Acquisitions in the digital domain have a direct impact on the stocks of any media holding company, or at least that is what many in the industry believe. An acquisition can make the company’s stock look good, but whether or not it brings in the additional revenue and market share that makes a difference to a company, is a subject that industry officials do not want to give an honest comment on.
In the digital domain, too, WPP has been the first to bring an Indian company in its fold. WPP’s 75 per cent stake in Quasar Media now gives it a full-fledged digital agency in India. A thumbs up from analysts no doubt, but according to WPP officials, it brought a host of advantages to business too. Mark Read, CEO, WPP Digital, said, “It adds a group of talented people, new client relationships, strong technology skills – an excellent base for our future growth and for attracting new clients and people to WPP and our companies. We believe WPP and its companies now have a very strong digital offering in India.”
There is hardly a media holding company that hasn’t spoken to digital outfits in India. Another holding company that is believed to have been in constant discussion with Quasar was Aegis. Digital presence is a priority in the Aegis India agenda at present, and the intention is to bring Aegis’ global digital brand, Isobar, in this market.
Does this move from WPP put any pressure on Aegis? Patrick Stahle, CEO, Aegis Media, APAC, replied, “Quasar is a company we know well and they are competent, but they are still very small in terms of market share. We believe that it is more important to do the right thing rather than jump into deals for the wrong reasons. We are running the largest digital network in the world with our Isobar offering and our view is that our competitors are more desperate than we are to get moving.”
Stahle sees solutions on the digital media front for the Aegis group coming in by 2008. He said, “India is a very young and immature market in digital communication. We are continuously meeting potential partners to grow our successful Isobar network in India, but will only ‘propose a marriage’ if we fall in love! I would expect to have a solution in 2008.”
A clear problem that many players are seeing in the digital space is that of valuations. Many industry observers are of the opinion that the exorbitant values paid for the new media businesses might just be creating a second dotcom bubble. WPP’s CEO, Martin Sorrell, has been quoted in an international publication as saying that he saw a severe bubble in technology valuations, where there was a disconnect between technology markets and financial services markets. The case is not too different in India either.
Stahle explained, “Some of the valuations are definitely too high and these are created by market growth expectations. Our view is that we need to find a digital partner delivering value to both our clients and our shareholders. It is important for us to find the right future partner and the market is still relatively small, so we are being patient until we find one.”
Quasar is definitely not the end of WPP’s digital plans in India. The media conglomerate is clear that more units have to come into its fold going forward. “Absolutely,” said Mark Read, reiterating, “We believe in long term growth of digital media in India and we are going to focus on both organic growth and acquisitions to take advantage of this.”
Prior to the WPP-Quasar deal, in the digital arena, all media holding companies had similar footprints in India, which is otherwise a WPP-dominated market in the disciplines of media, advertising and other domains. No media holding company has been able to build any significant digital capability within its fold, nor has seen any organically grown digital brand. The need to “acquire” stems from this, and in this acquiring game, WPP has made the first move.