Are small & mid-sized ad agencies struggling?

Mainline agencies have big MNCs as Agencies on Record, an impressive clientele and a strong team to able to deliver their best. However, when it comes to independent agencies the picture may not be so rosy.

There has been a lot of conversation on forums with agencies coming under the mid-size stratum speaking about the disparity and the creatives getting paid less despite increase in workload.

Sharing an overview of the advertising business last year, Aejaz Khan, Chief Executive Officer, Makani Creatives said, “The Indian advertising market was forecasted to grow by 16 per cent in 2022 to reach USD 11.1 billion (Rs 88,639 crore). This would have led to over 14.5 per cent growth by TV and 31.6 per cent on the digital side. The numbers for 2022-2023 aren’t out as yet, but if we did manage that, we will become the fastest-growing market globally. In 2023, businesses will have to deal with the war in Ukraine, economic challenges, as well as an ever-faster development of technologies impacting digital advertising.”

SMAIs paid less?

We reached out to small and medium advertising players to understand if they were getting the fair share and right penny for their efforts. The reactions were mixed. While some agencies said that they were struggle to get the right money, others shared that they were getting top dollars and the right amount.

 

Limited resources

A mainline agency often has a team of up to 25 people working for a singular client but in a mid-sized agency it could be down to four to five people.

Sharing more on this, Apurv Verma, VP – Operations, SRV Media, said, “Mainline agencies benefit from their huge teams. They showcase 20-24 people who will be working on a brand. That automatically gives them a good way to negotiate as far as the retainer is concerned. Whereas, small-scale agencies can’t allocate more than eight to ten people and almost each member of the team is on the tactical and the execution front.”

Digital/Social media increasing workload?

Speaking on how digital marketing has increased or contributed to the work share of creative agencies, Rahul Vengalil, Executive Director at Everest Brands Solutions, says while KRAs are discussed when an agency is onboarded eventually the work doubles due to the changing trends of social media. However, even if the workload increases the budget might not increase.

Vengalil notes that there is a disparity between mainline agencies and mid-size agencies. “I remember a time early in my career when I was working with a marquee client in India. My retainer for being the digital creative agency was x and the retainer that my counterpart charged then for being the mainline agency was nothing less than 30x. This gap has significantly reduced over the year but still exists. Digital or more rightly put social media has become the lead medium for every client in India today. The expectation is for every piece of content that is put up on social media to provide the brand’s POV, and if possible make it viral,” Vengalil had remarked in a column he wrote for e4m.

Meeting client expectations

MNCs and legacy brands often go for mainline agencies, who in turn give work on a project-basis to SMAIs. However, those who approach SMAIs directly are often new-born businesses led by people with less to no ad experience.

Seconding the same, Prathap Suthan, Managing Partner and Chief Creative Officer at Bang In The Middle, said, “For example, if there are 10 best soap companies in the country, they will all go to the 10 top agencies in India. The moment there is a new brand in the same category they will come to mid-size or smaller agencies.”

He went on to explain that a majority of new businesses might not pay the right amount as they are not able to understand nature and effort put into the work. However, there are cases when they come around, Suthan added.

Scant client-loyalty

“It is a sad that size matters when it comes to the agency world. Our experience has been that we’ve partnered with start-ups and small brands. But once they grow then they go for a large network agency. They end up being a small fish in a big pond. Agencies within a holding company, media and creative, keep opening doors for each other.”

Despite these nagging issues, there are some in the SME circle who are still hopeful. Siddhartha Singh, Managing Partner & COO, Infectious Advertising, said, “Fortunately for us, our roster of clients includes a lot of pedigree marketeers, the likes of Ultra Tech Cement, Bayer, IDFC Bank, Tata’s and TBZ, who in turn work with other agencies too but have never discriminated against us because of our size. If the thinking and the output are at par then no one likes to cut corners.”

Echoing the sentiment, Abhik Santara, Director and CEO, atom network, said, “There are many occasions where independent mid-sized agencies are able to charge a premium over network agencies. Midsize agencies are able to offer far more value, as they don’t have layers of hierarchy, and the ones that are charged for, are actually the ones involved in the business. Clients are smart enough to see that, and the cost advantage they get is because of that.”

The future of SMAIs

Speaking about the future of SMAIs in this ever-thriving space, Khan said, “The independent mid-sized agencies are going to have a solid run in the future. Big brands will want better, more engaged service and will turn to independent mid-sized agencies. The big network agencies will be here for sure but the independent mid-sized agencies will thrive too.”