The evolution of the advertising agency

"There is a tremendous pressure on the traditional agencies' structure, which appear ancient and linear in a completely complex and dynamic ecosystem."

"So, it's become a scale battle, a capability battle, and a core competency battle."

"As agencies we have to relook at the way in which we are structured, start offering everything that the clients want and become nimble. But this is work in progress."

Anil S Nair, CEO & managing partner at L&K Saatchi & Saatchi India, in conversation with Ritwik Sharma.

• Why 2017 will be critical for the advertising industry

How have advertising agencies restructured themselves in response to changes in the industry in recent years?

Almost eight years back, when digital started coming in, you needed somebody who understands HTMLisation, a little bit of tech so you started seeing a new set of people doing that.

Traditional agencies handed over the fundamental creative design to somebody who made an animation based on that. And then all the agencies started doing it in-house.

But eight years back a take-off on the digital medium started, which coincides with the development of social media in India. So, you had certain cases like Kolaveri Di suddenly from nowhere reaching some numbers which even television couldn't deliver.

People who understood technology started digital agencies. And some agencies jumped into the bandwagon by converting existing direct marketing divisions into digital. That was a reactionary step. Agencies again began having more brand-driven specialists.

That is the first so-called significant restructuring that happened.

Globally, there was another wave largely because of the questioning of traditional media.

With the reality of media costs going up year after year, this questioning of RoI started. All said and done, TV and print measurement is quite archaic. The moment digital happened, you could pinpoint, slice and dice and arrive at a much more accurate data. So, marketers started seeing value out of it.

Then came the business consultancy firms who started coming out with a modelling, and as they still needed content they started buying smaller creative companies.

How have these developments impacted agencies and how can they best respond?

Globally, significant amounts of ad spend started shifting out, directly going to a Google or a Facebook and Accenture and IBM in certain cases.

Also with e-commerce, you knew who was buying. So far, it was about communicating. Now buying came into the picture.

Today, what has happened is for a marketer you not only can communicate, you can influence purchase and you can see who is buying at what time. The mystery is gone.

So, in the new reality entered the tech consulting firms, who said, "This digital ecosystem which you are talking about where consumer is buying is controlled by us and we can drive the algorithms."

So, they started buying smaller management consultancies and employing creative people directly there.

Agency networks have reacted by acquiring or aligning very strongly with tech companies and forming partnerships.

Eventually, what is happening is that there is a tremendous pressure on the traditional agencies' structure, which appear ancient and linear in a completely complex and dynamic ecosystem. So, it's become a scale battle, a capability battle, and a core competency battle.

As agencies we have to relook at the way in which we are structured, start offering everything that the clients want and become nimble. But this is work in progress.

• 'Relax son, it's just advertising'

Does it mean major changes in the core roles of agencies?

In the middle of all this, there is a very interesting truth.

The human mind is at the centre of everything because at the end of the day it's consumerism, which isn't triggered by need, but largely by want. That is no algorithm's control. You still need to emotionally appeal, so storytelling and engagement on that front is critical to it.

What an IBM can never answer is why do people buy? They can say when they buy and how much they buy. The ability to connect that with storytelling is still the domain of the agencies.

With diversification of services for an agency catering to multiple channels, what are the skills being demanded?

Today, a campaign is an unrecognisable thing from a traditional perspective. So, flexibility is a huge thing demanded of creative people because you're getting real-time feedback.

Second and more significantly, time has disappeared. Because you don't have many weeks, or many days for a campaign.

And also, you have to react to it, so it's not that you produce and it's over. It's live, so it is like your head chefs on a live counter in the middle of a large food hall.

And also a minimum technical understanding is required.

• Meet the billionaire poster boys of online advertising

What are the pitfalls of reliance on big data?

Data talks the way you want it to talk. Big data's problem is that. It is an amorphous, large universal cloud. Nobody has the full view. You cull out information. Now, it's exactly what you want to hear. Overreliance becomes a problem.

Have there been broad changes in consumption patterns in India, also because of the demonetisation effect?

Honestly, consumption patterns haven't changed. There has been a reaction to the thing, and I think the impact was largely at the distribution level.

Like our stock markets many things are sentiment-driven. The direct inconvenience-led impact would have been there but it's more sentiment-driven.

Obviously advertising industry faces a brunt when you see a slowdown of sale. Some launches were put off. Some big campaigns got delayed. But money flow is back in the market.

Also, there is going to be an automatic springback of consumers, since it's a consumerist economy.

• Is DeMo destablising the media?