N. Shatrujeet

There is a conscious attempt to underplay Carat's success in this market.

The media business is often likened to a fish market in high noon - ruthless haggles that leave one or the other of the parties thoroughly distraught and dissatisfied with the result. But Meenakshi Madhvani, CEO, Carat Media Services India, insists it could well be a win-win situation. "If they work together, a good media agency and a good media owner can create magic for the client - and be happy for themselves." Madhvani should know, for she has spent a good part of her professional life in all three capacities - client (as part of the account management team on HLL at Lintas), media owner (Zee) and media agency (Carat). And it is this combined experience that has helped her navigate Carat through choppy waters during the agency's entry into India. In this interview with N. Shatrujeet of agencyfaqs!, Madhvani talks about how the 'established players' did their best to keep Carat out of the country, how the industry will benefit from MindShare's entry in India, why creative agencies should welcome media specialists and how Carat has changed the way the industry does business.

Edited Excerpts

The general perception in the industry is that Carat has not been able to grow fast enough, and that for a media specialist, you have failed to aggregate clients.

First of all, what is important is to understand that we set up offices in India in the first half of 1997. And we actually got going only by the second half of that year, after getting all the clearances and such. In effect, it's been a little less than four years that we've been operating in this market. And in four years, we have been able to reach a turnover of close to Rs 300 crore - which by anybody's logic is phenomenal. I'd be surprised to find even one ad agency in this country that has added Rs 300 crore in four years, starting from a zero base.

So, in terms of growth, we've had a phenomenal track record. And I think what concerns a lot of agency people is the kind of growth we've had. Which is why there is a conscious attempt to underplay Carat's success in this market. And frankly, we are very happy about that. Because we would much rather be underestimated and have our clients realize our true worth. If it wasn't for what we bring to the table, why would clients such as Cadbury, Mattel, Asian Paints, Bacardi, Bharti, Max New York Life, Virgin, Maxima and Frooti sign us up? Very often, there's this thing of 'Oh, Carat is a small company… a lalaji company.' Now if we had a roster of lala brands, I could understand that kind of response. But that's not the case, is it?

Talking about the industry's position vis-à-vis Carat, in 1997, the AAAI had apparently tried floating a resolution aimed at barring media independents from operating in this country. What exactly happened, and what were the motivations that led to this bid?

Quite simple. In one word - panic. The advertising gurus of this country were worried about what would happen to the market place once Carat came in. And their concern was, I think, justified. Because here was a global player, a media independent, which could change seriously the dynamics of the market. A player who could raise questions on the 15-per cent commission, on remuneration, on the quality of the media service that these people had been providing… Therefore, I think the AAAI decided that if it can prevent Carat from kicking off, it could control the media environment in India a little longer, and protect the cozy club. So they tried to take the matter up with the INS and the ISA. They even moved the ISA to issue a notice to its members not to use a media independent. And as we were the only media independents around at that time, it's clear whom the AAAI was picking on.

I think I must go on record here that it was my personal relationships and equations with the media industry that allowed us to take this head-on and survive all moves made by the AAAI. Without getting into the details of what happened (which are quite sordid), it was just a large amount of lobbying with the INS and the ISA, educating them about what Carat was planning to do. And I guess all that passion and commitment I displayed in what I had set out to do was infectious. And incidentally, we are the only media independent to have an INS accreditation.

Coming back to the issue of aggregating clients, what about this perception that in media buying, size is of ultimate consequence… the more clients you have, the more your bargaining power. Does size matter?

I think the whole issue of size is something that was played up by traditional advertising agencies four years ago, when we started in this country. It seems to me that 'size' is their calling card. Their whole logic was that we have the size, so we shall be able to give the client the best possible rates. But the fact of the matter is that no media owner in the country is actually giving out an agency rate. The Times of India does not have an agency rate. I'm sure if I wanted to buy a banner on agencyfaqs!, I won't get an agency rate. So where's the question of clout? And if it was a question of size, every client that was working with HTA should actually get the lowest rates. Now we have been able to win business away from HTA. We've been able to win business from O&M and Lintas, both very large agencies of considerable size.

I think what you also need to understand is that we are not a buying company. Carat is a media specialist - we provide a complete media service to our clients. Very often, people say Carat is a leading buying house - no, Carat is not a buying house. We work in partnership with advertisers to find the best media solutions for their marketing tasks. And the fundamental difference between us and the media departments or divisions of advertising agencies is that these media departments are always the last stop when it comes to the creative process. With Carat, we are not the last stop. We work in tandem with advertisers every step of the way, to find the right focus and the right solutions for the brand.

Are you implying that the media divisions of advertising agencies are saddled to the diktats and fancies of their mother companies?

It's a very obvious thing… All the media dependents are divisions of advertising agencies. They are not independent entities with independent published P&Ls. As divisions, they have to be subservient to the business motives and business drivers of their parent companies. Therefore, it's very rare for a person from a media dependent to advise a client not to spend money on mass media. This is because they are working in the context of the business concerns of the parent company. If the parent company decides that it wants to use television, the media dependent will have to devise a plan that incorporates television. The dependent is not in a position to question this decision. From my experience, I have learnt that in 90 per cent of cases, it's the creative tail that is wagging the strategy dog. And that is something that no advertiser can live with in this day and age.

I agree that this might have been the case some five years ago, when advertisers themselves were not too clear about the mechanics of media strategizing. But don't you think this attitude has changed in media dependent outfits too?

There's been a big change of late. And I think Carat should take the bow for that, as it is the direct result of our setting up in this market. This is another amazing thing I find… everybody says that Carat is not doing too well, but everybody's uncle in the advertising industry wants to set up a media company. When we started, the advertising agencies gave us six months. I know guys who went on record saying Carat will have to shut shop in six months. Today, the same people are standing up and talking about their commitment to media. My question is, if there was a commitment to media, why wasn't it demonstrated earlier? It's only because we're now giving them competition - and significant competition - that they're now waking up to media.

What does the India entry of MindShare spell for smaller media outfits like Carat? Given its size and bloodlines, is MindShare a threat?

As far as I am concerned, the entry of MindShare is a fantastic thing. I think so because MindShare will actually accelerate the pace of change in the industry. I am saying this is because, till now, Carat has been the only voice that has been saying 'media, media, media…' Now when you have someone like MindShare talking about the role and relevance of media, it obviously carries a tremendous amount of weight with it. More and more advertisers are going to think maybe there is some value in unbundling media from the creative agency. Now once that realization dawns, the next step is asking, 'Who should we give it to?' And that is where the better company with the better service will win hands down.

MindShare is going to force all the media companies (dependents and independents) in the market - good, bad, indifferent - to start taking decision, and define their spaces, their strengths and their weaknesses. Competition from a MindShare will only improve the standard of service. And who benefits? The client. I think advertisers in this country have been taken for granted for too long - by all their service partners. Today, advertisers ask for accountability. And I think it is wonderful that advertisers have begun to ask difficult, uncomfortable questions.

Why has it taken so long for Indian advertisers to realize the value of media, and accord it its due respect?

Till some time ago, the media environment was a fairly simple one. Now as long as things are simple, we find ways and means of managing them. It's when complexities arise, when you have more and more options, more and more data, that we find it more and more unwieldy. It's only then that you require the help of a specialist who will unravel the threads and show you where they are connected and where they are not. So, it is the recently arisen complexities in the media environment that have opened advertisers' eyes to specialists.

The second reason is, pressure in the market place. From an advertiser's point of view, as long as the competition is limited, as long as the volumes and profits are growing year after year, the need to understand the specifics of the complexities of the environment he is in is low. The moment the competition heats up, the pressure to understand all this builds.

One of the biggest advantages that media dependents have is that often, by default, they have access to the media business of those brands/companies that their respective parent agencies service. Carat has no such luck.

I think the fact that we are a media independent, and therefore, do not have any creative agency mai-baap is a fantastic advantage. Because we value every little piece of business we have, as it has really taken a hell of a lot of effort to get it. We can't afford to take any of our clients for granted. If we mess up on any of our deliveries, we've lost the client, because we don't have a creative parent who'll say, 'Don't worry, I'll pick up the pieces after you.' This gives us a huge psychological advantage.

Also, with media dependents, something goes wrong with the creative agency-client relationship and you're in huge trouble. Very often, there are factors that are totally beyond the control of the media dependent. The parent loses the creative business, the media account moves out too. In our case, we know what we have. It's there, it's visible, and it's been won by our own efforts. And it also makes us hungrier.

But isn't 'growth from other sources' one of the reasons why Carat entered into this JV with Percept where Carat will service the media planning and buying for Percept clients? You also have an agreement with Equus to the same effect.

True. With Percept we have a joint venture - Carat Integra - where Percept has put in all its media businesses. Carat Integra services all the media requirements of the Percept group. One of the reasons we decided to do this was because we wanted to add on inorganic growth. It also gave us a foot in the door, as far as a lot of Percept clients were concerned. We also set up Integra with the objective of handling conflicting business.

As far as Equus is concerned, Suhel and Swapan (Seth) did not have a media department - and do not intend setting up one. So they asked me if we could help them here. And as I like both of them a lot, I said fine.

Aren't these arrangements a means of counterbalancing the disadvantage of being a media independent?

I again repeat, I do not see independence as a disadvantage. Even in the case of Percept, we have the right of first refusal. There are businesses we are willing to take, and there are some we aren't willing to. And it all depends on the client being ready to work with Carat.

So, for creative agencies, is this the way to go?

I think so. And yes, I would be open if more such agencies came to us with offers. After all, creative agencies must realize that there is a fundamental difference between the kind of fantastic media product we have and the typical advertising agency media product. We'd be happy to handle their media business. And there is no reason for them to feel threatened. After all, we are not interested in their creative business. That's their specialty and we cannot pose a threat to them even if we wanted to.

See, very often, a creative agency might have good creative, but a poor media product. Now another agency comes along, promises the client good creative plus a great media product. What happens is that agency A ends up losing not just the media business, but also the creative account. I think creative agencies should see the use of our service as a means of maintaining their hold over the creative business. By inviting a media independent, creative agencies are actually protecting the lion's share of their commission. The media independent is looking at a maximum of what… 5 per cent? The remaining 10 per cent is still theirs to keep. Being blinkered and saying that 'I'm going to give my client an inadequate media product, in the hope that my creative will be able to hold them back,' is inviting trouble.

You have mentioned the 15 per cent commission, but we all know that the 15-per cent commission is on its way out. Where do you see this heading?

The commission structure is going to fall apart. It has started… you can already see major cracks in the wall. Of course, agencies have tried to hold it back. Over the next one year, we are going to see a fairly large slice of clients moving out of the 15-per cent commission mode. Not necessarily a fee-based structure, but a reduced commission. I think that's the issue. Yes, there are some agencies and clients who are already working on a fee system. But I do not think the move is towards abolishing the commission system as a whole, but more of reducing the commission. I think in the next two years, lots of large advertisers will either move into a single-digit figure, or peg it around 10 or 11 per cent.

Why have some of Carat International's global clients such as Coca-Cola, Adidas and General Motors still not moved their media businesses in India with you people?

On a frivolous note I can say that these clients do not know how desperately they need us - particularly Coke. But on a more serious note, unlike creative accounts where global alignments are extremely tight, with Carat you will find that there are many pockets where we work with a client, but there are an equal number of areas where we don't work with that client. For instance, we work with Coke only in Germany and France. To that extent, Coke is not beholden to work with Carat, and neither is Carat beholden to work with Coke. The alignments between media agencies and clients are not as watertight as the one between clients and creative agencies. One reason for this is, media is seen more as a local strength. Media is more market-driven than centre-driven.

As far as Coke is concerned, when it put its media business up for a pitch, they called us in to pitch. And the feedback from them was that we were the best. The only reservation they had was whether we would be able to manage their extremely operational-intensive business. They needed bodies, which we didn't have. These international alignments work in your favour sometimes, like in the case of the recent Philips win. And sometimes they don't. All I have to say to the Cokes and Adidases is that we are here, growing bigger by the day. So should you have a problem that needs cracking, talk to us.