24 July 2009

The growth potential of digital advertising in India is prompting traditional ad agencies to join hands with online companies. In Cannes, Microsoft announced partnerships with two leading advertising companies - the WPP Group and Publicis Groupe. Rishi Srivastava, consumer and online marketing officer, Microsoft India, did not comment on the nature of the deals but said Microsoft was already working closely with all major agencies in India and such deals were the need of the hour. “Online advertising is increasing rapidly and the deals are aimed at offering better solutions to large brands,” he reasons.

While the traditional media will not grow over 13 per cent year-on-year (Y-oY) this year, analysts believe digital media will grow over 80 per cent Y-o-Y as the base is quite small in India. Internet advertising is a Rs 250-300 crore market and, according to a Ficci-PwC study, is expected to touch Rs 1,100 crore by 2011. Tapping this growth requires deeper relationships between stakeholders. Some data is with agencies, some with publishers. To convince clients to put money into a new medium, the stakeholders will have to work together. Agencies are tying up with publishers for consumer research, data sharing, training and leveraging of technology platform.

Parminder Singh, business head, technology, at Google India, adds: “Now agencies are willing to do joint pitches (for accounts). One reason is also that digital is a very dynamic medium. Agencies have to collaborate with publishers for technical know-how to keep pace with the medium. Also, the social media frenzy has opened up new avenues. Offline agencies need publishers’ expertise to explore such avenues.” Google works closely with all big agencies in India.

Nitin Mathur, director (marketing), Yahoo! India, adds: “Creative agencies play a very critical role in incorporating digital at the core of any idea. This is vital because when they begin to think digital as a key alternative at a campaign conception stage, there will definitely be a larger shift of ad dollars moving from offline to online.” Yahoo also works with them closely at a client account level, in helping shape the digital component of all marketing campaigns. It also invests in time and effort in educating creative agencies on thinking digital and even helping them learn how to develop creatives for the medium.

Sidharth Rao, CEO and co-founder of Webchutney, concurs that internet companies and advertising agencies “will have to spend a lot of time and effort evangelising the medium to their clients.” Most of the top 500 advertisers in India, according to a recent Webchutney survey, are allocating only 5 per cent of their spends on digital advertising. And, though the industry will grow a healthy 44 per cent this year (more than most other mediums like print and television), “We have a long journey ahead, which requires stronger partnerships and coordinated efforts,” Rao says.

Prashant Mehta, COO, Komli Media (an ad network which provides products and service for digital advertisers and publishers), agrees the space is witnessing more deals. Komli is also chasing some deals with some big names, but Mehta refused to divulge any details. Independent digital advertising agencies don’t feel any threat, though. Mahesh Murthy, founder and CEO of Pinstorm, believes traditional ad agencies are yet to understand how to work in the digital medium. Their structure, which separates creative and media buying, is not suited for the integration that digital needs.

Moreover, their business models, based on flat fees or commissions, are also unsuited to the performance-driven digital advertising industry. For this reason, he feels this space will probably be led by independent digital agencies. Conventional agencies also realise that independent digital ad agencies are tough rivals, according to industry observers.