Why Advertisers Are Sold on India

Publicis Groupe's Maurice Levy discusses why his company bought a 60% stake in a Delhi-based marketing and research outfit

Ad agencies are falling in love with India. Global players have been buying up local shops since the mid-1990s, and today the four giant conglomerates that dominate world advertising also control 96% of India's ad market.

The reason for their interest is simple: The country -- with its 1 billion citizens, growing middle class, and exploding economy -- has a potential matched only by China. India's $2.7 billion ad biz is growing at 13% annually. There are 250-odd TV channels, up from 100 five years ago, while scores of new newspapers, magazines, and Web sites present fresh opportunities. And Indian companies are taking increasing advantage of those new outlets. Conglomerates such as Reliance, Tata, and Bharti are spending more to buff their images and get their products noticed (see BW, 12/12/05, "The Buying Of The Indian Ad Industry").

Today, with the agency business virtually sewn up, the global ad powers are prowling the streets of Bombay and Delhi for ancillary firms that will help them boost their portfolios in India. The most recent deal came on Nov. 22, when France's Publicis Groupe took a 60% stake in Delhi-based Solutions Integrated Marketing Services, which does promotions and market research.

BusinessWeek's Manjeet Kripalani spoke recently with Publicis Chairman Maurice Levy about the acquisition and his plans for India and the rest of Asia. Edited excerpts of their conversation follow:

What appealed to you about Solutions?

I met with Srikant Shastri of Solutions when I was in Delhi last year. We had a conversation with him and his partner, it lasted for 60 to 90 minutes, and immediately after that, I said, "I like you, I'll do the deal." They're fantastic, and they can grow like hell. They're entrepreneurial and accountable.

Marketing services is growing very fast worldwide, and by acquiring the No.1 marketing-services company in India, not only will we help Solutions to grow in India with our clients, but we will grow ourselves because we will offer more services to our clients. Their experience and expertise will help us grow in South East Asia as well.

This is your first venture outside of the basic agency business in India, correct?

In India today, before the Solutions acquisition, it's 80% advertising and 20% media buying. Globally, our tally is 55% advertising, 23% media buying, and 22% marketing services. India will have to grow all the other services, and we will do that.

How do you view the Indian market?

I was in India at the end of last year for the India World Economic Forum meeting in New Delhi. I met the Minister of Finance, the Prime Minister, and a lot of Indian companies, and I was very excited. Not only can this market grow much faster than it does, but we have some great people in this market who have international development opportunities.

The level of education in India is very good, the language skills are excellent, the number of people speaking English in India is huge. And by developing our position in the Indian market, we can have some Indian colleagues who can grow and take roles in our businesses in other international markets. Down the road, India could have a bigger role in our organization -- we could one day think of having a back office in India as well.

You've been a latecomer to India. Is that a disadvantage?

We're challengers to the established players. We don't feel bad that we're behind WPP, it will help us grow faster. Our people are much more energized and have more hunger for growth. We're growing from a smaller base.

How does India compare to China?

In China, we're No. 1 or No. 2, neck and neck with WPP. We have grown in China much faster than in India. There has been a frenzy of investment backed by the Chinese government, so that has helped fast growth and permitted the quick buildout of strong positions.

How much of your business comes from Asia, and what do you expect of China and India?

Asia in total represents 10% of our total revenues. My objective is to bring this to 15% in the next three years. In China, we still have a few acquisitions to make. But the market in which we would like to invest the most is India.

Many in the ad industry say the business is becoming less creative and more an accountant's profession. Do you agree?

In the Publicis group, that's not the case. Financial results cannot be an objective by themselves. For us, everything starts with the client, and our objective is to give clients the best possible service -- great strategy, remarkable creative work, holistic communication. If the client and product work well, everything works well.

We don't have any confusion about the raison d'etre of the business -- it's not the bottom line. It's to help the client grow the business. and that's [achieved] by being more creative than our competitors. It doesn't work the other way around. If you start at the bottom line, you will stay at the bottom.

As a giant global shop, can you effectively localize your content?

Globalization, people thought, is one single global campaign. We said, "You can't speak to the Chinese, Indians, Americans, or French in the same way." The standard of living, culture, family relationships, society, aren't the same. We have to take it into account, including local culture. India has such a strong culture, not just coming from the past but also from Bollywood.

Edited by David Rocks

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