Inorganic growth is about building expertise, not revenue: Rana Barua

Growing at 30% YoY, the advertising network Havas in India earns one-third of revenue through its diversified services like CX, Havas Play, Havas Market and CSA, told Rana Barua, Group CEO, Havas India, South East Asia & North Asia (Japan & South Korea) to BestMediaInfo.com in an interview.

Since joining Havas, Barua has overseen numerous acquisitions and expanded the team from 200 to 2000 members. However, he emphasizes that organic growth remains paramount, constituting 70-80% of their overall growth. Barua views inorganic growth as a means to enhance expertise rather than solely focusing on numbers or revenue.

After placing India in the top 10 Havas markets across the globe, Barua shared that Havas is open to more acquisitions, mainly in the CX, consulting, and social media agency space.

Excited about Havas being listed independently by the end of 2024 or the beginning of 2025, Barua said, “Our mission is to build Havas into a much more aggressive and robust ecosystem.”

Excerpts:

You've got the responsibility for nine additional markets. How do you plan to give equal attention to each one to ensure none is neglected? Will the Indian market remain a top priority for you?

Taking care of nine additional markets is a big responsibility. However, when it comes to giving attention to each one, my focus will be on ensuring that no market is neglected. India remains a top priority for both me and Havas globally.

Now, when it comes to prioritising among these nine markets, I'll be placing extra emphasis on four of them – Singapore, Thailand, Malaysia, and Indonesia. These markets show great potential for Asia and have a significant history in the world of advertising and media. That being said, it doesn't mean we will overlook markets like South Korea, Japan, the Philippines, and Cambodia. Each market will have its relevance and importance, and we will have a clearer plan in the next month or two about how we approach and prioritise them.

Many clients say that agency heads show their faces once a year, at the beginning of the contract or the end of the contract. How do you want to react to this?

Fortunately for us, our regional team is very strong. Of course, I will meet Havas clients in all the 10 markets. I have already met a few in Singapore. My intention is not to shake the boat but to sharpen the product, give it some direction, and have a clear strategy about how we can become a bigger player in the global conversation.

How was the growth for Havas in 2023, and what goals have you set for the agency in 2024?

Havas Network has been growing more than 30% year over year, which includes both organic and inorganic growth. We brought much of our global expertise to India and forged strategic alliances in 2023. We launched Havas Play, Gameplan and Havas People. Our base has become large and helped us become one of the top 10 markets for Havas globally. Initially, we had a modest team of 200–250 individuals. Presently, Havas Village accommodates 2000–2500 professionals. This figure is poised to double within the next 3–4 years.

What part did organic growth play in the overall expansion of the company?

Organic growth plays a critical role and has contributed over 70–80% to our growth. Havas Media and Shobiz have grown massively organically in the last few years. Havas Worldwide won 5–6 clients last year and began receiving more business from existing clients. In just two years, Conran has evolved from a small beginning into a significant revenue generator, boasting major clients such as Coke and Nestle.

Inorganic growth is just a way of building expertise. Our acquisition strategy has never been about building numbers or revenue. Our approach is to provide the fast-growing expertise that the ecosystem desires.

Are there more acquisitions in the pipeline?

Certainly, there are a couple of places that we are exploring, not only in terms of India but also on a global level. We are looking at consulting and CX as areas in which we wish to explore acquisitions.

Another area where we have a gap is in the social media digital agency space. I believe that for a creative agency, whether classical or integrated, to be proficient, it must have a digital agency that has been there for some time. We do have digital capabilities, but not at scale.

All the agencies and companies that you have acquired have different cultures and subcultures. How did you integrate all of these cultures into the main culture of the Havas Village?

During the initial years, it was challenging as our own culture was not clearly defined. We were acquiring agencies while simultaneously building our core product, resulting in a room filled with diverse ideologies.

However, once we identified and settled down, the process became easier. Presently, we have distinct cultural nuances and values—simple, straightforward, and entrepreneurial in approach. It's an employee-first culture where individuals are invited to contribute based on their expertise.

We maintain a distance to preserve their independence, allowing them to uphold their values and ethos. Subsequently, we seamlessly merge backend offices. Led by me, a 34-person management committee meets once a month, be it virtual or in-person. When agencies become a part of Havas, we don’t even call it acquisition; we call it partnership.

Having said that, we don’t rush into acquisitions. Our average ticket time is between 18-24 months. We first form a strategic alliance and then exchange an NDA. The acquisitions don’t happen until we are ready to release the money into their banks.

Havas' media business is strong. How do you plan to enhance the agency's creative side? Any notable creative wins or campaigns from Havas Creative recently?

While Havas Worldwide may not have secured notable awards, the team is producing excellent work. There were numerous wins last year in terms of businesses and pitches. Havas Worldwide created about 40 campaigns in a year, including work for UTI, MamaEarth and several workpieces for Reckitt. Although these might not be the most talked-about campaigns, they showcase the agency's creative strength.

The perception of Havas Creative is indeed weaker than that of the media. Our media business has created a strong and stable presence over the last 15 years. Nevertheless, the creative team is experiencing exponential growth with strong leadership at the top now. 

While ‘running campaigns’ contributes to revenue, how vital is it for a creative agency to take the risk and occasionally produce big idea-led works?

Big idea-led work should happen regardless. Our job is to ensure that we have big ideas because that makes you more attractive and makes you stand tall in a crowd. Havas has already started doing that. We will also be entering a piece of work at Cannes Lions this year.

In a scenario where adex growth is primarily in media buying and martech, how can creative agencies stay relevant and increase their share in the growing adex?

The clients will be happy to pay a premium if we give them a solution out of the ordinary. I encourage Havas Worldwide to look at itself as a solution provider and not just a creative agency. To do that, Havas Village philosophy powers Havas Worldwide to bank on the roster of 17–18 specialist offerings within the group. Like this, it can offer business solutions and not just creative ideas.

Agency remunerations are down to 0.25-0.5%. When agencies offer value-added services, they expect them to come as value-added and not pay additional fees for them. How do you plan to navigate clients' focus on reducing creative and media commissions?

We call value-added services ‘diversified services’. Very smartly, in the media space, we have hiked off diversified services as a very fast engine of growth. Under Havas Media, we have Havas Play, Havas Market, Havas CX, Havas CSA and a few others. All these diversified services have their own leadership teams in place.

The future might be tough for agencies selling one form of service. For us, with Havas Village philosophy in play, many new opportunities open up with the kind of diversified services we have. Diversified services add 30% to our revenue, and this percentage is only growing.

Agencies such as Dentsu are transforming into marketing x tech consulting firms with an eye on fee structures like consulting firms. So how realistic do you think this strategy is and do you also intend to take ours in that direction?

We will never go in that direction at all. For us, the business of creativity will always rule and we will only stick to that. We love to position ourselves as a challenger brand.

Agency networks such as Publicis and WPP recently announced big investments in AI capabilities. What exact scope agency networks are exploring and how is Havas approaching AI?

Most of them have a global tie-up with Adobe. We have also done the same. Tie-ups like Adobe will prepare us for the future. We cannot ignore AI. Havas is working on a new operating tool, which will be announced soon. This tool will help integrate data, consumer insights, content generation and meaningful brand philosophy to create very effective work. We have also brought a world-class production company Prose on Pixels to India. It was launched at Cannes last year, serving as a robust backend for digital production globally.

In 2023, there were talks of mergers and consolidations in the M&E space. How do you analyse the industry, and how well-prepared is Havas for future challenges in this evolving ecosystem?

Our global CEO has definitively communicated that we will independently list Havas by the end of this year or early next year. Our mission is to build Havas into a much more aggressive and robust ecosystem. As for my overall perspective on the industry, I believe consolidation is necessary to enhance efficiency.

Agency networks face challenges in profitability, often resorting to hiring freezes and layoffs. How is Havas handling this challenge, especially when skilled talents are crucial for business expansion?

The growth of a business is closely linked to the quality of its talent, which in turn impacts profitability. We prioritise hiring efficient individuals who contribute to driving profits rather than simply filling positions. It's essential not to hire for the sake of it; instead, focus on hiring the right individuals and offer competitive salaries. Traditionally, we've been accustomed to abundance in India. Here, joining a company often comes with demands for an entire team, whereas abroad, individuals typically request only a workspace. This mindset shift is necessary for progress.

How can traditional mediums like TV, print and radio continue to attract advertisers’ attention in the current advertising landscape?

Traditional platforms face a significant behavioural challenge as they have become accustomed to specific methods of operation and are resistant to innovation. They must innovate at the same pace as advertising agencies to remain relevant. A valuable lesson in disruption can be gleaned from out-of-home (OOH) advertising, which has evolved considerably from the time it was declared obsolete. I don’t remember one big innovation across print and radio. It’s ad agencies that come up with innovative ideas on platforms, not the other way around.

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