"Martech, AI, and all are good PR talks. Those are all fee-driven models. We are investing a lot in martech but money will not come from there. It will come from performance. The growth and the margins are better on performance," Shashi Sinha, CEO, Mediabrands India, said in an exclusive interview with BestMediaInfo.com.
Sinha estimates the media agency industry witnessed a billing drop of at least 20-25% last year (January-December 2020) and hopes that 2021 will be a year of recovery. He believes media pricing will go back to the normal rates by May this year and the first six months of 2021 will draw revenue of about 85% of 2019 figures.
In the interview, he shares a different view from most people on digital growth and says that people are overstating the digital case.
How much degrowth have you seen in the business?
When it comes to remuneration, we have two kinds of clients. We have a fair mix of fees clients and commission clients. But in the pandemic, fees clients have been really supportive. They are big global companies and they have not really hurt us on the fees. So to that extent, our remuneration was protected. With commission clients, we obviously got hurt. A lot of large, local Indian clients are on commission and they didn't spend.
My estimate for the industry’s billing drop for the whole year (January-December 2020) is between 20-25%. This also depends on the medium: television would be 20-22%, print would be slightly higher, and digital would be slightly less.
The revenue drop would be around 12-15%.
Has there been any pick-up since October?
The last quarter was good for two reasons. It was festive and then there was the IPL, which turned out to be very good for us. That gave us billing and revenue. It's not that in 2021’s first quarter, the recovery is 100% because our clients are still facing many challenges. The best way to compare is with 2019. I personally feel that the first six months of 2021 will be about 85% of 2019. It will be fabulous compared to 2020 because April-May-June was a disaster.
So media pricing is also not back to the 2019 levels?
Not really. It is very early to predict. It will definitely not come back in the first quarter. I'm saying six months but it may come back by May.
Can you tell us about the digital part of the business — the growth/degrowth in overall spends and remuneration?
I have a slightly contrary view to what people are saying. We have a large digital company that does both mainstream display advertising and also search and performance, etc. In the performance part, there has been a huge growth.
An automobile company will spend on the CRM part but if they are not selling cars, they will not advertise. I think people are overstating the case about the display advertising part.
Many are apprehensive about digital as large parts of the spends are going as spillage. They are spending but they are not getting the returns. Your comments?
There is a controversy about BARC, but finally, it is a third-party driven currency. In digital, the heart of the problem is the display part, which is where a chunk of large agencies are, without third-party measurement. It is very subjective and you need third-party measurement there. But on the performance part, if I'm doing a lead generation campaign for an auto client, and if those leads convert to sales, they pay for it. To think of it, why is it that the largest e-commerce players are spending more offline than on digital? Look at Amazon, Flipkart, Unacademy, Byju's; they are spending a lot more offline. It's very easy to say that they are building a brand image but finally the audience will be digital.
Is the performance part going to be big in the coming years?
Performance depends on delivery. The performance will be measured against the end product: sale or whatever. It's not about likes and all. It will finally be about adding to the cart or not.
How are you expanding your scope of services and streamlining the businesses to remain profitable?
We are doing a lot of things in the performance area, all in digital. We are getting into CRM and e-commerce. The growth and the margins are better on performance. For example, our long-time client, Zodiac, used to hardly spend on mass media. In the pandemic, we took on their web store, which was not doing well. It's a classic non-puller and media agencies generally don't do it. I'm not asking for any money. All promotion costs are mine; they just give me a percentage of sales. We took this on in August last year. So far, we have improved dramatically. This is the future. It will be extremely profitable. This is the ultimate definition of performance. It's very fashionable to say consultancy, but clients don't give us real value for consultancy. Today people are launching e-commerce and getting a fee for it. That's not going to make a big difference and clients will hardly pay.
Martech, AI, and all are good PR talks. Those are all fee-driven models. We are doing a lot of investments in martech but money will not come from there. It will come from the kind of work we are doing for Zodiac.
What percentage of growth are you looking at in 2021 over 2020 and 2019?
Even if we get 12-15% revenue over 2020, we will be happy. I haven't calculated over 2019 but it won't be dramatic. My expectation is that it would be single-digit growth, around 5-6%. There may not be growth in billing but still there would be growth in revenue.
What role would new business acquisitions and retention play?
It does play a role, but, finally, it comes down to the client's business doing well. New business cannot be the only thing for a source of growth. It's very important for morale, for the health of the organisation and fulfils many of the objectives. But the money comes from the performance of the existing clients. Existing clients are more important. New business is welcome but finally your heart has to be from existing clients. In 2021, the focus will be on how clients' businesses grow.
What are you expecting 2021 to be like?
I'm a very touchy-feely kind of person. I would go to the offices and talk to people. For me, these nine to 10 months have been a disaster doing everything on calls. For me, meeting clients and spending time with teams is most critical. If that comes back, I will be very happy. So my desire is that this vaccination reaches a critical mass and we can get back to that. Working from home has some efficiency—it ensures balance and quality of life. But I'm very keen to get back to the office.
When do you think it will get back?
The sooner the better. I have started going to office once a week. I’ll encourage the seniors to come. At least those who don't come by public transport. I’m hoping by March-April, we can get back to work.
Did the virtual pitching discourage you, your team, and the industry a bit?
It did. While it made life easier for a lot of people, finally a pitch is not just about the content which you are putting on. It's also about body language. My experience is that 50-60% is the content and 30-40% is the chemistry. So the chemistry gets reduced on these virtual platforms.