TSBI's Harikrishnan Pillai proposes sustainable fix for “razor-thin” agency margins

New Delhi: The advertising industry is facing a critical challenge as agencies operate on razor-thin margins, according to Harikrishnan Pillai, CEO and Co-founder, TheSmallBigIdea. 

Pillai described it as the "worst thing" to happen to advertising this year, warning that such practices are unsustainable in the long term.

“Working on multiple projects might get volume, but the pressure will then come on to the team or their margins. The teams will burn out, or suddenly you're taking money from one division to run another,” he explained.

Despite the pressures, Pillai emphasised the importance of maintaining quality in both delivery and creativity, even if it impacts the agency in the short term. “It hurts the agency, but compromising creativity for a factory-like output is not the solution. Over time, people will realise the value of focusing on bigger, better creatives,” he added.

Pillai is optimistic that the industry will eventually recognise the need for sustainable, value-driven strategies to thrive.

TheSmallBigIdea has adopted an innovative approach to tackle margin challenges, steering clear of traditional commission-based models. Instead, they encourage clients to pay for staff time and take a share of sales revenue. “For example, if we sell 100 units at Rs 100 each, we take Rs 10 or Rs 20 per unit. This method earns much more than the 10% commission on media and instills confidence in clients as they see us aligning our earnings with their success,” Pillai said.

TheSmallBigIdea (TSBI) achieved a 63% increase in its top-line revenue compared to last year. Pillai revealed that the agency has successfully balanced its core focus on media and entertainment with significant contributions from the BFSI and pharma sectors.

"Two years ago, 80% of our revenue came from media and entertainment brands, while 20% was from other sectors. This year, 50% of our revenue comes from non-media categories like BFSI and pharma, without affecting media growth," Pillai told BestMediaInfo.com. 

Notable wins include GSK, for which TSBI created a film featuring Amitabh Bachchan, directed by Balki, and key projects with Mahindra, ICICI, and IDFC.

The agency has expanded its team size from 220 to 300, with 80-90 new hires in just six months. 

Pillai emphasised that the growth is driven by the agency’s creative and studio businesses, including ad films and retainers, rather than just media spending. "This growth reflects our focus on efficiency and value-driven services," he said.

"Our Middle East expansion is a natural extension of our growth strategy, driven by significant investments and market potential, particularly in Saudi Arabia," Pillai said.

Looking ahead, TSBI aims to:

1. Expand its media and entertainment portfolio across OTT, music, sports, and movies.
2. Strengthen its presence in non-media sectors like BFSI.
3. Scale its profitable operations in the Middle East and explore other global markets.

Pillai went ahead to share insights into the agency’s tech capabilities, spotlighting software called ACE (Advanced Content Evaluation). 

Developed in 2009, ACE was ahead of its time, offering a data-driven approach to performance marketing.

“At a time when Meta and Google were poised to dominate the digital advertising space, we created ACE to help brands optimise their social media content,” Pillai explained. “The tool evaluates posts across 64 parameters, providing actionable insights into the most effective creative configurations. For example, it could predict whether a smiling Shah Rukh Khan or an intense Salman Khan would resonate better with audiences in a particular context.”

However, the Cambridge Analytica scandal of 2018 ushered in stricter data privacy regulations, disrupting many digital tools, including ACE. Despite these challenges, TSBI Tech adapted, focusing on helping brands optimise their social programming.

“Similar to creating television programming, we enable brands to fine-tune their social content for maximum efficiency,” Pillai said. “This optimisation not only improves engagement but also reduces media costs significantly. For instance, reaching 1 million people might cost X, but with optimised social programming, it could drop to just 70% of X.”

TSBI Tech’s innovative approach has led to sustained improvements in content efficiency and strengthened brand partnerships. As the digital landscape evolves, tools like ACE underscore the importance of balancing creativity with technology to drive impactful marketing solutions.

Speaking about emerging marketing trends, Pillai emphasised the shift from Instagram pages resembling product catalogues to platforms that tell compelling brand stories.

“Brands need to stop treating social media like a notice board. With Gen Z making up 49% of the consuming economy, brands must adopt a creator mindset, crafting narratives that resonate,” Pillai said. 

He also highlighted the growing trend of CXOs leveraging personal branding through LinkedIn, podcasts, and YouTube to connect with younger audiences.

Pillai believes 2025 will see a surge in innovative content formats like audio and comics. He foresees animation playing a pivotal role, driven by generative AI.

“In the future, influencers could evolve into animated characters. Generative AI will democratise creativity, allowing anyone to build compelling characters and stories without requiring expensive studios. This will unlock new possibilities for creators who prefer working behind the scenes,” he said.

“For example, look at the Marvel Universe; these characters are products of imagination, like Spider-Man. Now, imagine everyone can be a Stan Lee because you don't need studios to create great animations. For instance, I could think of a superhero like Sparrow Man, who is very caring for people, and build a story around him. Even if I'm good at writing but not at animating, I don't need expensive animators to bring my character to life. There won't be just one Stan Lee; many people will come up with great characters, and generative AI will help them create those characters. AI will allow people to create stories without needing an illustrator. Generative AI can create multi-part cartoon strips, enabling anyone to be a cartoon creator," concluded Pillai.