Slowdown: A blessing or a curse for the new agencies?

By Devina Joshi , afaqs!, Mumbai | In Advertising | February 10, 2009
Several creative people, perhaps disillusioned with the large agency setup, started their own agencies last month -right in the middle of the economic downturn. A look at what's good and what's not for these newborn outfits

The Registrar of Companies was one busy body in the beginning of '09. In the month of January itself, at least five creative directors, having quit their jobs at big agencies, queued up to have the names of their own ventures registered with the body.

As a result, we have the Aggie-Paddy venture, TapRoot India, ready to tap into advertising; ex-Mudra hand Jagdish Acharya's Cut the Crap is all set to do exactly that; ex-Grey and Lowe man Brijesh Jacob is 'digitally yours' with 22 Feet; Leo Burnett's Sukumar Menon is swimming in creativity with Black Swan Life; and as you read this, we know of at least two more creative stalwarts who will soon join the list.

The & #BANNER1 & # fact that all these new outfits have been launched during the current economic slowdown is obviously mere happenstance - no one planned it this way. However, this is not an occurrence without consequences. In this report, afaqs! explores the advantages and the grey areas of having started a venture in advertising during these tough times.

Well begun is half done

In an era when clients are frantically reworking their marketing budgets to cut costs, the slowdown couldn't have come at a more opportune time for these new outfits in a lot of ways. Clients looking at reducing overheads/agency fees may seek solace in the arms of these new firms, who bring with them the allure of cost effectiveness.

The list of wandering clients also includes those who are dissatisfied with being just one fish in the pond of a larger agency, and may look towards a newer, smaller outfit for a personal touch and pampering.

As Vijay Jain, chief executive officer and director, Orra, The Diamond Destination, puts it, two types of clients will be very interested in these newborns. The first lot includes smaller clients on their way to growth and expansion, who will be more comfortable with such outfits as they don't get the same kind of patronage from larger agencies. Secondly, larger companies looking to start a new brand, or wanting to do a one-off project on an existing big brand, may hop over.

"These agencies will offer such clients greater continuity in the creative idea," he adds. "A boutique is owner led and unlike large agencies where creative teams on various accounts are constantly shuffled and reshuffled, owners don't change every day!" In that sense, there will be greater consistency in the delivery of a particular creative idea in a smaller outfit.

Jagdish Acharya, founder, Cut the Crap, says, "With one person leading at the front, there is greater flexibility and lesser wastage." He adds, "Why should a client pay an agency for the whole year - when it's only one launch campaign, or a one-off ad, that he requires during the course of the year?"

Another significant factor to be considered is that these are all personality-driven firms.

"Their survival and business acquisitions will depend on the relationships they have developed over the years with clients," says Arvind Sharma, chairperson, Leo Burnett India - a fact that is already beginning to rear its head. The Times of India and the Mumbai Mirror accounts followed the Agnello Dias-Santosh Padhi duo to TapRoot India (from JWT). Incidentally, the two worked on the accounts together when they were at Leo Burnett.

"It is no longer enough for large networks to strut their stuff - and flex their power - in front of clients. At the end of the day, it boils down to individuals and the rapport," agrees Santosh Desai, chief executive officer, Future Brands. Clearly, here's an area where the new entrants are likely to score.

Thus - cost effectiveness, quicker responses, direct access to the creative hotshots and hence greater attention are what clients ought to expect from such outfits.

Hop on

The slowdown has also led to an awakening of sorts across agencies. CEOs are discussing cost cutting and layoff plans, the unproductive creative director is being asked to leave and one constantly hears of low increments or even decrements at agencies. In such a scenario, newer outfits have the obvious advantage of poaching talent from larger networks at low pay packages - especially considering that large networks have stopped hiring.

Says Sharma of Burnett, "If I am a young creative guy looking for growth opportunities, I may be inclined to, or often, left with no choice but to take a risk and join a startup." Obtaining talent so cheaply, he says, would not have been possible during the ripe times in, say, April or May.

Santosh Padhi aka Paddy has something interesting to share: while in larger agencies, the pressure on one man to deliver is tenfold thanks to the slowdown, a startup has the advantage of working on fewer clients at a time, which makes things more manageable.

As creative people may want to work in a relatively pressure free environment, this is an added magnet for the new ventures when it comes to talent. "Like Aggie once told me, the day we bring aboard some 50 clients is the day we'll sell off our company!" he quips. So, they're going to keep their nails short and clipped, with fewer clients and smaller teams.

The flip side

Not everyone agrees that smaller outfits are all about smiles and advantages. Aniruddha Banerjee, president and chief operating officer, Publicis Ambience, says, "I don't think these new players will have any better luck when it comes to poaching talent. The people supply in our industry is quite limited already."

He says that when people are dissatisfied with working for a large agency, they will either swallow their pride and stay on till the tough tides wash over, or they move on to another large agency, even if only for the same/marginally better pay packages. "This is because in such emotional times, they wouldn't want to take a risk with a startup venture, especially when job prospects are already not too bright," he says.

Furthermore, he doesn't quite think the monies from one-off projects or from smaller clients will be enough for survival in the long run.

Colvyn Harris, CEO, JWT India, echoes the view, saying, "There's an element of serious risk involved here and not every one of these agencies will survive."

For one, you never know what the circumstances were under which these people left their previous agencies, he muses. So, those who may have been asked to leave had no choice but to start their own venture. "In such a case, you can't be a leader if you don't have followers! Obtaining clients will also be tough here," he says.

Next, Harris puts forth that if one is starting an agency with a big creative vision, then "one cannot do it on a small platform." According to him, a serious marketer would not want to be associated with agencies that do not offer him the requisite resources, scale and talent required to meet their communication needs. "This is a tough time to start an agency," he concludes grimly.

Offering the client's take, Santosh Desai feels that these outfits can survive only if they have a ready client base to begin with (the relationship led kind); if the startup goes shopping for clients (read: pitches) in the beginning itself, it will be one huge problem. "The climate is relatively readier for these outfits now than it was earlier," he allows, "But in absolute terms? I'm not so sure."

New entrepreneurs have their say

Most of these new agencies are keeping their structure lean and tight, scrapping off unnecessary departments and outsourcing photography, production and other specialised work. Jagdish Acharya's Cut the Crap has gone all out and even scrapped the concept of a client servicing department in its structure.

"This has nothing to do with the slowdown; we won't touch clients that require a huge servicing team in the first place," insists Acharya.

But some others aren't buying into this 'philosophy'. As Brijesh Jacob of 22 Feet puts it, "If creative guys feel they can handle all aspects of the business, then why did they groan and moan when asked to attend client meetings in the past? The reluctance starts from there."

TapRoot India, too, plans to minimise servicing people and planners. Currently, the agency has seven people in the creative function: five in art and two in copywriting. It has only one person in the servicing department as of now, and plans are on to recruit talent from campuses for planning and servicing as well. "I think servicing is required only on certain brands and not every brand. But one can't do away with a department like that!" says Paddy.

Jacob agrees that it is implausible to erase a whole department just as an answer to the downturn, even if only to cut costs. "While some creative people can double up as servicing/planners, I don't think that is their core competence," Jacob explains.

His game plan is a little different from the other startups: as clients are increasingly eyeing digital media to cut down on costs and reach out to target groups, 22 Feet and other digital companies in the space are likely to enjoy client patronage for quite a while. "Divine intervention!" Jacob exclaims.

Sukumar Menon, founder, Black Swan Life, feels that the slowdown is a blessing in more ways than one. "I feel this a time when some clients won't mind trying out something radical, both in terms of ideas and working relationships. Many clients have already started questioning the conventional agency system and the slowdown will put some immediacy into that," he says. This has also happened in other countries, with big brands trusting smaller agencies to deliver on creativity, beyond one-off projects.

Most of these new entrepreneurs admit that it will be quite a task to shake clients out of their comfort zones and try something different with them. Further, they admit that as creatively inclined brains, it may be difficult for them to achieve competence in areas such as planning and research, or even recovery of monies from clients.

As eternal optimists would say - there's room for everyone. It will be worth watching whether there are enough chairs in that room, though, for everyone to sit down during the slowdown.