Agnello Dias and Santosh Padhi are the hottest creative stars in the ad industry. So why did they choose to sell a majority stake in their start-up Taproot so early in the game?
The Deadly Duo
• Underdressed, muted and humble in demeanour, but powerhouses of creativity
• No pre-determined ‘agency look’; create campaigns for each client from scratch
Agnello Dias, 46
(Standing) Great copywriter, arguably the best since the legendary Mohammed Khan
of Enterprise. Great observer of life and people
Santosh Padhi, 38
Probably the best ad director in India. Bolder in approach compared to Dias
“We didn’t start Creativeland Asia as a broiler-chicken model, knowing one day we’ll need to sell and eat it.” As the founder and CEO of Creativeland Asia, a widely respected independent advertising agency often mentioned in the same breath as its more famous rival Taproot, Sajan Raj Kurup appears non-plussed. On August 29, Kurup and the rest of the advertising industry heard the news that their peers, Agnello Dias and Santosh Padhi, the founders of Taproot, were selling a 51 percent stake to Japanese ad conglomerate Dentsu.
It wasn’t entirely a surprise though. After all, rumours had been swirling around for a while that a slew of independent hotshops like Taproot, Creativeland Asia, Beehive, Law & Kenneth, Saints & Warriors, Curry-Nation, Interactive Avenues and Scarecrow were being wooed by the large ad networks like WPP, Omnicom and Publicis.
Yet, Taproot seemed to be on a roll. Founded by Dias, 46, and Padhi, 38, in 2009, the agency had in just a few years racked up critical acclaim and awards for its campaigns for clients like Bennett, Coleman & Company (which publishes The Times of India), Bharti Airtel and PepsiCo.
And, like Kurup, Dias and Padhi also liked to set the rules of the game. While the majority of large agencies consider a pro-bono pitch as standard operating procedure, neither Taproot nor Creativeland Asia ever made a formal pitch for a client’s mandate unless they were compensated adequately for their time. Besides, they charged clients, who moved from large agencies, a hefty premium for their creative work, often “multiples” of what the clients paid earlier, claims Kurup. That didn’t seem to deter clients though. Taproot had a waiting list of clients—something that was unheard of in the industry.
So if things were really so hunky-dory, why did the two whiz kids of the ad industry sell out? What’s more, why did they pick Dentsu over its more glamorous peers like WPP, Omnicom or Publicis?
The real answers could represent a turning point in the way large advertising agency networks choose to grow in the country.
‘Chequebook Trips’
The fact is that large ad agency networks need creative boutiques in markets like India more than ever before. The action has been hotting up for a while now. “Senior executives of large agency groups have been visiting India every two to three months, armed with fat chequebooks,” says a veteran industry watcher who did not want to be quoted directly.
Padhi says Taproot has held serious conversations with at least four or five other agency groups during the last year before deciding on Dentsu. “Practically every single group has talked to us for an acquisition,” says Kurup.
The reasons for the acquisitive streak are all too familiar. Large agencies are desperate to lap up smaller independents because India and China, notwithstanding their numerous foibles, are growth markets for decades to come unlike developed countries where growth has tapered off.
Independent agencies are readymade packages of revenue and client relationships that can be bought and added straightaway to their topline.
At a more tactical level, these acquisitions are about getting access to highly sought-after creative talent. “There is a dearth of talent in India. It hasn’t grown proportionately with the growth of the market,” says KV Sridhar, the national creative director at Leo Burnett.
But the most strategic reason behind these acquisitions is the fact that large agencies are seeing more of their revenue and work get commoditised.
Very few agencies had been able to generate any kind of pricing power with clients. This is something that Rohit Ohri knows only too well. He came out of JWT, where he headed the Delhi branch, to be the new executive chairman for Dentsu in India. “Our remuneration models should be based on our creativity, not on the client’s media spends or on the number of people on a project. We’re trading ‘bodies’ and ‘man hours’ instead of the impact or quality of our ideas,” says Ohri.
The Future
(This story appears in the 28 September, 2012 issue of Forbes India. To visit our Archives, click here.)