Advertising, whose Big Do ‘Ad Asia', begins in Delhi on Tuesday is like the view men and women hold of each other: a pain in the fundament but, oh hell, can't do without them either.

And, since economists like to analyse everything to death, advertising too has been at the receiving end of their tender ministrations.

Expectedly, they haven't been able to agree whether advertising is good or bad – or whether it is ‘a' good, so to speak, when it is not being ‘a bad' (‘bads' in economics are the opposite of goods, that is, things which you need to be paid to consume, instead of paying for them).

Policy makers in welfare states have taken a critical view of advertising in the past, terming ad expenditure as excessive and harmful, manipulating people to buy wrong products at wrong prices.

Initially, economists were also intellectually dismissive of advertising. Their approach was summed up in the Latin saying de gustibus non estdisputandum , meaning roughly that where tastes begin, reason ends — and with it, the scope for sensible argument.

Without tastes (or preferences) there would be little or no advertising because after all, most advertising is aimed at altering consumer preferences in one way or the other.

This, of course, led to an intensely pointless debate over the morality of cunning ad men and women trying to put one over the gullible masses. The righteous always assume that everyone else is an irrational fool.

But prosaic as ever, economists led by the great Gary Stanley Becker, the Nobel winner in 1992, came up with an alternative explanation that leaves no room for ethics.

The answer, said Professor Becker, lies in the theory of complementary goods. Think, for example, of eating peanuts while drinking whisky during a cricket match: which should the advertiser advertise, peanuts or whisky or both? Or, if they are truly brimming with low cunning, ice?

The argument gets a little complex after this, so enough unto the day. But in a very tiny nutshell this theory holds that ads and the things advertised are complements, in the sense that an increase (or decrease) in the demand for one results in the same for the other.

Market structure

Be that as it may, the market structure argument is the most persuasive. Firms advertise because they want to sell; and the more competitive the market is, the more they advertise.

Economists have tried to analyse two other related questions. One is the negative utility caused by interruptive ads on TV and radio and the other is if you are consuming ads, why are you not being charged for it? There are no convincing answers.

Then there is the word-of-mouth advertising which requires no intermediation by an ad agency. Trust plays the key role here, but the odd thing is that while in the case of, say, an Airtel ad you don't have to trust the agency that created the ad; in the case of a restaurant, you do have to trust the person who tells you it is a good restaurant.

This elimination of intermediation brings up the central question for advertising in the 21{+s}{+t} century – will ad agencies survive, and if so for how long? In this age of ‘uncertainty', which incidentally is Ad Asia's theme this year, a lot of people in the industry have begun questioning the very basis of advertising.

Central question

The question, in India, at least has arisen from two main events – the overemphasis of certain advertisers on making creatives with an eye on awards rather than furthering sales or growing the market; and the advent of technology and consequent unbundling of advertising services taking place.

No longer is the 30-second commercial the be-all of advertising, with events, public relations, below-the-line promotions all playing a big part, and new channels opening day by day Already, digital technology, where return on investments can be measured, is threatening legacy adservices. That is, if producers can send their ad directly to you via the Net or mobile phones, and if you trust them more than you trust the glib-talking agencies, why would marketers simply not get in touch with you directly?

A related issue is the maturity of markets. Typically, ads in the West contain more information about the product and less of lifestyle hype whereas in less mature markets, it is the other way about.

Life in the old dogs yet

Industry forecasts say that China and India hold the keys to the future of global advertising. The markets are here, the brands have all arrived here and economic growth is also here. So together India and China will account for about a quarter of global industry growth between 2011 and 2016 predicts a Magna Global report. The size of the Indian advertising industry, at around Rs 32,000 crore, is only 0.3 per cent of GDP. The global average is around 1 per cent. In the US, it is 2.5 per cent. This is what gives Indian advertisers hope that there is immense room for growth and the magical figure of one per cent of GDP, if not more, will be breached soon.

Also, the advertising agencies' biggest line of defence is that companies cannot wish away the brand building value proposition that advertising offers. In a highly fragmented market, and with an even more fragmented media, where every changing day technology is presenting new ways of reaching the customer, the core function of advertising may not change. But the form surely will.

So what do advertising agencies need to do to continue as the most popular resource for marketers wanting to grow the market?

Answers anyone? Winner will be allowed to write the tagline on the headstone of ad agencies.

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