The Hindu Business Line : O&M scouts for specialist agencies to take over

Chennai, July 11 Advertising agency Ogilvy & Mather is on the prowl to acquire specialist outfits in high growth areas such as new media and healthcare communications. “We are at the moment looking at four or five acquisitions in India. Not in traditional advertising but in what we perceive to be new growth areas. These things take time… acquisitions have to be complementary to our existing business in cultural, commercial and in product terms,” Mr Miles Young, Chairman, Ogilvy & Mather Asia Pacific, told Business Line.

However, Mr Young clarified that there aren’t many outfits around that would be fit to be acquired. “We are not buying volume but we are buying talent and added value,” said Mr Young. Affirming that O&M has huge investment plans for India, and specifically in Bangalore, Mr Young said that the agency network is taking steps to globalise out of India. “We see this as a place which can play its full part in terms of creativity and in terms of servicing our clients.” Mr Young was in Bangalore on Tuesday for the second WPP Asia strategy meeting.

Elaborating on the point of the worldwide O&M network using the Indian agency as an outsourcing base, Mr Young stressed that he doesn’t see the country as an outsourcing centre for low-cost work. “India has moved beyond that; Bangalore is not cheap! If you want cheap, go to Bangladesh; I’ve been there and seen some of the low-cost hubs. I’ve seen some production houses in Bangladesh which are world class and much cheaper than what you would get here. So, I don’t see India as low-cost but much more — a value-based centre. In the 12 years I’ve been in Asia, Indian creativity has transformed itself from poor to very good. So, this is the opportunity to provide high value creativity, not low cost.”

Comparing India and China, Mr Young said that India is a star in the O&M network and “performs disproportionately in terms of its creativity and soft skills.” China, he said, has a better developed infrastructure but less so in soft skills. However, Mr Young said, “Even though I am greeted with howls of disbelief, India is still a small market in terms of advertising; it’s about the size of Indonesia but is growing very fast and its trajectory is going up all the time.”

The reason it’s small, he said, is that Indian advertisers spend much smaller amounts on advertising as a percentage of their sales than other advertisers in Asia. “And, if you were to ask why is that, it has to do with the antiquated distribution system in India. It’s changing dramatically but Indonesia’s distribution system is much more organised than India’s and that’s where the difference lies. The hype about India is exaggerated but the take off is about to happen. If this is good, what’s going to come will be even better. I am enormously optimistic about India; this is an underleveraged market for me,” said Mr Young.

The lower ad spends in India, Mr Young said, is because historically the distribution system has been rather antiquated. “The normal effect of advertising where you put in something quickly through modern retail trade hasn’t worked here yet. That’s the issue. Advertising explodes when retail trade concentrates,” he elaborated.

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