Omnicom’s biggest gamble in india yet...

BY IMPACT Staff

It is touted as the single biggest deal in the history of Indian advertising. And that may well be true. But Omnicom is, as yet, not divulging the financial terms of its agreement with Mudra Communications, where it has taken a controlling stake in the Anil Ambani-owned advertising company. Irrespective of whether the deal is a financial landmark for the industry or not, for Omnicom, this is the biggest investment that the company has made in India yet.

Omnicom has been frequently criticized for developing a late strategy for India, but for the company’s President and CEO, John Wren, there is no point discussing things that were not done. Wren is more interested in the present and the future, and from the look of it, has already lined up rather aggressive plans for India now. Last week, Omnicom finalised a deal with Mudra, buying a majority stake in it, with the clause for a subsequent takeover at a later stage. While people are still guessing and doing back of the envelope calculations of the deal value, one thing is for certain --- the move signals Omnicom’s next big thrust in India and this controlling stake in Mudra is only the first step in this regard.

Wren tells IMPACT, “You are right --- this is the next step. With Mudra, we get really great people who have done extraordinary things. This is a great addition to the family. There are quite a number of things that we can do from here.”

Not the Company, but the Culture

Elaborating on Mudra, Wren recalls the performance of BBDO India and Mudra DDB at the Spikes Festival this year, and says, “Who else won there! Irrespective of the shell, culturally, we are alike and this shows up in every way you can demonstrate it. Spikes is just an example.” Mudra was an obvious choice for Omnicom not only because of the relation that Mudra has had with DDB since 1990, but also because Anil Ambani brought equity to the equation that made all the difference for Omnicom. The move has not instantly catapulted Omnicom’s position to the top in the market. The market is still dominated by WPP that boasts of an estimated revenue figure of USD 400-450 million in a year. Interpublic Group follows with revenues estimated at USD 100 million. After this acquisition, industry sources calculate Omnicom to be in No. 3 position with a revenue figure of USD 75-80 million in India.

Being the ‘biggest’ though was never the objective for Omnicom. Wren observes, “As head of the company, if you start by saying that you simply want to be bigger, you end up making many bad decisions. You have to be the best. Then, if you are lucky and if you are good, the rest of it comes.”

The move does instantly give Omnicom presence in diversified areas of specialized communication agencies, and one more creative brand in Mudra Communications. Wren states, “Under the five groups [Diversified Agencies Services (DAS), Omnicom Media Group (OMG), TBWA, DDB and BBDO], Omnicom probably has 100 important brands. Ideally I would like to have as many in India as possible. Some of these we can act on as quickly as we possibly can. Our PR companies are good -- they can be better. There are  technological advances that we have done in terms of different types of media to service different types of clients, which we would be deploying very quickly. Then there is a whole set of opportunities within DAS.”

Of New Opportunities

The likes of healthcare and field marketing are some such areas. “There are quite a number of specialty, ethical pharmaceutical companies that are not simply selling drugs to consumers but really looking at the molecule and all the way to servicing the patient,” explains Wren, and adds, “There is an opportunity especially with some of the skillsets that exist within this expanding group for us to seriously deploy some of our strategic thoughts on how we get those brands represented in the country. Take the example of PepsiCo. Pepsi sees two million retailers to deliver its product. We have extensive capabilities in terms of field marketing capabilities on what happens in the last mile.”

 John Wren divulges that strategically, Omnicom is challenging all its lead managers to challenge Wren on why a specific company should come to India. “When I look at India, and I am generalizing a little here, there are five states that are each bigger than the economic union. There is a lot to do here. I am probably not young enough to get it all done, but there is a lot of ambition and capability.”

Mudra also enables Omnicom to service more of the three sets of marketers that Omnicom focuses on. The first set are global clients that Omnicom services in markets outside of India, or at a global level. The second are Indian companies such as Tata, Bharti Airtel that are going to be global or are global already. And then domestic Indian companies that are servicing the Indian markets.

What Omnicom means to Mudra

While one part of the deal is how Mudra helps Omnicom in India, the other part is how does Mudra, as a company that offers different kinds of services to marketers in India, benefits from this deal. Mudra and Omnicom have had a strong relation, where Mudra had access to Omnicom’s international expertise, tools and best practices. Omnicom’s regional heads have been spending time with Mudra in India for training and talent development. Wren reiterates that the relation still remains first a partnership, and the companies will continue to do things they were doing, only with a greater access now. He quips, “The analogy I use is if you would build a pool in the backyard if you rented a house versus if you owned the house. You might make two different decisions. The more we have, the more willing we are to pour resources in.”

Mudra’s current structure is broken in four key units – Mudra Communications, DDB Mudra, Tribal DDB and Mudra Max. When Omnicom bought Mudra, it bought the people and the services of the company. This becomes more apparent when Wren says that there would not be any immediate changes in Mudra’s structure or management. He points out, “I am not going to be followed by a guy with the book, who will say this is the way you do things - that’s not it. We have a lot to learn, and they have a lot to share. Just get off from the business aspect for a moment, and look at the building they have built. That is an example to our employees in the world that we can build a sustainable structure and be responsible citizens in addition to doing great advertising. We don’t pretend to have the formula of what works in a market like India. We are going to learn, as much as we are going to offer resources. There are no plans to change anything at the moment. What will happen, is now there would be more exposure and conversations, but not so much by the leadership but people who are running the businesses. And if there are things that will help them attract talent or win business, we will make it available.”

OMG!

The deal does not impact Omnicom’s creative brands --- TBWA and BBDO --- in India. The big question is how it impacts Omnicom’s media agencies. Now that Omnicom has both Omnicom Media Group, headed by Jasmin Sohrabji, and Mudra Max, headed by Pratap Bose, in India, what will Omnicom’s media strategy be, considering the media business can benefit from leveraging synergies on functions such as buying. Wren informs that Omnicom is still in the process of working out details. He adds, “I have met both heads. I am extremely happy with where OMG started and where we are today -- it is amazing. I am not about to give any advice to anyone right now. But I have told the principles running the companies to find each other, have conversations and see if there is anything that they can take or give to each other. I want people running the businesses to enter into conversations, to learn what we have to offer, to come and ask if they want something or tell me ‘it is cool, leave me alone’. I am happy either way, because culture beats strategy.”

While Omnicom has Keki Dadiseth, Non-Executive Chairman, Omnicom India as a head figure for the market, the company is not in a hurry to hire an Omnicom India head as such. Wren says, “There are no viceroys coming to town. It is on record that this deal is as much anybody’s, as it is mine. And I am not used to failing, so I would be more engaged in making sure that we become better in India, because this is a very important market and I have a lot to do here.”

Is there a target timeframe by when Omnicom wants to become the clear number one, or even number two in India? “I hope very soon,” answers Wren, and adds, “But I don’t have a timeline, because that would drive silly decisions, and I am not known for making silly decisions.”

A New Commitment

The majority stake in Mudra does not immediately take Omnicom to a sizeable share of the Indian market but it gives an impetus to Omnicom’s presence in India by creating newer growth opportunities. The value of the deal is still not disclosed but if market sources are to be believed, Omnicom has paid a very high price, so the logical next question is whether it is worth it. If the deal does include real estate and Mudra Institute of Communications (MICA), and hence Omnicom has paid much higher than Mudra’s value, was the deal beneficial for Omnicom?

Wren has a simple view to all of this: “We paid a fair price and the general parameters, of all the deals we have done, would be disclosed when we announce our fourth quarter. What is important is that this is clear demonstration of not only Omnicom’s commitment but my commitment to India. Now we are going to do whatever is sensible in deploying as much as we can, and as quickly as we can, with the idea of being the best. As I said, if we are the best, the rest follows.”

The year 2012 will mark another important year for Omnicom in India. The last action from the company at a comparable scale was in 2008. But when Wren says he would personally be more engaged with India, one can expect a high decibel year from Omnicom.

Tags : Impact Feature