Take one surreptitious look over your shoulder on your next local train or metro ride and be prepared to face a flurry of updates and pings emanating from the dimly-lit screens closest to you. Welcome to the 21st century, where citizens nurture a fervent and almost umbilical connection to their smartphones, constantly stalking strangers, reading about celebrity lives with voyeuristic pleasure or sharing intimate details of their own mundane lives online.
Waiting for Godot
Search and display ads are a popular choice among companies
Not surprising, then, that most brands seem to have caught on to this trend. According to a 2013 study by Ernst & Young on social media marketing, 42% of companies said they spend anywhere between 1% and 5% of their marketing spend on social media; 17% spend between 20-30%. Around 30% of the respondents said their social media marketing budgets were between ₹11 lakh and ₹25 lakh.
Though the greatest demand still remains for search engine optimisation, companies are slowly realising the impact that social media can have as a marketing and consumer engagement tool.
Ramesh Chembath, assistant vice-president, sales and marketing, Godrej Appliances, says, “We evaluated the nascent digital space as far back as 2010. While there is still scope for growth in the space, we have realised that making the shift to digital back then was the right step. Social media marketing is not just about Facebook likes; as we already know, engagement is the key. Digital marketing not only reduces costs but also improves marketing efficiency by spreading word through various platforms.”
And it is not just the old economy that is betting big on social media — even businesses that thrive on the new economy are taking note of it.
Praveen Sinha, founder and managing director, Jabong, says, “Everyone has to build their own USP and position themselves on social media in terms of quality of responses and turnaround time. They cannot be entirely impersonal in their interactions on such platforms.” Leena Shoor, marketing head of Maybelline India, says, “As the digital space becomes more and more important as a medium to target the young Indian consumer, our spend has kept pace with it at about 25% of our advertising budgets each year.”
With digital marketing slowly gaining ground, a whole new bunch of start-ups looking to advise companies on their social marketing strategies have also sprung up. While larger umbrella agencies have the required leverage over smaller agencies, the past few years have seen the start-ups grow organically to gain prominence and be accessed by big brands thanks to their reliability.
Rajiv Dingra kicked off one such initiative by starting WATConsult in Mumbai in 2007. Started with three other friends as an attempt to work freelance in the digital space, WATConsult bagged Rediff as its first client, with the ₹4 lakh advance received from that account serving as the initial investment in the business.
Starting off by offering social media management and creative work to begin with, WATConsult now offers a wider range of services, from social media marketing to video and mobile apps development and search engine optimisation. Dingra says he holds what one could call the first-mover advantage. “Being one of the first few agencies to do what we do, we had a lot of time at hand to learn how to avoid mistakes that relatively inexperienced agencies would make. Since my blog — which served as an inspiration for the agency — was about the digital space, we never had to go out of our way to learn how to make things work on social media. It was our lack of financial management skills that was our initial failing but we had enough time to recover from it.”
And how. Today, WATConsult has around 85 clients on a retainer basis, 150+ employees and four offices across Mumbai, New Delhi, Bengaluru and Kolkata. Under a retainer arrangement, the client pays the agency a pre-specified amount in lump sum or EMIs. With a top line growth rate of 80-90% and profit margins of up to 30%, Dingra is confident that the agency will be able to clock ₹27 crore in revenue by the end of FY15 — almost double its revenue figures of ₹15 crore in FY14 — by charging a retainer fee of ₹2.5 lakh-3 lakh.
With video production for the digital space and mobile apps becoming more commonplace, WATConsult has realised that technology still remains its greatest expense, with 10-15% of spend going towards the same. “People, technology and processes comprise a lot of our expenses at the moment. But those are costs that we are prepared for; we have built up on internal accruals over the years,” says Dingra.
Around the time that WATConsult came to life, four friends came together in 2008 on a mission of sorts. After pooling in ₹16,000 each, Pratik Gupta, Harshil Karia, Suveer Bajaj and Paritosh Ajmera started FoxyMoron in Mumbai, named so to be, well, oxymoronic.
About what started off as just a way to be different from the rest of their Bachelors in Management Studies classmates, Gupta, its director for new business and innovation, says the company has now turned out to be a seven-year long internship for the group.
“A website was as digital as companies could get back when we started FoxyMoron. The first 15 months taught us a lot about the industry and about what clients want, and being heavy users of social media ourselves, we realised that brands would want to pursue social media as well at some point in time. That’s when we shifted to being a full-fledged digital agency.”
The first services that were offered were website-making and blog creation, both handled by Ajmera. Its first major client being PVR Pictures, FoxyMoron was responsible for the campaign for the Twilight movie franchise when it first made its entry into India.
At the moment, FoxyMoron has around 70 clients, to whom it provides digital solutions — referred to as 360 Digital — depending on their needs on a retainer basis, and has serviced 500-600 of them, including big names such as Maybelline India, Viber India, Starbucks and Quikr. They seem to be growing in terms of revenue as well. Starting off from earning ₹30,000 per month, FoxyMoron managed to rake in a total of ₹25 crore in the last fiscal and is expecting ₹40 crore by the end of this year. “At 22, it doesn’t help when you have to write your own rules about a space that is in its nascent stage. In fact, we started questioning all the rules that came in from offline advertising,” adds Gupta.
One of the rules FoxyMoron questioned was the need for a client servicing team and, consequently, to this day, it functions without one. However, employee retention and training remain its greatest challenges, with the company having to spend ₹45,000 per employee to train them about the latest developments in the digital space.
FoxyMoron is still struggling to find ways to be able to keep up with its own growth, especially after opening a second office in Gurgaon in July 2013. “We were a team of 80 people in 2013, now we are a team of over 200 people. We end up saying no to a lot of business because we cannot create the required bandwidth that quickly,” says Gupta. In June 2012, the company added video production to its portfolio, adding PR to its varied digital services by 2013.
Looking ahead, Gupta says, “To scale up without losing touch with our creative impulses is the challenge. We would eventually like to merge media planning and creative work for the digital space. Right now, 35% of our revenue comes from creative and media work each. The remaining 30% comes from our remaining services such as PR, video production, SEO and the like.”
While some players have chosen to act as social media solutions providers, others have taken roads less travelled. Bhupendra Khanal founded Simplify360 in 2009 after his first venture, Marketelligent, kicked off. Being a data enthusiast, this seemed like the most obvious solution to combine social media and data analytics, though it didn’t come into being with the idea of being a monitoring solution for companies.
“The challenge was that there are multiple sources of data because of the various platforms available to the public. All these social conversations were important; our job, then, is simply to provide the data with a unified view to our clients,” says Khanal. After two years of R&D, the company finally began operations in 2011 and earned its first client in Café Coffee Day. After building a crawler to keep up with conversations, it soon started working with media agencies and BPO companies and decided to take the platform ahead. It built a social marketing suite in 2012 that integrates Simplify360’s analytical findings to help companies measure RoI for their social marketing campaigns.
“The marketing suite does three things — listen, analyse and publish. We may not be active in creating campaigns but we provide platforms for them by providing intelligence from markets,” explains Khanal. Product revenue contributes to 80% of his total revenue, which, as of FY14, stood at ₹3 crore.
Khanal soon realised that some of the greatest beneficiaries of his data were media companies and BPOs — in fact, his clientele still consists of around 70 media entities and seven BPOs. With a 30% growth rate month-on-month, the company is only expected to do better in future, with ₹18 crore expected by the end of FY15. Priced at ₹25,000 and upwards, Simplify360’s platform fee is decided by brand image and perception, with airline and telecom companies paying the highest price for the service. While intelligence gathering for India-specific needs was what opened the door for the company, customer relationship management data remains the largest contributor to revenue.
The real world
However, things are not always hunky dory for such agencies. Though competition is tough, they seem confident about being able to tide over those issues, at least for now. Dingra says, “By virtue of owning the mainline spend, the Ogilvys and WPPs of the world tend to control digital trends as well. It may seem like a case of might over matter but, over the last eight years, we have fought for the attention of our clients. From a creative standpoint, strong mainline creativity needs to be adapted to the social and digital space. But that does not mean that it will work every time.”
Though a majority of companies are spending below ₹50 lakh annually on social media marketing, the trend is expected to change in coming years
Gupta of FoxyMoron says, “Anyone’s first reaction to a new company is to say that ‘our company is older than yours. Why should we hand over our account to you?’. We are young and because most of us have little agency experience, we realise that we are constantly learning. Being a digital agency, we see what the customer is demanding on a real-time basis and give it to them in the voice of the brand, as opposed to a mainline message that remains the same across all media. We have to create messages in a 30-second window on a daily basis. Without sounding cocky, we can beat them at their game.”
For Khanal, training people is a challenge. “The biggest problem is finding people to use the data analytics effectively, though this may be because the company does not have an analytics team in place yet. “We work with training academies to help solve this problem as much as we can. Our own strong analytical base means that we can help the companies as well.”
But clients are pleased with the current regime, nonetheless. Chembath of Godrej, a client of WATConsult’s, says, “Being a specialised space, we realise that we needed strategy from experts. Back in 2010, offline agencies weren’t as equipped as WATConsult and Dingra were. It helps that their involvement in our brand has the same amount of sense of ownership that we have.”
Says Shoor, “FoxyMoron has brought a complete integrated approach to the digital space. Its ideas are not just about creating virality for the sake of it but about understanding the brand’s bigger business objectives and making digital work towards the same end. Also, being a group of young professional themselves, they are able to think and talk like my target consumer and create ideas and campaigns that connect much better with them.” The audience agrees — the popular crowd-sourced ‘kiss’ song for Maybelline was handled by FoxyMoron.
With rising social media spends, competition in the digital and social media solutions space will only increase. There is also a strong possibility of traditional advertising agencies buying out social media players, with Publicis’ global takeover of digital agency giant Sapient for $4 billion recently.
While consolidation is still some time away as far as India is concerned, for now, digital media agencies need to find a sweet spot for themselves. Marketing consultant Anaggh Desai feels larger agencies do have the wherewithal to handle strategy well and understand the brand but are slow when it comes to turnaround time and speed of execution.
“Smaller or niche digital media agencies can turnaround much faster and are good for tactical deliveries or projects but need to have the advantage of a complete bouquet of services. There are two paths all of them have to choose — commoditisation of work (which today is 75% of the agencies) or innovative, integrated value addition work, which is the future.” For now, though, it seems like these startups are doing a pretty good job in riding the social media wave.