The 'Why' and 'How' behind Mushrooming specialist agencies
By Reena Mehta - June 21, 2013
Last few years have seen a sudden mushrooming of specialist agencies in the outdoor space. Outdoor Asia puts agency wallas - big and small - in an analytical mood to reason out this trend and suggest the way forward.
The reactions from the industry are mixed with some dismissing it outright and some hopeful, but the fact that the current state of affairs in the industry requires attention is unanimous. Most of these agencies lack vision, in the words of Dipankar Sanyal, COO, MOMS Outdoor Media Solutions Pvt. Ltd. "On one hand large players that would make a difference are not entering this market and on the other, are individuals or a group of individuals who have some client contact decide to set-up on their own, with no vision, credibility or long term objective. We have seen over these years some serious start-ups have succeed whereas other simmered away.â€ Abhijit Sen Gupta, CEO, OAP India, hits straight at the rationale behind this trend, "Unfortunately the entry barriers are very low, and all it takes is few lakhs of rupees, a small office and two three people, a bit of experience and small amount of convincing nonsenseâ€.
The why of it
We next set out to find the reason behind this influx, which can range from - lack of growth opportunities career wise in big agencies. With most of the big agencies facing turbulent times, there is a sense of stagnancy while working with big daddys or as Abhijit says,
"it is because everyone thinks they can be bigâ€. The reason, many say is a combination of all these forces acting together, some of the reasons would include the fact that career growth is very fast in the OOH Industry and after a certain level, professionals don't find the right avenue for further growth. This is the most common reason for them to think of their own venture for unlimited growth.
Vikas Bhambri and Gourav Tandon, Managing Partners at Apex Integrated Marketing, comment on similar lines, "it is a combination of couple of these points and more importantly, after long successful stints in these agencies your entrepreneurial sense keeps growing and when you reach a threshold point you would want to go ahead and explore the entrepreneur route. If you have succeeded where you have worked you want to do it on your own, after all these agencies, the so called big ones, also started with humble beginnings.â€
Nabendu Bhattacharyya, MD, Milestone Brandcom, blames it on the myopic view by the industry of the industry, "Unfortunately large organization is not giving enough importance to OOH vertical and not investing on knowledge and tools hence the business is remained as commodity rather than an important media channel in media mix.
The brutal truth is that all large organizations made enough monies from this business but they never ploughed back investments to create industry unified research or proprietary tools, which is the primary concern regarding the growth of the Industry and hence affecting the eco system in the Industry.
Mandeep Malhotra, President, Mudra Max OOH, goes to the roots of the problem as he says, "Above all the leaders in this business have no vertical vision of outdoor. We have inherited to play cost as a cut throat strategy to win business. Where is the value system in the business? Private equity investors want to see emerging business as a cash cow so any business beyond 10per result attracts. PE firms by dozen are looking out for such ways of quick break even. Remember two out of 50 make theire profits. It will be fun to watch is which tow will.â€
The way forward
After having scrutinized the reasons, we try and comprehend the future, we ask for solutions and ask if just letting it be and letting the market decide is a solution. Abhijit agrees on a combination of both i.e. of creating some entry barriers and then letting the market's invisible hand do its job, "This trend has brought lower margins and ridiculous offers. The media owners should be able to create higher entry barriers of their own safeguard. Also, if investments happen in tools and data, then these will also come at a price which will help only serious players to remain in business. But I think in a couple of years there will be a correction and only serious players will remain in business. We need not worry too much.â€
Mandeep on the other hand highlights the dangers of not having entry barriers, "I would surely want to have credit terms as an entry barrier. In the absence of any united governing body the entire industry stands to lose. We have seen a lot of default clients in the business and a few agencies not being able to stand tall.â€ Both Nabendu and Dipankar agree on the need for a strong governing body to lay certain guidelines/recommendations towards regulation and interest of the industry, its clients, agencies, and media partners, irrespective of the size of the agency; but without discouraging entrepreneurship and infusion of new blood.
Vikas and Gourav second that point, "We feel everyone has the right to become an entrepreneur and the industry should welcome them with open arms. They also have to be clear that they have to be responsible and do their side of the business following the good practices of the industry.â€
Creating a niche
Many agree that this trend is inevitable, as has been observed in other industries. Also there is the belief that the media industry would use this opportunity to better themselves in terms of quality, cost and research by contributing to creating a larger pie. Dipankar resonates this view when he says, "Right now it's like breaking a wall and each taking a brick rather than each adding a brick and creating a bigger, stronger and a more sustainable wall. It is time we bring in measurability, accountability, transparency and credibility.â€
Reflecting similar sentiments Nabendu pitches in with an advice, "Don't look at OOH industry's present size of approximately Rs 2,500 crore , look at the entire advertising industry size of Rs.35,000 crore. Hence create a value proposition.â€ If outdoor is important for any client, they'll ultimately bank upon the serious and established players only. And OOH is important for every client these days. Mandeep Malhotra ends up in his classic style, "All will make enough in this vast ocean (advertising industry). Fun will be for the ones who create their own ocean.â€