India's advertising industry is going through its toughest phase ever as the ongoing coronavirus lockdown may even mean a negative growth in the present calendar year.
In an interaction with BestMediaInfo.com, Ashish Bhasin, CEO, APAC and Chairman, India - Dentsu Aegis Network, said, "By no definition, 2020 is going to be a great year for advertising for sure. The most realistic scenario would be slightly negative to zero per cent growth this year."
Talking about how the DAN agencies are planning to absorb the economic impact of the Covid-19 pandemic, Bhasin said, "DAN agencies are taking stock of the situation on a weekly basis and taking whatever steps possible to protect our people’s and company’s future. As far as salary cuts are concerned, we are doing our best while keeping in mind that junior-level people should not be impacted."
Bhasin said that the Indian government should step in and help the agencies tide over the crisis.
"We should get our own money, which is TDS. As AAAI president, I have given all suggestions to the government in a way that it does not impact the exchequer. We have not asked them for sops. If they give our money back in time, we can use that to tide over the current situation."
There is a notion that life will return to normal after a few months, and there would be a bumper growth in the second half of 2020. This seems to be quite an optimistic view because even if the situation improves, the market may open up gradually, and hence recovery will not be as fast as expected. What is your realistic view?
I wish this comes true, but I do not think it is a likely scenario. The next two quarters are going to be very tough. This quarter is already going to be very bad looking at the lockdown until May 3. Who knows how much the market will open up after this.
When factories and industries shut down, they don’t resume operations at the click of a button. An industrialist told me that it would take four to six months after the situation starts normalising, even for coming back to the Jan-Feb level when the economy was already low. Labours have migrated, and there are other people in the chain on whom the industries are dependent. Raw materials have to come in. Above all, liquidity is going to be a major concern. Even as RBI tried to pump in some money, the liquidity crunch is a real and significant issue for medium-sized businesses at the moment. Amid all, advertising will be the worst hit being the relatively easiest expense to cut specially at a moment when everyone wants to conserve cash. So the talk of V-shape and U-shape recovery is not going to be the reality.
Besides the longevity of the virus situation, the monsoon will play a big role in recovery, on which 22% of the GDP depends. India is a very sentiment-driven market. If all goes well, like if rains and crops are good, Diwali season could speed up the recovery.
But by no definition, 2020 is going to be a great year for advertising for sure.
At the beginning of the year, most of the agencies predicted advertising growth between 11-12%. We will be lucky if we end this year flat or even slightly negative. The most realistic scenario would be slightly negative to zero per cent growth this year.
Undoubtedly, India will do very well in the medium term and long term.
Will Indian advertising outperform all the other countries in 2020?
Indian advertising will definitely outperform all the other countries. We will remain one of the fastest-growing major markets in the world. But, our benchmarks are not relative to other markets. We were used to grow by 15-18%. Then we came down to 10-11%. This year, we were looking at a growth of 11-12%. Let’s assume that we will grow by 2% but we will not feel great about it.
2020 was the first year when we were going to be a major market with $10bn (Rs 75,000 crore). So our relative share is continuing to grow. But relative to what we were expecting, it is going to be much lower.
Businesses except essential services are shut, and media platforms are almost running without advertising. With the two stakeholders bleeding, how much brunt agencies are bearing as the third stakeholder in the ecosystem?
Agencies are bearing the brunt like any other stakeholders in the business. The single largest cost for any agency is its people, which is between 60-70%. And that is the cost that you have to bear irrespective of the income.
Some businesses are badly hit. Events, out-of-home and sales promotion businesses have come down to near zero straightaway. If you have an airline or hotel as your client, the business will obviously come down to zero from them. Some parts may remain encouraging but overall I do not think that there is any part of the business that will remain unaffected.
How are the agencies reacting to the situation?
Profitability will be significantly hit. Agencies will have to tighten their belts and they will have to cut all expenses. We are renegotiating office rentals. On people’s cost, certainly, there will be no increments. Bonuses will go away. At some point and places maybe, there will be salary cuts. And last, I hope that scenario does not come, but there may be layoffs.
People will have to find different solutions depending on what their agency structure is, what their holding power is, and how long this crisis lasts. Hopefully, all these will be temporary measures, and once business is back on track, things will be back to normal.
When the entire workforce of an agency looks up to the leadership, how challenging is this time for you?
In many ways, it is also a test of leadership. You cannot ignore it. When you are cutting, you have to make sure that you are cutting the fat and not the muscle. Because there will be a rebound at some stage and you have to be ready for that situation.
In this litmus test, there will be some who will come out to be better than the other in the post-Covid world.
You have to be very honest, transparent and authentic. You have to tell your people that there is a big problem and everybody will have to feel the pinch, eventually. You have to be kind and sympathetic and make sure that you can minimise the impact and make it temporary. Communicate much more with your people. I feel that you have to tell them the truth and give them a real sense of the situation. At the same time, you have to be optimistic as leaders and cannot lose hope. Keeping the balance of authenticity and optimism is very important in such a crisis.
How should a leader react on every stage to protect business along with its people?
In such a crisis, you have to first and foremost worry about the safety and security of your people and keep in touch with them. Nothing is more important than human life in my view. Covid-19 came to India much later than China, where we had already implemented WFH and that learning helped us plan the infrastructure here. Unsung heroes in all this are IT people who made 3,700 people working from remote position simultaneously.
Then comes the continuity in business.
The third thing is stability once the crisis is over. Making sure people are not losing hope while taking all the precautionary measures.
The recovery phase is the last phase for which you have to plan.
At every stage, you cannot think of your targets.
At the same time, if it is about the safety of your people, it should also be about the safety of your business.
If you tell people at the top what the real situation is, and tell them that they all need to come together, then everybody rises to the occasion.
Many businesses have already started taking drastic cost-cutting measures, including layoffs. How would you react to this?
Every business will have to take all the drastic cost-cutting measures as much as they can. They have to conserve cash. Different companies will have to react in different ways depending upon their bit. It is also important that you have to take some steps because it is not business as usual. But it is not time to overreact. You shouldn’t take this as an opportunity to do what you otherwise may have wanted to do. Your steps should be measured in a way that you are in the position to start reversing those steps when the recovery starts.
How are DAN agencies preparing for such measures?
DAN agencies are taking stock of the situation on a weekly basis and taking whatever steps possible to protect our people’s and company’s future. As far as salary cuts are concerned, we are doing our best while keeping in mind that junior-level people should not be impacted as much as we can resist.
Government across the world are helping their businesses, including reimbursing the salaries of employees. What do you expect from the government of India?
Every government is handling this crisis in their way. From the Indian government, what best we want is that we should get our own money, which is TDS. As AAAI president, I have given all the suggestions to the government in a way that it does not impact the exchequer. We have not asked them for sops. If they give our money back in time, we can use that to tide over the current situation.
Would the global leadership come to the rescue of businesses in different countries?
The impact is global, and everyone is facing more or less similar situations. Every country leader’s task is to handle the business in his/her respective country in the most efficient way. When every market is in trouble, no country will be in a position to save the other.
Digital is said to have an edge over other mediums and as it forms a large part of DAN's business. Do you find yourself a bit comfortable?
While all media will be impacted, digital will be least impacted, and it will still grow. If the original growth prediction for digital was 27% for 2020, it might struggle to cross double-digits. When the recovery starts, performance marketing will be paramount because all the businesses will focus on sales and leads.
Finally, what would be your piece of advice for business leaders across categories?
I’d advise industry leaders to be very truthful, transparent and authentic.
Secondly, in times like these, you have to communicate more and not less. You can practise social distancing, but you must practise virtual proximity. Everyone is working for long hours at home in comparison to office. You get more ideas, and your teams get more reassurance. This makes the whole organisation knitted closely.
The third important thing is that this is not the end of the world. As a leader, you have to have optimism and instil confidence in your team.