Sunny days for digital agencies

By , agencyfaqs!, New Delhi | In Digital | November 23, 2007
After the WPP-Quasar and Network18-Webchutney deals, digital agencies are very much on the buying list of large agencies

Digital & #BANNER1 & # agencies have never had it so good. In just a week, two big announcements in the advertising industry have made digital agencies much sought-after. First, the acquisition of a majority stake by WPP in Quasar Media, and second, the investment by Network18 (through its investment arm, Capital18) in Webchutney. What's common between these two agencies is that they have found their place in the sun without the support of a large parent company or a traditional agency. More so, agencies like Quasar and Webchutney are serving big-budget clients such as Microsoft, Kingfisher, Airtel, Perfetti and Hewlett-Packard. It is no wonder then that traditional agencies that have been unable to create standalone digital advertising businesses, are interested in adding independent ones to their portfolio.

Krishna Kumar

Ratish Nair

Chaya Brian Carvalho
This certainly indicates that the valuation of independent agencies operating in the digital space will go up, but is being acquired the way forward for them? Krishna Kumar, CEO of Media2win, thinks that these deals are good for the industry. "Independent operations have become significantly large and it is no surprise that group companies are looking to buy them out. But not every business is aligned to agencies. For instance, there are a number of independent search agencies in India which are doing well on their own," he says. With a revenue of Rs 10 crore last year, Quasar may seem to do a fraction of the business traditional agencies do, but it is growing rapidly.

It is the larger digital agencies such as Media2win, Interactive Avenues, Pinstorm and BC Web Wise which are being viewed by industry observers as the most likely to be picked up by agency networks. In fact, it is held that most of these agencies have already been approached by acquisition offers, but have not taken the bait... yet. But for those that are willing to, this is a good time.

Ratish Nair, founder and CEO of Interactive Avenues, which serves clients such as Colgate, Bacardi, Axe and Titan Fastrack, would not comment on whether the agency has received an offer, but said, "If we get an attractive deal, we may be willing." However, Nair added that smaller agencies will continue to exist - it all depends on their goals.

A factor that may create obstacles for the acquisition plans of large agencies is the desire of smaller digital agencies to retain their independence. After the cash investment by Capital18, Sidharth Rao, founder and CEO of Webchutney, told agencyfaqs! that the agency did not want to become a part of a network because it wanted to continue operating independently.

Pinstorm has already turned down as many as five acquisition offers. Ansoo Gupta, vice-president, global business, Pinstorm, says, "There is space for independent agencies to not only survive, but grow organically, and that is how we see ourselves growing."

Chaya Brian Carvalho, MD and CEO of BC Web Wise is of the opinion that "traditional agencies do not have experience and learning in the digital space". She adds that if these agencies do make an investment in another agency, they should invest enough to help that agency scale up. That said, Carvalho adds, "We have always been open to talking to potential investing agency groups..."

Hari Shankar, business director at Starcom IP, says, "In India, there is no one agency which is the leader in digital advertising. There is a huge amount of fragmentation in the market and acquisitions are happening, but they are not necessarily a trend."

It's hard to say whether the digital acquisition trend is here to stay, but it is only a matter of time before other advertising agency groups such as Publicis Groupe, Omnicom and Dentsu follow the WPP lead.