India has come a long way since the country’s first ad agency B Dattaram and Co. was born back in 1905, or the first AD club in Calcutta in the 1950s. Post the 1970s media boom, there were a plethora of magazines that needed ads, and Indian commercial illustrators stepped up to the challenge.
Come the 80s, and the Asian games immortalized the colour television. The allure of the fantasy world commercials promised got even more believable. How could you not trust companies when your daily dose of entertainment - ‘Hum Log’, ‘Chitrahar’, or ‘Mahabharata’ was sponsored by them, and they had the likes of Lata Mangeshkar for Surf for commercials with claims that the detergent cleaned fabrics better than any other you could buy.
“Mind you, those days you didn’t have commercial breaks like today. One had commercial breaks for a few minutes, and then the show ran non-stop for the next 30 minutes or so. It was a different era altogether.” Ramanujam Sridhar, Founder & CEO at Brand-comm reminds.
The second major turnaround was the 1990s liberalization when foreign companies landed on Indian shores. Most Indian agencies were sold out, and agencies stepped up to address the needs of aspiring Indians.
Sridhar explains how the industry has changed drastically over these years in accordance with rapidly changing client demands.
“The revenue structure of the Industry and their job has changed altogether. In the days of full servicing agencies, we jokingly called agencies as 15% commission and 85% confusion. They got a 15% cut of anything they did for their clients – research, logo, printing or packaging. The agency was a one stop solution for all media needs. Today with the emergence of PR and other specializations, the job is fragmented and ad agency revenues have come down drastically.”
That seemed preposterous when one thought of the advent of newer avenues like web advertising and reports of FMCG majors spending as much as 50% of their net revenue on marketing, and some e-commerce giants spending as much as a whopping 70% on the same.
It’s tough to believe ad agencies don’t have their hands stashed with currency. Companies should be more than willing to pay for the original content they bet so big on. Turns out that’s not the case.
“Most of that budget goes to the media. The ad agency typically gets 2.5% of the total amount”, Sridhar informs.
When asked about challenges ad agencies are facing today apart from the financial crunch Sridhar adds...
“With increasing client demands and shrinking profit margins it is getting difficult to hire great talent. Advertising is currently one of the lowest paying professions. There was a time when ad agencies hired from the top b-schools in the country, including the IIMs. You don’t see that too often today. Nobody buys a TV to watch commercials or a newspaper or laptop to browse through ads. The more creative ones do well. The idea is to get you to watch it.”
For naïve readers, the last line is advertising rolled in a sentence for you.