OAC 2010: Size Zero effect - Minuscule commissions and slicing the already sliced pie

Just as Kareena Kapoor's size zero may be great for her image now but won't be healthy in the long run, OOH specialist agencies pitching for clients with lower and lower commissions may help them secure a client but this move is far from healthy for the agency business. The final panel discussion the second day of the OAC saw Sam Balsara moderate this debate and more.

Earlier in the day, Mandeep Malhotra, senior vice-president, Mudra Max discussed whether too many OOH specialist agencies are slicing the same pie, thus causing their own destruction.

Later, D Muralidharan, managing director, Metro Multimedia shed some light on the current outdoor scenario in Tamil Nadu. While in 2008, the outdoor market in Tamil Nadu was valued at Rs 15 crore per month, this number drastically fell when billboards were removed overnight in April, 2008. This was because the outdoor market was dominated by 5,000 billboards in Chennai and another 5,000 plus in the rest of the state.

"Outdoor spends shifted from outdoor to other media. About 25-30 per cent of this went into TV and print and outdoor was valued only at Rs 4 crore a month," he said.

Later in the day, a panel discussion was held on 'An ounce in the name of commission, tons of expectations, reasonability questioned'. The session was moderated by Sam Balsara, chairperson and managing director, Madison World and consisted of panellists representing the specialist agency side, including Madhuri Sapru, managing partner, Kinetic; Arminio Ribeiro, chief executive officer, Madison Outdoor Group; and Nabendu Bhattacharya, founder and MD, Milestone Brandcom. The client side was represented by Arun Sharma, general manager, marketing and head, media, Bharti Airtel; Ajay Dang, head, marketing (West and South), Hindustan Times; and Saurav Bose, GM, Videocon.

Balsara started off by questioning clients on why they pay outdoor agencies so little. He said, "Outdoor as a medium is older than any other medium. The growth rates of outdoor have not been very good. However, different advertisers from time to time have discovered that outdoor works brilliantly. Now there is some contradiction here."

Bose of Videocon offered that in fact, the returns from outdoor are reducing. Sharma of Airtel explained that while telecom is the biggest advertiser on outdoor, the fact is this is not because outdoor as a medium delivered, but they were able to capitalise on the 'locality' factor.

"Historically, we had 23 circles and 23 different marketing heads for these circles, with each circle having a different plan and thus, a different communication message. Then, outdoor made sense. But now, plans are similar across the country and so are communication messages," he said.

"Costs have fallen from Rs 16 per call to less than 50 paise now - so if we're saying a call is for 1 paisa, what do we say differently across markets? The message is the same! Thus the advertiser needs to bring down the cost per person also," said Sharma.

Discussing the specialist agencies' commissions, Sharma shared that a colleague from the industry revealed that at a pitch, the highest commission asked for was 3.5 per cent. Responding to this, Balsara questioned the agency representatives about why they had such low confidence? Didn't they believe in their work enough?

Bhattacharyya of Milestone cleared that while working at Ogilvy and handling Vodafone, they never worked with a commission less than 12.35 per cent and have never worked with any client for less than 7 per cent commission. He also offered that it is desperation that causes agencies to pitch extremely low, just to get a big client on board and thus use the name of a big brand to secure more clients.

Balsara said that agencies should be brave enough to sacrifice business in the short term if they're offered low commissions, or clients do not agree with their terms.

Later, Sharma of Airtel discussed how the share of outdoor hasn't grown and is at 6.7 per cent of the ad pie, to which Noomi Mehta, chairperson and managing director, Selvel One Group from the audience retorted that the Delhi outdoor market was hit, so was Chennai and some other cities. Yet the industry has been able to retain rates of 6.7 per cent. His comment met with much applause from the audience.

Further discussions brought up the much discussed and debated 'measurability' factor of outdoor and panellists agreed that the Indian Outdoor Survey (IOS), which has been carried out across Mumbai and Pune, must be taken to at least 13 top cities in the country.

Balsara concluded by urging clients, media owners and specialist agencies to come together and meet in 30 days with a pledge of five points each that they'd like the others to follow.

The day also saw the industry gather for the Outdoor Advertising Awards 2010.