I thought, for a long time, that this was a translation of a Chinese curse. Further reading taught me that China had nothing to do with this wonderful curse, which suggested that ‘interesting’ times are usually times of trouble.
2021 will be, to say the least, interesting.
Every year, for the last so many years, I try and articulate what I believe would happen in advertising, media and marketing in the coming year. There has been no year that it has been easy to take this punt, but as I write this, I can say with confidence that this has been the most difficult one to write.
Here are the headlines:
- 2021 will be a very tough year for all in advertising, media and marketing
- There will be more layoffs in advertising and media
- Ageism will negatively affect many over 50
- English newspapers will get battered
- Digital will gain significantly
- TV will comfortably hold share
- eCommerce will grow, kiranas will go through difficult times
- Cost will come to the fore once again
What will happen in the advertising world?
When I say advertising, I include ‘creative’ agencies, media agencies and digital agencies.
In all three, the effect of budget cuts by marketers will impact revenues – and consequently impact headcount and office space priorities.
Sir Martin Sorrell, since he launched S4 Capital, has drummed three words into the minds of marketers he has met (and he has met many): Faster, better, cheaper.
That’s what all marketers will demand in 2021.
By the way, much before Sir Martin made ‘faster, better, cheaper’ his mantra, it was Henry Ford who made the phrase popular – and made these three words his single-minded obsession.
Marketers will make the three words their obsession, too. And aided by procurement, ‘cheaper’ will be the one that impacts advertising the most.
Having said that, ‘better’ clients will urge procurement to look at the Indian alternative to ‘faster, better, cheaper’: cheap and best.
When you think of ‘cheap and best’ the immediate belief is that whatever is being labeled thus is neither the cheapest nor the best but delivers the best return on your investment.
The implication of the ‘cheap and best’ approach is that a lot more questions will be asked of advertising agencies on the effectiveness and impact of the advertising and on how the advertising will positively impact bottom-line and top-line.
If we start with the premise that, in most categories, A&M spends by companies will shrink, the revenue for the entire gamut of advertising agencies will shrink as well.
And for the network agencies and large non-network agencies, the predictable revenue will shrink as well – which will lead their decision-makers to pare predictable costs.
The two largest heads of predictable costs are the people cost and real estate cost. Both will be hit.
Which means that management will sit with HR departments and create lists of two sets of people: Those who are not ‘clearly’ delivering and those who are expensive.
And try and figure out the return on investments in these people.
That’s where ageism, a word we didn’t use even a year ago, will hit hard.
With age comes high cost (thanks to the power of compounding). Even if someone started at a low-ish salary (say, 2.5 lakh per annum) 25 years ago an increment of just 10% each year would cause that salary to balloon to Rs.27 lakh per annum. Think of what happens if the base was higher or the intermediate increments higher. The current crisis will heighten the focus on every single employee earning anything above Rs. 40 lakh or so – and, if the management feels that the RoI is poor OR that the employee concerned is not ‘essential’ to the safety of revenue, you’re in trouble. Network agencies AND media agencies will be hit hard. There’s no way of avoiding this; they will have to cut their clothes according to the cloth.
Ageism will also affect media companies – both TV and print, especially in the sales and marketing areas.
Expect more variable pay (linked to agreed targets) and smaller fixed pay.
Real estate will shrink as well, thanks to the 10-month experience during the Covid crisis. Many will be asked to continue working from home as management tries to reduce the second head of predictable cost – rent.
Within agencies, the composition in the basket of clients will help define whether 2021 will be good, tolerable or just plain terrible. The more brands you handle in the ‘essentials’ basket, the safer you will be. The more you handle in the funded start-up area, the safer you will be. The more you handle in the discretionary categories or white goods or auto area, the more difficult it will be – because in these areas, maintaining share, let alone growing share, is an uphill task. To make matters worse, margins are being squeezed with little or nothing left over.
What happens to media?
Let’s start with newspapers. In the early days of the lockdown, there was no distribution of newspapers – causing a forced suspension of what was, to millions of Indian households, a habit. The habit of reading a PRINTED newspaper.
While the distribution of the physical newspaper stopped, a new habit was forced: turning to digital for the daily news fix. As distribution re-started, many have junked the old habit and embraced the new. News consumption continues, but the growth is in the digital area and the shrinkage is in print.
The problem is simple: the major revenues, till today, are booked in the physical form.
How many print readers have been lost and how many digital readers have been gained?
It is impossible to measure the first, thanks to the biggest problem that print is facing (and has faced for the past few years): the absence of reliable measurement. The Indian Readership Survey has been a shambles for the past few years and currently, we have no idea when the new numbers will be published. To make matters worse, the skipping of a few quarters forces the absence of a reliable curve or trend line – all we have are some randomly placed dots.
So we have a lack of clarity on the numbers AND on the quality of readers and the demographics of the readers – and this is happy hunting ground for the largest advertisers and for the large media agencies. The more ambiguous the numbers, the greater the ability to bring down the advertising rates.
So the focus on the management, faced with revenues shrinking, will be on cutting costs (the costs that haven’t yet been cut).
Within newspapers, English will be hit the hardest – as, considering the reader base, the migration of the reader to digital will be the maximum.
To add to the migration to digital is the editorial mix: a limited amount of local news and a preponderance of national and international news. The mix forces the paper to be less of an ‘essential’ buy, as these categories are the ones that one can find most easily on digital (including social media) updated minute-by-minute.
Newspapers in Indian languages have always had strong local pages – and become more ‘essential’. Perhaps these papers will be able to withstand the onslaught of digital for a while longer, even as they get their revenue act together on the digital front.
The lockdown has, not surprisingly, been a boon for TV (and for OTT). When access to all forms of entertainment (movie halls, malls, theatre, live sport, events, eating out) was unavailable, TV was a welcome friend. Nobbled in the first two months thanks to the inability to shoot, TV bounced back after channels found solutions to production. Fresh programming, coupled with the limited entertainment options, proved to be a fillip to TV – both in terms of viewership and advertising.
“Though advertising in April – June dropped by 26% compared to Q1 2020, it peaked to the highest ever Ad Volume of 38.7 Mn seconds in week 43, 2020,” says BARC CEO Sunil Lulla in an interview to exchange4media. (The interview appeared this morning).
TV has received a big boost – and it will be interesting to see how the major players make use of this boost. All the major TV networks are also players in the OTT space, and balancing viewership and revenue between the two will be a big challenge.
The secret sauce is not secret: It is compelling content in Indian languages that will be the differentiation.
The TV Vs OTT battle, as far as India owned broadcasters is concerned, is not so much one versus the other but one and the other. Indian broadcasters need to win both – and the fundamental answer lies in content.
It gets interesting when one adds the multinational OTT players like Netflix, Amazon Prime and Disney Hotstar to the mix.
Will Indian viewers rush in their many millions to the multinational players whose libraries boast the latest AND the best of Hollywood?
My view is that the ‘Hollywood’ market is limited as the market for English newspapers and magazines has proven to be limited, as the market for Hollywood in the cinema halls has been proven to be limited, as the appetite for English content on television in India has proven to be limited.
Add to the language issue the issue of cost. When I do that, I come to the view that 2021 will see a huge battle for domination in the OTT space as far as players focusing on Indian language content is concerned, with the ‘English’ market growing at a sedate and unexciting pace. It’s vocal for local in this space as far as I am concerned.
The area that bears close watching is the e-commerce space, thanks again to the Coronavirus. With urban consumers being forced to stay at home, 2020 saw more and more products, hitherto unavailable on e-commerce platforms, suddenly available. The past six months have seen consumers buying their daily groceries, including fruit, vegetables and staples, on e-commerce platforms. This has spurred e-commerce players to increase their offerings, improve UI and UX and get their act together on the scheduling of delivery front.
The perfect storm for habit change.
If the consumer is comfortable with buying from these platforms, brands need to get their act together and be available on these platforms – or lose share. No longer are e-commerce purchases limited to few categories; the consumption basket includes mobiles and laptops and books and clothes (which were the early categories that consumers demanded) BUT ALSO chocolates and medicines – AND CARS.
e-commerce is now clearly an important distribution chain for marketers – and the longer we shun crowds and going out, the greater the number of consumers who will embrace the shopping experience.
But the area that will gain the most in 2021 will be digital.
Every aspect of it:
Consumption of news and other content, including live events.
e-commerce and other apps.
Yeah, what’s new, you say.
What’s new is that the winners will be those who offer solutions in Indian languages, not those who limit themselves to English.
Whether in advertising or in media or marketing or TV or OTT or the great world of digital, here are my two mantras:
Think Indian languages.
Be faster, better, cheaper.