faster responses from advertising agencies and the market is turning more competitive. Says Narayan of AAAI: "Satellite television is exploding and Indian consumers know today what his counterpart is enjoying elsewhere in the world. So, their aspirations have been soaring and they have begun to demand more."

Alongside, media costs too are soaring. As media vehicles remain fragmented, rising media costs are getting fuelled further. So, the challenge for the industry now is to get on to the next smart cost-effective idea which can add to brand equity. Says Varma of Mudra Communications: "Offering a better output has become the newest challenge for the Indian advertising industry."

How are advertising agencies going about this? They are shifting focus to become one-stop advertising solution-providers. The top five advertising agencies in India are diversified. For instance, Lintas has a public relations arm LinOpinion and a market research agency called Pathfinders. The Mudra group has a well-integrated set of subsidiaries that supports its functioning. O&M and Hindustan Thomson Associates too are diversified. And Trikaya Grey has repositioned itself as a communications company.

But, mere diversification is not enough. The biggest challenge facing advertising agencies today is acquiring new skills. For, the world of media is transforming rapidly. Broadcasting is giving way to narrowcasting. This is redefining traditional paradigms and the focus of advertising agencies is shifting from marketing-many to marketing-one.

What’s more, Internet is ushering in online advertising and advertising on hand-held devices is rapidly catching up too. All these developments are then forcing advertising agencies to acquire new skills and offer integrated communication solutions to clients across assorted channels. Says Narayan of AAAI: "That is why workshops, seminars and training programmes are fast becoming a must for advertising agencies."

Automated media-buying
All these changes are bound to influence media buying and media management too. Very soon, media management will assume tremendous importance in the Indian advertising matrix. "Media will soon be at the forefront of the advertising strategy table," says Purohit of FCB Ulka. Needless to say, roles of media buyers will become more complex with data getting more sophisticated. Meanwhile, multiplicity of channels will mean greater audience segmentation. Advertisers will have to go beyond television rating points and find more efficient means of assessing adspend.

As customer relationship management (CRM) assumes importance, technology will play an important role in advertising. Technology will drive the initiatives in devising better ways of reaching consumers. Technology makes it possible to finetune customised communications and so chances are that media buying will become highly automated.

Already, global advertising agencies are talking about automating and integrating offline and online media. Plans are to extend the same core technology that is being used to offer customised communication on the Net to other media as well. That means, it will be possible to deliver targeted advertisements both in the traditional media and on the Net.

Such focussed advertisements will soon be a reality. For, sharing of psychographic and demographic information are all becoming possible. Days are not far when online and offline media-buying companies will be fully integrated and automated.

This is already beginning to happen. AdRelevance has begun to integrate online and offline data through parent Media Metrix. Abroad, Doubleclick had a plan to marry its offline and online databases. But, the plan was shelved thanks to the controversy about invasion of privacy.

However, once these issues are resolved such integration and automation would happen fast. With the possibility of interactive television happening in India in a couple of years, days of such automation and integration are not very far. Says B Venkataramanan, group media manager with the Mumbai-based Hindustan Lever: "Advertising agencies should be at the cutting edge of technology and at the same time should adapt to local market conditions."

Emerging scenario
That means adaptation is two-fold. Indian advertising needs to adapt to all those emerging technologies. As Internet turns more pervasive, Indian advertising is bound to see more opportunities and challenges.

Advertising on the Net is going to be a hot area. The Indian advertising turf might soon see advertising networks and interactive agencies mushrooming up, thanks to the fact that more advertising agencies and software companies specialising in media latching on to the technology bandwagon.

As the bandwagon gathers speed, the gap between interactive agencies and advertising networks is bound to get bridged. In a bid to gain muscle, large interactives will get into advertising networks and large ad-networks are bound to get into the promising business of interactives.

Further, as technology dictates the content of advertising, specialised niche advertising agencies will emerge on the Net. Once interactive advertisements catch on in India, the number of advertising agencies offering specialised services will also move up.

Not just that. These specialised advertising players might go in for strategic alliances to gain competencies. For instance, players specialising in rich media technology might end up forming strategic alliances with advertising networks.

Net initiatives
So then, all these new initiatives calls for new thinking. Advertising agencies will have to assess new media opportunities and build effective strategies. For instance, there exists an opportunity to tap small and medium companies for online advertising.

Online advertising might soon become the proverbial pot of gold at the end of the advertising rainbow. True, online advertising accounts for a very small percentage of the total Indian adspend at the moment. But, technology initiatives are bound to fuel online advertising soon.