Jio, falling handset prices drove digital disruption
Chairman & CEO, South Asia, Dentsu Aegis Network
First of all, 2017 had the overhang of the demonetisation that had taken place at the end of last year. The first quarter was a bit slow. However, around April we were done with the impact of demonetisation. But towards the middle of the year, we were again hit by the GST slowdown. So, the first eight months from an advertising perspective were quite slow and the growth was pretty muted. It was with the festive season that the pickup really started and it was around the months of September-October that things started looking up for the industry.
Looking back, the year has turned out to be much better than what was initially anticipated. In growth terms, it has not been a spectacular year but the industry has managed to register a double-digit growth, between 9.5 and 10 per cent. In terms of one big trend or disruption this year, digital for one has come to the forefront. There are various factors to it. One significant factor was the launch of Reliance Jio last year which brought data prices down significantly. Secondly, the bandwidth improved. So if I was paying ~100 earlier, now I was paying ~5 for the same amount of data. Earlier, I as a consumer was getting x bandwidth, now I am getting 20x bandwidth at ~5 instead of x bandwidth at ~100. From consumers’ perspective this has been an exponential development and it has resulted in significant growth in data consumption.
The other thing is the falling handset prices. Reliance Jio this year literally ensured that through its unique offer consumers can get a handset for almost free with buyers getting the initial deposit of ~1,500 back in three years. Now, other manufacturers too are talking about smartphones priced at ~2,500. These two factors from a macro-level helped the industry to grow.
The other big factor, besides these two developments, has been the changing consumer behaviour. The younger consumer has moved to digital in a big way. Every business now realises that it is impacted by digital.
The year 2017 will be remembered as a year in which digital came in more prominently than the years gone by.
Agencies and marketers and everyone else are going to realise that digital will not remain a medium. It is going to be the way you do your business. And there will be no business that is not going to be impacted by digital. Even if you are a popcorn seller! Users, while booking tickets from online platforms like Bookmyshow.com, get an option to buy popcorn along with the ticket. The bigger point is that digital in 2018 is moving away from being a medium to being the way business is done.
The digital transformation wave or tsunami is going to hit every single business. It is an area where the consumers are leading marketers and agencies alike. The consumer is moving faster than many brand owners and agencies are. The impact of this would be that a lot of legacy, old-world agencies will be shaken up and the more agile and forward-looking future-proofed agencies will do much better. The second thing is that we are in an era of specialisation. Clients do not want to deal with generalists. For example, in digital they want to deal with a digital expert, within that they may be looking for a search expert. It is an era of super specialisation. But agencies have structured themselves in silos and the client is going crazy in dealing with say a creative agency and a digital agency.
In this respect, the solution of one P&L (profit and loss account) has proven to be more successful. One P&L means that we (Dentsu Aegis) are 26 agencies, but when we report out of India we report it out as Dentsu Aegis Network India. In doing so individual silos do not matter. What this essentially means is that I can move people and resources around according to specific needs of a client. And that is why we as an agency have moved from 40 to 50 to 3,300+ people.
Most agencies are going to try to adapt in some way or the other to the one P&L model. The difficulty would be that they have been structured to work in silos for years altogether. So it is very difficult for them to have one P&L. In our case the transition was easy as we were a relatively late entrant and set ourselves as a new age agency. A lot of agencies will want to do the equivalent of one P&L. Some will scrape through, but many will struggle.
Going forward, I believe 2018 will be a good year as I anticipate more than 12 per cent industry growth for the calendar year. And digital will continue to grow more than three times that of the rest of advertising.
Meanwhile, my biggest concern for advertising as an industry, which was there in 2016, is there in 2017 and will continue in 2018, is actually the quality of talent. We are all busy poaching from each other. We are not growing the talent pool in a market that is growing rapidly. We alone have grown from 40-50 people to 3,300+ people. We have a huge demand for workforce which reflects in the agency at times recruiting in hundreds or even in thousands in a year, given the attrition that normally happens in the industry, coupled with our extremely rapid growth.
The question that we need to answer is where good quality talent will come from.
This year will be remembered as one in which digital came in more prominently than the years gone by
As told to Sangeeta Tanwar