A digital mediapalooza in the making?

Google and Facebook together received advertising revenues of close to Rs 40,000 crore last year, which is a significant amount. This is more than the outlay in all the TV mediums together, substantially higher than what was put into the print medium as well. As a digital marketer since 2010, I should be jumping with joy looking at these numbers, but the truth is I am not. I am afraid there that we are going into an unsustainable model in the coming days. 

Digital marketing has become a much sought-after career today, from creative to media to data to whatnot. The number of youngsters who want to get into digital media, social media and content marketing has multiplied manifold of late. These are good trends, but unfortunately, I believe there is a bubble in the making. The costs have gone up substantially on one side, but the agency remuneration hasn’t gone up accordingly. If I were to put the key reason behind this, it is the democratization of digital media. 

Let’s sieve through the chaff and really look at reality. Google and Meta increased their revenue last year and are close to Rs 40,000 crore. This entire amount hasn’t been planned and bought by the media agencies in India. It is bought by agencies, influencers, mature startups, SMEs/MSMEs, and many mom-and-pop stores. As per one estimate, Meta has over 8 million active advertisers on their platform globally and a major part of its revenue comes from direct advertisers. It won't be that different in India as well. This means that the advertising budget that is handled by agencies would well be less than half of the number that is quoted everywhere. In contrast, more than 90% of offline media is bought by agencies. In a biz model that works on commission, a lesser number of people are buying almost double the media on offline channels. 

I remember a time early in my career when I was working with a marquee client in India. My retainer for being the digital creative agency was x and the retainer that my counterpart charged then for being the mainline agency was nothing less than 30x. This gap has significantly reduced over the year, but still exist. Digital or more rightly put social media has become the lead medium for every client in India today. The expectation is for every piece of content that is put up on social media to provide the brand’s POV and if possible become viral.

That’s undue pressure on the agency partner to deliver, and mind you, an agency creates everywhere between 15 creatives and 30 creatives each month, that’s a run rate of 1 per day. Compare this with what the mainline agency creates, which is 10 campaigns in a year, resulting in videos, print ads and other collaterals.

What a digital agency creates in a month a mainline agency at best creates in half a year, keeping the studio job outside of the purview for now. Companies are still not ready to create a remuneration parity between digital agencies and mainline agencies today, because the perceived notion is that the 1 TVC or print ad is significantly more important than the content that is created for social media platforms. 

Digital media is so democratized that any advertiser with a credit card can advertise today, and a bunch of friends who understand social media can create an advertising agency. My most conservative estimation is that there are over 3000 digital media agencies (creative and media together) in India today. In comparison, the number of mainline agencies would be significantly lower. The hurdles to start an offline media buying unit is high, from initial investment for tools, access, affiliation, etc in comparison to online where you just need a credit card. The challenges to start an offline creative unit is also comparatively higher compared to the online counterpart, after all, one can also create content using Canva to publish online. 

Just to reiterate, the number of people coming into digital media has increased, the costs of the resources have increased, and the number of agencies doing digital is much higher than traditional, but the amount of media bought by digital agencies has not seen a corresponding rise, the remunerations paid to digital agencies for making content is not at par with traditional agencies (barring few exceptions).

The situation is much like the media palooza of the mid-2010s where brands went after buying efficiency by ignoring planning effectiveness. When agencies are not paid equitably for the amount of time and effort that is being put on the table, the quality of the output will suffer. The conversation should move away from what’s the “best cost” to “what can you do to impact my business positively”. Alternatively, businesses can also lower the expectation from the digital partner, which I don’t think should be even on the table as an option.