THE SECOND COMING

After a big hit about a decade back, financial advertising agencies are making a strong comeback over the past year. They rise from the ashes with lessons well-learnt.

They have a more glorious past than a present. In the heady days of the stock market boom in the early `90s, a clutch of small-time advertising agencies made hay, specializing in what came to be known as financial advertising.

This was a bit of a misnomer because what they did involved little advertising. Financial ads were essentially SEBI-approved straitjacketed formats where information about Initial Public Offerings (IPOs) had to be displayed. They had to follow strict norms. Most IPOs came from unknown companies that were cashing on the boom. There was no brand building, strategizing or creatives. But there was certainly an expertise involved. These six agencies-Pressman, Sobhagya, Concept, Clea, Adfactors, Percept along with smaller ones like Imageads- knew what it took to deliver a successful IPO. They knew the merchant bankers- the chaps who would tell the corporations which agency to use. They also had networked with brokers, analysts and the business media to get the best possible coverage and reach to potential consumers. "No brand building, creative agency could match this expertise", says Vinod Nair of Clea PR.

In `95 these six agencies shared nearly Rs 1500 crore of business. Besides, the Six were kings of all they surveyed. Unlike for brand work where agencies have to pitch and hope they'll be the chosen ones, here clients came to them. There was no negotiation, no bargaining because the job had to be done right the first time. There was no time and certainly no room for mistakes. And there was that wonderful caveat that worked beautifully for both sides- SEBI rules allowed seven per cent of the issue amount to be spent on advertising and promotions. So a company wanting to raise Rs 100 crore could easily spend Rs 7 crore in a month or so to build its image. The money would eventually go from the public money collected. Neither the client nor the agency took the hit. Also, if the issue was oversubscribed by say ten times, common in those days, the client had Rs 900 crore of extra collection to be returned over 45 days. At 1.5 per cent bank interest he pocketed a cool Rs 20 crore before he returned the funds, all within legal limits. So the agency was never questioned on expenses as every issue was oversubscribed and the Six basked in unprecedented growth.

Then came the fall. The markets collapsed and the IPO business dried up as fast as it had blossomed. The Six were suddenly virtually out of business, saddled with staff and infrastructure. And they had no other advertising expertise to go seek brand-building business.
Some realized that the talent they had was actually public relations. Little wonder then, that agencies like Percept, Adfactors and Clea went the whole hog into PR. At one point, this activity supported the entire structure. The biggest success story amongst all was however Percept. Senior founder Harinder Singh- once remembered most for displaying Pooja Bhatt's best assets to draw people to an IPO- diversified rapidly into all directions- events, celebrity management, branding agencies, below-the-line services etc- to create an empire that is today valuated at Rs 2000 crore.

Pressman, Concept and Sobhagya went the PSU route getting empanneled on companies like MTNL and BSNL. Today as these corporates increase advertising, they are growing.
Mercantile shut down. Imageads sold out to Percept. Those who survived comfortably was say Canco. Says Ramesh Narayan, founder, "We took IPO business of existing clients but never pitched for IPO business alone."

However these agencies remained the pariahs of the advertising industry. They were for instance never allowed membership in the AAAI. At one point the AAAI asked to see the books of accounts of members and that was instrumental in shooing away some financial agencies that were already members. An ex-president of AAAI says that they were unscrupulous and the AAAI wanted to stand for ethical standards.

Today, a second wind has blown into their once-tattered sails. They are quietly re-surfacing as the IPO-financial advertising market is once again looking up. The financial ad business is around Rs 300 crore already. It is expected to go to Rs1000 crore. Everyone knows those days will not return. But the same crop of agencies are at it again, returning to do what they know best. But this time round, they are cautious and keeping the other fires burning as well. Agencies like say Concept are doing both corporate and financial advertising for clients like Air Deccan. Says Naren Suchanti of Concept, “Half our business comes from corporate advertising.”

While the MNC ad agencies look down upon this bunch, the fact is that they all tried to set up financial advertising divisions but failed. Luckily for them, clients did not share this sentiment even though the cloud of being just financial advertisers has yet to be completely lifted. The agencies in themselves may be bruised but are all grown up.

(This article appeared as the lead in Billboard the weekly advertising and marketing features page of Hindustan Times in May `06)