“Nobody wants to work in advertising anymore because there is no money, no respect, and it’s not about toxic ad agencies, but the little money that does come in feels like a pressure cooker ready to burst,” says ad veteran Prathap Suthan, Managing Partner and Chief Creative Officer of independent ad agency BangInTheMiddle.
“Large agencies have clout and access to media, where media companies won’t release ads without an advance check or a bank underwriting for protection. For instance, when Vivo defaulted, Ogilvy took legal action because it was Ogilvy, as did Wieden Kennedy in a similar case. Salaries in such big agencies remain unaffected by these issues,” shares Suthan while addressing how independent agencies have nowhere to go when faced with problematic clients and delayed payments.
Suthan emphasises that big agencies avoid pitching unless there’s a financial commitment since time and talent are at stake. “There is no industry body to complain to in case clients take some of the ad agency’s ideas and use them. These clients have access to many legal guys, and you will end up going to court for the rest of your life. This happens because there is no set format or process. The way forward is to forget the money as bad debt. Where is the time to go and fight?” he asks.
There is no one to put a check on these atrocities, says Suthan who has thrown open a matter that’s been festering for decades, slowly eroding the ad agency ecosystem.
Small and independent agencies do not have the resources or the means to protect their interests against bad practices in the industry and feel the fire need for stronger industry bodies that will represent them and proactively protect their interests.
The state of ad agencies and their business is dire with increasing pressure on their financials, talent drain, hyper-fragmented media landscape and intense competition. The situation is far worse for independent and smaller agencies who have no safeguards against bad practices like delayed payments or no payments, pitch exploitation, idea theft, severe undercutting, and unreasonable client expectations that leave agency leaders and employees in shambles.
“I have seen junior marketers call up CEOs of ad agencies and shout at them. That guy has possibly 25 years of experience, and you are 2 years into handling social media, for which the client is paying something like one lakh a month; they want everything for just one lakh, from LinkedIn to Snapchat; sometimes these are not even part of the agency’s work. Agencies are paid one-fourth of what they are supposed to be paid. If agencies aren’t paid, where do you get your talent from?” Suthan adds.
Independent and small agency owners find that they have no one to turn to for help and to secure their interests as they fight for survival. Specifically addressing industry bodies like AAAI and Ad Clubs that are also meant to provide a redressal and resolution mechanism for challenges that agencies face.
The issue starts with entry into these bodies. For agencies to become a member of such bodies, you need Rs 5 lakh–15 lakh; small agencies typically don’t have such money to join industry bodies.
A spokesperson from AAAI said, “These are internal guidelines and given only to those when an agency applies for membership,” addressing the question of how hard it is to become a member of AAAI, what the criteria and pay are, and the membership fees.
On its website the mission states: “Advertising Agencies Association of India (AAAI) is the official, national organisation of advertising agencies, formed in 1945, to promote their interests. The Association promotes professionalism, through its founding principles, which uphold sound business practices between Advertisers and Advertising Agencies and the various media. AAAI today is truly representative, with a very large number of small, medium and large-sized agencies as its members, who together account for almost 80% of the advertising business placed in the country. It is thus recognised as the apex body of and the spokesperson for the Advertising industry at all forums – Advertisers and Media owners and their associations and Government.”
Cutting off at the knees
Suthan points out that the advertising industry lacks unity. “We are undercutting each other. Advertising Agencies Association of India (AAAI) and the Advertising Club won’t be able to take accountability for these smaller agencies because the money spent in Delhi is not the same as in Nagpur, the money spent in Nagpur is not the same as in Cochin while you are independent, and the same rates and market dynamics don’t apply everywhere. However, there is nothing to stop you from complaining about etiquette. Cost might be different, but etiquette and behaviour can be standardised, saying that if you call me bad names, I will go to the body and they will file a case against you,” he says.
Gautam Reghunath started independent agency Talented after he and a few others quit Dentsu Group to branch out on their own. In a short span, Talented has established itself as formidable competitor to both legacy and old indie agencies. It is more an exception than the norm. Reghunath shares his point of view. “There’s power in numbers and precedence of industry bodies successfully influencing and lobbying for more favourable terms than status quo. But I think advertising’s problem is bigger and that the main culprit is our broken business model.”
Reghunath asks, “For starters, why are we acting like a bank and financing credit and advances on behalf of our clients? Why do we bear the burden of ‘advances’ purely because we have more efficient finance processes in comparison to client-side inefficiencies like multi-level payment approvals? Even when we begin a relationship, most agency value is front-loaded and given away for free in a pitch. If that is the start of the relationship and we don’t value ourselves correctly, every other problem is then a derivative. How do we expect clients to value anything about our processes after that?”
On the question of whether a separate body is required to protect independent agencies and the ad ecosystem, Reghunath said, “We will support a new body if formed, but I’m looking at internal operational solutions first.”
Divya Pratap Mehta, Founder of Intertwined Brand Solutions, has not even tried applying to AAAI because he was told the membership fees run into lakhs. “Delhi and Gurgaon hardly have any ad clubs. Bombay is much better. We need chapters of AAAI or a new body. The industry needs to also be mature to share, collaborate, and protect each other. May be media houses and us can also join forums. We are allied industries.”
Another grouse is that association clubs are mostly centred around the top 20 agencies which belong to large networks and holding groups like WPP, Publicis, IPG, Omnicom, Havas and Dentsu. “Even if you go to Goafest, it’s a fest for a maximum 20 agencies. AAAI should subsidise our entry as we don’t have deep pockets like networks,” Mehta states.
Harshil Karia, founder of indie firm Schbang, says, “To be fair, we haven’t interacted much with AAAI beyond award submissions, nor with the Ad Club of Bombay. It would therefore be unfair to comment on their contributions or effectiveness without further engagement. I believe awareness remains a challenge. We did love to know more about what these bodies offer and how we can engage with them more effectively to drive growth and value for our agency.”
No bark, no bite
Thampoo Jacob, National Creative Director, ANAROCK Creative & Digital Agency, shares, “I was one of the oldest members of the Ad Club as a member in 1980 and am no longer a member. Ad Club has lost its bark and bite over the decades. My agency was a member of AAAI as it used to help agencies unite as one on many issues. Today, AAAI is more of a premier club than anything else, protecting their own flock. I don’t even see a single interaction with independent agencies as it is not part of their mission.”
Jacob further talks about “meaningless multi-agency pitches” to pick brains at random, ruing the wasteful and burdensome deployment of resources: “We must demand a basic speculation fee depending on the magnanimity of the brief. We must legalise copyright of the ideation, which may not be stolen and used at random. 3. We must have a regulatory authority that governs marketers and ad agencies with SOPs and rate cards for all deliverables. We must bind the defaulting clients with monetary and punitive charges and stop all their work being published, aired, digitized, or released in any media. Ad agencies must return to the most coveted place of work, growth, career orientation, and the place to be seen and heard.”
Kanchan Datta, President of Kolkata Ad Club and Founder and CEO at Inner Circle Advertising India Pvt Ltd says, “Advertising Club’s job is not to look after ethics and honesty in advertising. It is a platform for professionals and students of advertising and marketing to come together so that they learn from each other’s expertise. The Ad Club fosters a sense of bonhomie through award nights and enriches each other.”
Datta adds, “We cannot fight a legal case for someone else. We don’t have governance or power. We are not police. If someone is a defaulter, I can, at most, casually and informally call the client and request the client to pay.”
PK Natesh, who was the former President at Ad Club Cochin (now defunct) says, “Ad Club Cochin had a grievance redressal committee consisting members of the media who would address all such grievances from agencies and deal with defaulting clients.” He recalls an instance when a client had released an ad through a Kerala based agency and refused to pay the advertisement bill saying they did not get top position on a premium page. But they had not paid for the premium page. “When the agency complained to the publication, they considered the same and stopped accepting any ad from that client. Eventually the client had to settle the invoice fully. Only after the payment was made the publication gave clearance to the client.”
Ramesh Narayan, who is currently a member of International Advertising Associations’ India chapter and was a President in 2001 at AAAI says, “In my term, I have helped many agencies recover their money by cooperating with other industry bodies like Indian Newspaper Society (INS) and Indian Broadcasting Association (IBS). Working along with them, we have in fact reached out to clients and have had meetings with them and have successfully recovered money for them for larger agencies.”
Narayan clarifies that AAAI is one of those associations which has a tabular membership; the fee is lower if the agency is smaller. “During my term, we had seven categories, the largest agency would be in category 1 and the smallest one would be in category 7.”
Great expectations killed
Still, independent and smaller agencies feel shortchanged and left in the lurch, due to the focus on larger firms that have clout and market presence. An independent agency chief Storyboard18 spoke to said agencies like theirs have nowhere to go. He cites the example of reputed large agencies so desperate for business that they cut their fees by 30 percent just to compete with indie firms. “It is unviable and eroding the entire industry. But we can’t do anything about it. The ad industry lacks unity. While we push clients to grow with purpose and take a stand, we can barely stand up for ourselves and each other. Shame! It’s self-destructive,” says another agency chief on the condition of anonymity.
Anisha Singh Motwani, Founder-CEO, QED India, says one would have expected the industry bodies to be a bit forward thinking and already develop some sort of system for new and independent agencies because the latter has been mushrooming for a while now.
Due to no such initiative, a lot of freelancers have come into the market and are undercutting the amount that agencies would charge. As a result, clients always want to lower their spending and look for cheaper alternatives. “Credibility and quality are slowly going out of the window. It’s all becoming about who is charging the cheapest, and even after that, clients are not willing to make payments in time. Sometimes, when you follow up after 3-6 months of no payment, it seems like you are harassing the client,” says Motwani.
“Independent agencies have a smaller capital; we can’t really give 100-plus days. There is really nothing that prevents us or protects us if a client suddenly refuses to pay. More and more creative people who have made their own agencies are left in the lurch and, therefore, also moving out of the industry, and companies are shutting shop,” she further adds.
Motwani shares her own personal experience and says, “As an agency, we have had issues where we worked with a worldwide agency that got us to do a lot of work and didn’t pay us. I could have taken legal action, but I was told that other big agencies would refrain from speaking to me; ultimately, who is going to believe David? Everybody believes Goliath here.”