“Consolidation is going to happen. Bigger advertising agencies acquiring digital agencies in the country brings an integrated offering when you pitch a client,” Rajiv Dingra had shared with Lighthouse Insights late last year.
Rajiv, CEO & Founder of one of the most well known digital agency in the country, WAT Consult had shared these thoughts while the agency was still an independent one. Nine months later, WAT Consult, which celebrated 8 years of its existence last month, is no more independent. It recently got acquired by the Indian unit of Japanese advertising group Dentsu.
From early last year we have seen a spike in networks acquiring well known digital agencies in the country. The noted ones were Social Wavelength acquisition by JWT, 22 Feet acquisition by DDB Mudra, and Law&Kenneth acquisition by Publicis.
With digital growing in the country, acquisitions like these are good for the market as more and more network agencies realize that they need more firepower in terms of specialist digital and social media agencies.
However, getting acquired by networks has its own pros and cons. Networks bring the combined knowledge and skill set which an independent agency can’t manage but independent decision making, investing in products, are some of the areas that are compromised post acquisition.
This trend is also gaining pace at a time when digital is still evolving and barely scratching the surface in the country, are agencies giving up too fast? This also leads to another moot question – Is it really tough to survive as an independent digital agency?
Rajiv still believes that being independent isn’t a challenge; the only challenge lies in the vision. “Do you want to be the owner of two percent market share or do you want to be the owner of twenty percent market share and then what are the sacrifices that you are ready to make to achieve it.” He added,”There isn’t much of a difference in a network and independent agency, in fact the latter works much harder while networks have access to better tools. It is the vision that makes the difference.”
Like Rajiv, Vineet Gupta, Co-Founder at 22Feet also stresses on the vision.”Every independent agency has a vision when they start. Therefore whatever decision an agency takes is in line with that, so whichever helps to get you to that vision better and faster is what you eventually go with.”
Talking about the 22Feet acquisition reasons, Vineet informed that it was scale, access to better talent, access to newer markets while aligning with someone with the same wavelength. “If you look most of the acquisitions in this space have happened by networks to protect their existing business from going to others. But if you look at our acquisition we have aligned to the network to grow our own business. We do work with some common brands but the intent has been to grow 22Feet.”
Digital as a market has grown tremendously over the last few years and so have the acquisitions – bigger networks acquiring digital agencies at a time when digital is still evolving, leaving a handful of independent agencies in the market who are surviving for their cutting edge work. One of the them is the 12-year-old Mumbai based IBS which till date has opted to stay as an independent agency. “We have reached to a stage where we manage our growth. In fact we collaborate with many of the networks on a lot of projects. We have carved out our niche and we are not affected at all by the networks,” said Sabyasachi Mitter Founder and MD at IBS.
Talking to Lighthouse Insights last year Sabyasachi had stated that it has been a conscious decision by him to be independent and still deliver quality work. For IBS the vision is to be a global agency delivering creative work powered by technology. One such work has been the successful implementation of Jifi at Kotak; at present IBS is working with 13 financial institutions. “Our challenge is not whether we should be or not with a network. Our challenge has been people, for the kind of work we do finding talent is tough and that’s what is slowing our growth.”
He further adds that IBS has been a profitable company for the last eleven years, cash flow was never a concern and right now the agency is in such a commanding space that it can look at acquiring.
Independent decision making
Acquisition by a large network obviously brings a lot of merits but at the same time independent decision making is questionable.
For example IBS had decided quite early that it would be a creative and technology agency investing in products. Jifi has been one such initiative that took years of hard work to perfect and now it is showing results.
Would this be a possibility if IBS was acquired? “The way we work is quite different in comparison to other creative or digital agencies. May be if we had been acquired then we might have been pushed into the vision of the network rather than what we want to do,” added Sabyasachi while stressing the fact that startups need freedom in decision making.
However, Vineet added that even though 22Feet has been acquired by a network, they still work and operate as an independent agency. “Till date we think and operate like an independent agency. While we may have got acquired our independence still remains.”
In fact Tripti Lochan CEO at VML Qais had earlier shared similar thoughts with LI on the Qais Consulting acquisition by WPP’s digital arm, VML. “For us it was very important to find the right match. We thought WPP’s VML was the perfect fit because it was a big cultural match for us. The key team at VML was as grounded as we are and was as entrepreneurial as we are. So it was a perfect match of mindset, ideology and culture.”
The meeting of minds is still a possibility says Sandip Maiti, CEO at Experience Commerce who has been part of a number of acquisition talks that never turned into serious discussions. However he has very less hopes with large network agencies since one can’t do much with them. “Whoever is acquiring you ultimately is being controlled globally, even if the local management is good still the journey post acquisition isn’t great.”
There are examples when large networks have killed agencies and its client base but there are some who are still enjoying the fruits of acquisition. Tripti agreed that most of the acquisitions start showing true colors after the honeymoon period but Qais has been quite lucky with VML. “We had a phenomenal journey so far. The result is that we are expanding in India, we have expanded in Indonesia. We are also looking at Vietnam, Malaysia and Philippines at the moment. So it has been a huge growth story from the time we got acquired.”
Competing with 360-degree offerings
One of the reasons why networks are acquiring digital agencies in India is also to boost their offerings to clients with a 360 degree approach.
Dentsu Aegis which has more than 650 plus people in digital, already has four agencies under its belt with a specific specialization. With WAT Consult joining its network it will have a strong presence in social media like it has in performance marketing with iProspect, creative media buying & planning with Isobar and then the immense skill set of Webchutney in digital. “With these four acquisitions in India, we now have the best and comprehensive digital team in the country. So that we can offer our clients end to end solutions with the best specialist in every area,” added Ashish Bhasin, Chairman and CEO South Asia Dentsu Aegis Network.
The 360 degree offering right now might look good on paper but is yet to find pace and acceptance with clients who still prefer to work with multiple agencies. Vineet fails to buy the whole integrated and 360 degree offering. “Networks have been integrated for long but it is very rare to find one client that is taking all services from just one agency. Just because digital has started off, the entire integrated story should not become stronger. Today clients have different PR agencies, below the line agencies, creative agencies, among others. In my view clients are not asking for integration for the heck of integration.”
Even if some clients buy the integration story, digital agencies have enough to chew upon and deliver, informed Sandip. “Today we are winning pitches while competing along with global agencies. There is enough room to grow since the market is growing really fast and if an independent agency can run it responsibly then it can survive like we have done for a decade now,” he said.
Today independent Indian digital agencies are few and far. While some have got acquired as per their vision, running a digital agency startup isn’t easy with the cut throat competition, price sensitive market and clients paying peanuts while demanding quality work. Nevertheless, agencies who will be ahead of the curve will find clients backing such ideas. They are also not enamored by the large networks.