Live Issue: Can digital ad agencies stay independent?

Two days post Goafest 2012, the ad frat received news of Publicis Groupe acquiring full service Indian digital agency Indigo Consulting. Four days before Cannes Lions 2012 kicked off, we got the news of another such acquisition. This time it was JWT acquiring a majority stake in Hungama Digital Services. While some of us were still at Cannes, WPP’s Sir Martin Sorell struck a deal for $540 million to acquire AKQA, a popular independent digital agency which handles clients like Nike, Google and Unilever. Is the acquisition of digital independents an eventuality, or is there a future for independents in the digital space?

Kunal Jeswani, country head – India, OgilvyOne Worldwide, says, “The market has shifted. The time of marketers seeking out independent digital agencies, simply because they were perceived to be more specialised, is gone. Today the network agencies invest more in digital training and have built larger digital units with deeper degrees of digital specialisation. This makes it tougher for independents.”   

Vikas Tandon, managing director, Indigo Consulting, adds to the reasons that favour network alignment for independent digital agencies. He says, “Clients today seek a gamut of services - be it websites, mobile sites and applications, social media etc. For ad networks, the integration of these services, along with the expertise, knowledge and experience of digital agencies becomes crucial and plays a key role when it comes to delivery.”

Not to mention that a digital agency stands to gain access to network business, know-how and centralised tools and capabilities on being acquired by a large network. But all may still not be hunky-dory. Alok Kejriwal, co-founder, CEO, Games2win, says, “There’s very little cash out from the deals that I have been hearing about. What I understand from this trend is that it’s a shell: people put in money into a digital agency for it to grow. But at the end of the day, a businessman wants to gains from his deal in five to seven years. I am skeptical that this purpose would be served by such a structure considering we are still in a fledgling state in the evolution of digital advertising.”

Venkat Mallik, president, Tribal DDB and RAPP India, adds, “A lot depends on the kind of deal you strike. For a digital agency that considers network alignment, one has to factor in the early bird advantage.  If you are the first independent agency bought out by a network, you’d be their digital companion, handling possibly all or most of their clients. But with every subsequent buyout, the digital agency in question will lose its significance in the large framework.”

Do we have an answer to the moot question? Can Indian digital agencies stay independent? Jeswani believes so. He says, “Of course they can. There will always be room for large network agencies and independent agencies.”

We asked an independent agency’s head to get a last word in. Sidharth Rao, CEO and co-founder, Webchutney, says, “There are pros and cons of both and one needs to really evaluate this in the context of timing, where their business is, where the founders’ or the management’s minds are.” Rao strongly believes that the independent shops are culturally driven, rather than financially. But he concludes, “At some point in the next couple of years, my sense is that a lot of ‘older’ independent agencies will explore their options with networks. And at the same point, a lot of exciting independent agencies will crop up. All in all, in the Indian context, next few years will be exciting.”

  

Network

Kunal Jeswani, country head - India, OgilvyOne Worldwide

“If you want to play in the digital space you can’t just be a digital agency or a web production company anymore. You need specialist talent in social, mobile, data analytics and e-commerce. You need a kick-ass technology team that can deliver across each of these areas. The networks are making these investments. The independents aren’t. They can’t afford to. And the cracks are showing. Digital is now serious business for the network agencies. The sheer aggression with which they are pursuing excellence in every facet of consumer engagement on digital, will make it very hard for the independents to compete.”

  

Acquired agency

Vikas Tandon, managing director, Indigo Consulting

“Being a part of a network agency gives you access to global practices, experiences and expertise which one can bring to the clients. It empowers you with the potential by virtue of which you can offer truly and seamlessly integrated communication ideas and campaigns. It enables the embedding of digital at the core of a communication strategy. A large network also provides security and stability to the digital agency’s employees and clients.”

  

Independent

Sidharth Rao, CEO, co-founder, Webchutney

“Most network agencies are publicly held so it’s a no-brainer that they are responsible to shareholders as much as clients. Whereas, independent agencies tend to be more aggressive, competitive and innovative which is great for the clients they represent. Having said that, the strengths of networks are not easy to ignore. We have seen a lot of alignment in the media space because of networks for the right reasons of scale. There is better learning across disciplines that network may have. Additionally, it may also provide the management team more head room to grow in their careers.”

  

Network

Venkat Mallik, president, Tribal DDB and RAPP India

“The independent digital agencies will have to face challenges in sustaining themselves. In a bid to grow business organically, they will have three good years and then maybe two bad years. And good network agencies will continue to grow. In addition to this, I feel that more often that not, it’s not the entire organisation but the individual who founded the agency that benefits from keeping the agency’s status as independent. People working in the middle level are struggling everywhere, be it in an independent agency or in a network. ”

  

Independent

Alok Kejriwal, co-founder, CEO, Games2win

“There are clear advantages of staying independent. It implies that you can do what you want, leverage on the tools of your choice, pitch to any client. There are no set norms about hiring or firing either. The negatives would be that at the end of the day, you are just a small fish in a large pond.  You might look attractive, but there’s no guarantee of good yield which is equally critical if not more. Therefore, each equation has its pros and cons. The big guys have been acquiring the small agencies all the time. They are listed , they are capitalised. And the independent agencies are not.”