Are small and medium-sized advertising firms struggling?

Mainline agencies have large multinational corporations as Agencies on Record, an amazing clientele, and a strong staff to provide their best. Yet, the picture may not be so good when it comes to independent agencies.

There has been a lot of discussion on forums with agencies in the mid-size range regarding inequality and creatives being paid less despite increased workload.

Aejaz Khan, Chief Executive Officer of Makani Creatives, stated last year in an assessment of the advertising business, "The Indian advertising market was expected to expand by 16% in 2022 to reach USD 11.1 billion" (Rs 88,639 crore). This would have resulted in almost 14.5 percent growth for TV and 31.6 percent growth for digital. The figures for 2022-2023 are not yet available, but if we achieve them, we will be the world's fastest-growing market. Businesses will have to deal with the war in Ukraine, economic issues, and the ever-accelerating development of technology affecting digital advertising in 2023."

SMAIs were paid less?

We contacted small and medium-sized advertising companies to find out if they were getting a fair share and the proper price for their work. The responses were mixed. While some agencies stated that they were having difficulty obtaining adequate funding, others stated that they were receiving adequate funding.

Resources are scarce

A mainstream agency may have a team of up to 25 employees working for a single client, whilst a mid-sized agency may have only four to five workers.

"Mainline agencies gain from their large teams," stated Apurv Verma, VP Of Operations, SRV Media. They feature 20-24 individuals who will be working on a brand. That obviously offers them an excellent starting point for negotiating the retainer. Small-scale agencies, on the other hand, can only dedicate eight to ten individuals, and practically every member of the team is on the tactical and execution front."

Is the use of digital/social media increasing the workload?

Commenting on how digital marketing has increased or contributed to creative agencies' work share, Rahul Vengalil, Executive Director at Everest Branding Solutions, says that while KRAs are addressed when an agency is onboarded, eventually the work doubles due to changing social media trends. However, even if the workload grows, the budget may not grow.

Vengalil observes a distinction between mainline and mid-sized agencies. "I recall working with a high-profile customer in India early in my career. My retainer for being the digital creative agency was x, and my counterpart's retainer for being the mainline agency was no less than 30x. This difference has narrowed dramatically over the past year, yet it still exists. Today, digital, or more accurately, social media, has become the primary medium for every client in India.

Addressing customer expectations

MNCs and heritage brands frequently use mainline agencies, who then assign work to SMAIs on a project-by-project basis. Those who approach SMAIs directly, on the other hand, are frequently new-born enterprises managed by people with little to no ad expertise.

"For example, if there are ten finest soap firms in the country, they will all go to the ten top agencies in India," said Prathap Suthan, Managing Partner and Chief Creative Officer of Bang In The Middle. As a new brand in the same category emerges, they will seek for mid-size or smaller agency."

Client loyalty is low

"It's unfortunate that scale matters in the agency business. We've collaborated with start-ups and small brands in the past. Yet, as they grow, they seek the services of a huge network agency. They eventually become a little fish in a large pond. Media and creative agencies within a holding company continue to offer opportunities for one another."

Despite these nagging concerns, some in the SME community remain optimistic. "Fortunately for us, our client roster 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," said Siddhartha Singh, Managing Partner & COO, Infectious Advertising. No one wants to cut corners if their thinking and production are on par."

"There are many times where independent mid-sized agencies are able to charge a premium above network agencies," stated Abhik Santara, Director and CEO of atom network. Midsize agencies can provide significantly more value because they don't have layers of hierarchy, and the ones who are paid are the ones who are truly involved in the business. Customers are astute enough to see this, and the cost advantage they enjoy is a result."

The SMAI's Future

"The independent mid-sized agencies are going to have a great run in the future," Khan said of the future of SMAIs in this ever-thriving market. Large companies will seek out independent mid-sized agencies for better, more engaged service. The big network agencies will undoubtedly be present, but independent mid-sized firms will thrive as well."