How small and mid-sized Indian ad agencies find their mojo, and grow

Agency executives believe that these days pitches are not worth it. As a result, many small and mid-size agencies are refusing to participate in a pitch if they aren’t paid for the time and effort they put into creating ideas and strategies. Image: Shutterstock

Not so long ago, an e-commerce company roped in a boutique digital agency for creating a social media splash. The campaign exceeded their expectations. But rather than giving their agency partners due credit, the company’s brand team asked them not to share anything about the campaign on the internet. Because they didn’t want the competition to find out their secret sauce. The agency, which is fairly new in the business, had a closed-door celebration and moved on to their next project.

In the advertising business, insecurities abound. Marketers are insecure about their creative strategies. Big agencies are insecure about small and mid-sized shops taking away their clients. Small agencies are hungry for survival, and want to be involved in growing the client’s business. At the same time, they are relatively fearless and call out on practices that are unacceptable.

Dealing with big, bad agencies

The advertising business is a collaborative one. However, there are issues that come with the turf. In many cases, when a large agency from a network ropes in specialised shops, they tend to control the creative ideas.

Saksham Jadon, founder of Youngun, a meme agency, tells Storyboard18 that many a time creative ideas from a small shop are manipulated by bigger agencies while presenting to clients. Jadon and his team have learnt the hard way and prefer to work with clients directly. “This helps us get more businesses and have more creative control,” he says.

He also says that when a big agency is involved in a brand project, life can be hard for smaller shops, especially with respect to timely payments. “With the exception of a few big agencies, this is common practice. Payments are held back for as long as four to five months. Often, bigger agencies hold vendor payments and rotate the money,” he says.

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Stay away from defaulters

Ever since Covid, payment delays have hit an all-time high. While some clients are genuinely still struggling, others are using business pressures as an excuse to delay payments.

Agency executives that Storyboard18 spoke to said that currently the average payment cycle after raising a bill is 60-90 days. That puts smaller agencies under a lot of pressure. Giants like Google and Facebook have strict measures in place for defaulters. So agencies make payments to Facebook and Google from their pockets to keep business running as usual.

The delayed payment amount depends on the risk appetite of the agency. Normally, it’s a month’s retainer, which can range between Rs 20 lakh to crores.

Kaustav Das, CEO of Bengaluru-based creative agency Ralph & Das, says that it’s important for small and mid-sized agencies to understand their P&L (profit and loss accounts) right from the start. “The mistake that startup agencies often make is not to account for various costs and investments that are there in the initial years of the business,” he adds. Das is of the opinion that it’s best to not take every project or be part of every pitch: “It’s extremely important to learn to say ‘no’ when you think you can’t take up something or when you think you will have to stretch yourself thin. It’s not worth it at all.”

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Finding the right balance

Agency executives believe that these days pitches are not worth it. As a result, many small and mid-size agencies are refusing to participate in a pitch if they aren’t paid for the time and effort they put into creating ideas and strategies.

Mihir Joshi, founder of Mumbai-based creative studio Dijma, says, “Many clients call in for pitches to find quick fixes. What they don’t understand is that strategies are not built in a few weeks. Marketers need to view agencies of our size as value adders and partners. There is nothing that we can’t bring to the table.”

Today, small agencies know how to charge a premium for their service and hold their ground on fair payment. Joshi is also the co-founder of Contracts For Creators. A bootstrapped initiative that he started with Manojna Yeluri, an entertainment, media, and IP lawyer, and Ayesha Kapadia, a creative professional.

Contracts For Creators is a platform that provides inputs related to contracts for free for the empowerment of the creative community. The trio sees this as a crucial tool that can help freshers and professionals protect themselves from unethical industry behaviour, late payments, unruly clients, etc. Joshi says it’s important to have an industry-level platform to address the issues faced by small and mid-size agencies.

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Looking for new avenues

Small agencies are built on sheer skill, thanks to the founders who often have strong personal brands. The challenge for these agencies is to scale up.

Says Naresh Gupta, co-founder and chief strategy officer, Bang in the Middle: “I understand that MNC brands will work with MNC agencies. What I don’t understand is Indian brands not looking at independent agencies.”

According to Gupta, the biggest issue for agencies of his size is the perception that since they are small, they will not be able to handle scale. “This leads to the twin challenges of attracting talent and availability of funds. Both hamper growth and keep indies limited to a certain size. This can only be resolved if independent agencies win sizable business,” he adds.

Das shares this view. He says that it is challenging to raise funds for small and mid-size agencies because of the outsize expectations of investors, especially if they are from non-advertising backgrounds.

The way to grow is to go niche, believes Jadon. “Small agencies should spend the first couple of years perfecting the craft so that they’re ahead of the competition. After reaching a certain level of expertise, they can start moving into other areas,” he explains.