Aurora Magazine

Promoting excellence in advertising

Survival of the cheapest

Published in Jul-Aug 2019

The question is: Where is the tipping point at which you cannot find a good resource on a cheap package?

The Musharraf era, which spanned almost eight years, saw significant expansion within the media landscape, most notably the mushrooming of privately-owned news and entertainment TV channels and the FM radio boom. Today, the scenario is changing as the big FMCG companies halve their budgets or shift their spend to other platforms, much to the detriment of TV, print and radio. As a result of this, and based on the notion of ‘survival of the fittest’, the media has started to rely on the ‘survival of the cheapest’, with reduced rates and lower creative fees and value-additions.

Advertising agencies too have been affected. Clients still want specialised, dedicated teams to work on their accounts, but for lower fees. This results in downsizing and a cut in salaries, bonuses and other benefits. Although I don’t blame the agencies, the question is: Where is the tipping point at which you cannot find a good resource on a cheap package?

If we look at the effects of the downturn on media buying houses, the key take-outs are not that different from the effects on the creative agencies. They are still working for the same percentage but the total business revenue is not the same. The fact is that not only have the FMCG giants cut their media spend, we are also missing those silly telco wars and mobile handset manufacturers – both of which were among the biggest spenders in recent years.

Asrar Alam muses on the impact of the downturn on the agency and media buying business.

It’s difficult to put an exact figure on this recession but according to Zameer Qureshi, CEO, Starcrest Communications, the decline might be as high as 25%, which makes for a disturbing figure. Slowly and surely, this situation, if it continues, will lead to another problem: there will be hardly any competition between media buying houses. Over 70% of the market seems to have been cornered by the three big media buying houses, which disposing of a bigger pool of media clients, are able to obtain better rates than the smaller players. The result is that the big players are becoming bigger and the smaller ones, smaller. A small media buying agency is unlikely to be able to offer competitive rates (because their turnover is small); small-sized creative agencies will have a hard time providing their clients with dedicated teams for separate brands. Hence, survival of the cheapest is going to be a cut-throat business, resulting in less competition.

Media budgets used to be five times the size of the production budget, which was a normal practice. Yet today, production budgets are miniscule and more fragmented as most brands prefer to make multiple digital videos rather than a big budget TVC in a calendar year, which is also a big reason why the number of small-scale production houses is increasing. In order to support the industry, we need to encourage local productions of TV commercials so that dollar supremacy does inflate a project’s budget. Another disease we have in the industry are those nasty kickbacks, which everyone seems to be ignoring. They are like cancer cells that spread in the bones and eat away the whole body, resulting in a final product that is weak and substandard.

Asrar Alam is Creative Director, Spectrum VMLY&R.