Ad agencies suffer Hyderabad blues

In the last two years, at least three national advertising agencies -- FCB Ulka, Saatchi & Saatchi and Everest -- have closed shop in Hyderabad. And if you believe Santha John, managing director of Mindset EYW, few are doing well even among the existing companies.

Though the advertising market has grown by 20 per cent over last year -- from Rs 100 crore (Rs 1 billion) to Rs 120 crore (Rs 1.2 billion), it is probably not enough to sustain all the agencies in the city.

John claims there are hundreds of small agencies in Hyderabad clamouring for the same clients. The absence of FMCG brands doesn't help either.

Says Vijay Kumar, managing director of another local agency, Breeze Advertising: "Companies like Allwyn and Ampro Products which used to advertise well have closed down."

Agrees JWT's general manager (Delhi) Rohit Ohri: "It's a small market in absence of FMCG companies. It's not lucrative enough to set up a business."

Leo Burnett's CEO Arvind Sharmalso admits having evaluated Hyderabad but found no national clients to service there. "It'll be a while before it emerges as a centre for national market," he says.

Vice president at Mudra's Hyderabad office Bal Deshpande says that Hyderabad is a peculiar market. "While the city has a huge pharma industry, it's restricted to formulation and non-OTC products. We don't have a Crocin or an Eno to sell from here," he says.

The market is dominated by engineering and IT companies and the public sector units, which primarily issue tender and recruitment ads. Of course the new retail advertisers such as pubs, hotels and jewellery stores are coming up.

"Yet the overall outlay of, say, a Meena Bazar here is small compared to, say, a Pothy's or Nallis in Chennai,Vichitra in Delhi, Kala Niketan in Mumbai," he says.

Besides, Hyderabad may be booming in the retail sector with umpteen malls coming up, but malls like Shoppers' Stop and Pantaloon have national advertising campaigns. "So they usually give it to Mumbai-based agencies to handle the business," says Vijay Kumar.

The local stores, however, tend to prefer the local agencies. Deshpande admits that local companies share a comfort level with the local agencies.

Incidentally, Mindset recently lost Coke's regional account to Rediffusion. But John says that loss of one account does not mean that national agencies are beating the local ones.

Trikaal Advertising for instance, is working on regional ads for national clients like Samsung, Videocon and LG besides local retailers like Meena Bazaar, Nalli Silks and TMC.

Despite its peculiarities, national agencies do not wish to let go of the opportunities in Hyderabad. Rediffusion, Mudra, O&M and RK Swamy have stayed put in the city.

"We came here more than six years ago. The city is bustling with IT, ITES, pharma, retail, education and media opportunities," says Ganesh Raman, vice-president O&M, Hyderabad.

Mudra survived by "looking at other avenues to generate revenue, doing corporate identity work besides controlling costs," says Deshpande.

But O&M's Raman believes that "New opportunities will arise and clients will need new services. The market is growing by scoring singles currently. We need some sixes and fours," he concludes.