Viet Nam News talks to Tarun Dhawan, managing director of RiverorchidNotch, about the development of digital advertising in Vietnam andSoutheast Asia.
* What do you think about marketing mergers and acquisitions, and why are they happening more these days?
Regarding M&A in communications agencies worldwide, the mostactive discipline is digital - with more than twice the number of dealsthan other traditional forms of advertising (PR, activation, research,media etc).
While large communication groups arekeen on acquisitions, "traditional advertising agencies" do not featurein most of their considerations. Holding companies are interested inindependent outfits that operate in the technology or new media space.
There could be several strategic reasons why agencygroups are keen on acquisitions, including the need to createcapabilities that agencies don't currently have (such as digital) sothat they can offer services that they previously couldn't provide.
Besides, when it comes to acquisitions, agencies want to increasetheir top line faster than is organically possible. For our merger, themanagement aims for a combined strength of two talent pools and futureexpansion into other market.
* Why are digitalagencies attractive acquisition targets, and can you give us an exampleof a successful M&A in the Indochina region?
Globally there are 2.5 billion people logging onto the internet eachday, which is a great way for clients and their brands to connect withtheir consumers. Clients expect more than this.
Digital mediais integral and has to be woven into marketing strategies and the waybrands engage with their consumers; not just interrupt them with TVcommercials.
Digital is the new mass media.Consumers increasingly spend more time online, be that via theirdesktops, laptops or mobile devices. Some big marketing communicationsagencies have recognised this big shift.
Toguarantee that they continue to be relevant in the future, they areinvesting in acquiring digital agencies, which is the fastest way forthem to build their missing capabilities. This is what makes digitalagencies attractive targets.
Interestingly, ourrecent merger between Notch - one of Vietnam's longest establishedindependent digital agencies, and Riverorchid Digital - part of theRiverorchid Group- Indochina's leading independent communicationsnetwork - was concluded with full due diligence in under 12 weeks fromfirst meeting to formal incorporation of the new entity.
This is against a backdrop of other M&A discussions currentlyunderway in the market, which have been swamped in red tape for years.
About three years ago, WPP acquired Who Digital, tomerge with Ogilvy, which appears to be going well. Apart from that, ourcompany's acquisition is the only other deal to have taken place.
* Why did you choose Vietnam to expand and enhance your digital services across the Indochina region?
Vietnam is part of the Next-11 (N-11) markets that have beenidentified as having high potential to becoming the world's largesteconomies.
Despite short-term challenges in Vietnam, the long-term potential of this market still remains strong.
It is also worth reminding ourselves that ASEAN (of which Cambodia,Laos, Myanmar, Vietnam and Thailand are a part of) is the single largestregional emerging market in the world.
Jointly inIndochina, you are talking of a population of more than 236 million,which is two thirds of the USA or 3.5 times higher than the UK, whichexplains why the Indochina opportunity is attractive to us.
We chose Vietnam as our hub because there is a good talent pool andthis is also where our digital teams were first formed.
The maturity of the market is the highest compared to others, and it'salso in line with some of our clients' strategies to manage theirIndochina business out of Vietnam.
* You called themerger of Riverorchid and Notch a "match made in heaven". What aretheir strengths and how will you combine them together?
We both have similar visions and aspirations for our business.Riverorchid Digital was keen to partner with an established digitalagency to scale up their digital operations and at Notch we were keen toexpand our business to cover other regional markets. Riverorchid gaveus that opportunity.
With this merger we aspire tobecome Indochina's premier digital agency network that is embeddedwithin Indochina's premier communications network.
Notch's scale and experience in Vietnam is now coupled with Riverorchid Digital's unparalleled Indochina footprint.
What this does is also allow us to offer integrated services to ourclients. Often clients are looking for a ‘complete' solution covering acombination of PR, Events, ATL and Digital.
With this merger we can confidently integrate all these areas and offer a seamless solution to clients.
* What does digital advertising cover and what are the major trends atthe moment? What do you think about the development of digitaladvertising, and what are its advantages and disadvantages?
The internet, mobile, social media and gaming have forced us to changethe way we think about running our business, and at the heart of thesethings is a new wave of consumers that are changing the foundations ofbusinesses.
Consumers have created a new digitalculture and there has been a shift in the whole business landscape.Steve Ballmer, CEO of Microsoft, once said: "All the media willeventually go digital. It isn't a matter of if, it's a matter of when".
And look at what's happening now. You don't use anencyclopedia anymore. You visit Wikipedia. You don't rent out DVDsanymore. You go to torrents.
The industry ischanging fast, and we have to adapt or die. In fact for brands oragencies that want to stay ahead of the curve, they have to stay a stepahead of the industry.
Mobile phones are a hugeopportunity. Today a smartphone can be bought for 150 USD, with internetaccess. You no longer need to buy an 800 USD computer to access the webor surf Facebook.
For us, this is of particularinterest as we now have a way to engage with "mass" audiences in theMekong or Myanmar via digital. Not many people know that Cambodia wasthe first country in the world where mobile phone penetration exceededfixed phone penetration, or that mobile phone penetration in Vietnam isfive times higher than desktops.
The biggestadvantage of digital advertising is the ability to target messagesspecifically to certain audiences and the ability to measure what theconsumer do when they see that message.
At times,TV can often result in excessive wastage and offers no way of measuringthe behaviour of viewers right after they see a spot or magazine ad.
I don't see any real challenges to digital advertisingexcept that we need to realise that it may be low cost, but it's notfree.
* Could you give us your projections for the market?
In Vietnam, digital advertising accounts for about 3-5 percent oftotal media expenses, and we project it will double in the next threeyears. That will happen. Digital has to grow.
WithinIndochina, Vietnam is the number one market in terms of population,market readiness and mobile penetration, followed by Cambodia andMyanmar.
Myanmar actually has a larger populationthan Cambodia, but it lags behind in internet development and mobilepenetration. Once the market develops, I believe Myanmar will surpassCambodia.
* Some say that there are too many digitalagencies struggling to establish a foothold in the local market byundercutting each other. How does this affect the big players?
There are more digital agencies in Vietnam than the market warrants,and when supply exceeds demand, it pushes prices down.
There are hundreds of small digital start-ups that often undercutlarger agencies because that is the only differentiator they can offer.
But clients would never want to work with a bunchof kids who may not have the depth of knowledge or experience they needto fulfill expectations.
As a digital agency youmanage critical assets owned by clients such as a website or a Facebookpage. The last thing a client wants is disruption to these serviceseither because a young team lacks experience, or worse still, that theycan't renew a hosting contract for instance.
Ourcompany has been in the industry for the last five years and we are oneof the few agencies who have managed to remain stable. We don't competewith low cost companies; we focus on where we can add value for ourcustomers.
* People often complain about spam ads?What are your recommendations for both market players and theauthorities in Vietnam?
Spamming is a big no-no. Ihave not come across spam ads here, but I do get spam messages on mymobile phone. Clients need to know that this is illegal in Vietnam, soanytime an agency promises a database, it is important to check if thisis really an opted in database or not.
Myrecommendation to clients would be that they must focus on buildingtheir own databases. This can be a highly competitive advantage whichwill pay dividends if used correctly.
* What do you think Vietnam can learn from the development of more advanced markets?
One of the main challenges we face in Vietnam is the short-termapproach to digital marketing. At Riverorchid Notch, we believe incontinuous consumer engagement.
What this means isthat we take a long-term strategic approach to digital and not acampaign-centric approach, although that is built in within thelong-term approach.
The other challenge is relatedto production budgets. Clients in Vietnam carry a perception that"digital is cheap". I have sat in meetings where the client is referringto digital ideas from the US or Europe and expecting similar results,yet when it comes to digital production, they fail to allocate adequatebudgets.
An idea like Gangnam Style didn't simplygo viral by itself. It was well engineered to go viral. It had the rightmix – an already popular K-Pop singer, a giant record label (UniversalMusic Group) behind it, and big production and media investments topromote it.
Digital media is relatively cheap, butif you want to provide your consumers with a great online experience, bethat a Facebook app or a website, it requires a certain degree ofinvestment.-VNA
* What do you think about marketing mergers and acquisitions, and why are they happening more these days?
Regarding M&A in communications agencies worldwide, the mostactive discipline is digital - with more than twice the number of dealsthan other traditional forms of advertising (PR, activation, research,media etc).
While large communication groups arekeen on acquisitions, "traditional advertising agencies" do not featurein most of their considerations. Holding companies are interested inindependent outfits that operate in the technology or new media space.
There could be several strategic reasons why agencygroups are keen on acquisitions, including the need to createcapabilities that agencies don't currently have (such as digital) sothat they can offer services that they previously couldn't provide.
Besides, when it comes to acquisitions, agencies want to increasetheir top line faster than is organically possible. For our merger, themanagement aims for a combined strength of two talent pools and futureexpansion into other market.
* Why are digitalagencies attractive acquisition targets, and can you give us an exampleof a successful M&A in the Indochina region?
Globally there are 2.5 billion people logging onto the internet eachday, which is a great way for clients and their brands to connect withtheir consumers. Clients expect more than this.
Digital mediais integral and has to be woven into marketing strategies and the waybrands engage with their consumers; not just interrupt them with TVcommercials.
Digital is the new mass media.Consumers increasingly spend more time online, be that via theirdesktops, laptops or mobile devices. Some big marketing communicationsagencies have recognised this big shift.
Toguarantee that they continue to be relevant in the future, they areinvesting in acquiring digital agencies, which is the fastest way forthem to build their missing capabilities. This is what makes digitalagencies attractive targets.
Interestingly, ourrecent merger between Notch - one of Vietnam's longest establishedindependent digital agencies, and Riverorchid Digital - part of theRiverorchid Group- Indochina's leading independent communicationsnetwork - was concluded with full due diligence in under 12 weeks fromfirst meeting to formal incorporation of the new entity.
This is against a backdrop of other M&A discussions currentlyunderway in the market, which have been swamped in red tape for years.
About three years ago, WPP acquired Who Digital, tomerge with Ogilvy, which appears to be going well. Apart from that, ourcompany's acquisition is the only other deal to have taken place.
* Why did you choose Vietnam to expand and enhance your digital services across the Indochina region?
Vietnam is part of the Next-11 (N-11) markets that have beenidentified as having high potential to becoming the world's largesteconomies.
Despite short-term challenges in Vietnam, the long-term potential of this market still remains strong.
It is also worth reminding ourselves that ASEAN (of which Cambodia,Laos, Myanmar, Vietnam and Thailand are a part of) is the single largestregional emerging market in the world.
Jointly inIndochina, you are talking of a population of more than 236 million,which is two thirds of the USA or 3.5 times higher than the UK, whichexplains why the Indochina opportunity is attractive to us.
We chose Vietnam as our hub because there is a good talent pool andthis is also where our digital teams were first formed.
The maturity of the market is the highest compared to others, and it'salso in line with some of our clients' strategies to manage theirIndochina business out of Vietnam.
* You called themerger of Riverorchid and Notch a "match made in heaven". What aretheir strengths and how will you combine them together?
We both have similar visions and aspirations for our business.Riverorchid Digital was keen to partner with an established digitalagency to scale up their digital operations and at Notch we were keen toexpand our business to cover other regional markets. Riverorchid gaveus that opportunity.
With this merger we aspire tobecome Indochina's premier digital agency network that is embeddedwithin Indochina's premier communications network.
Notch's scale and experience in Vietnam is now coupled with Riverorchid Digital's unparalleled Indochina footprint.
What this does is also allow us to offer integrated services to ourclients. Often clients are looking for a ‘complete' solution covering acombination of PR, Events, ATL and Digital.
With this merger we can confidently integrate all these areas and offer a seamless solution to clients.
* What does digital advertising cover and what are the major trends atthe moment? What do you think about the development of digitaladvertising, and what are its advantages and disadvantages?
The internet, mobile, social media and gaming have forced us to changethe way we think about running our business, and at the heart of thesethings is a new wave of consumers that are changing the foundations ofbusinesses.
Consumers have created a new digitalculture and there has been a shift in the whole business landscape.Steve Ballmer, CEO of Microsoft, once said: "All the media willeventually go digital. It isn't a matter of if, it's a matter of when".
And look at what's happening now. You don't use anencyclopedia anymore. You visit Wikipedia. You don't rent out DVDsanymore. You go to torrents.
The industry ischanging fast, and we have to adapt or die. In fact for brands oragencies that want to stay ahead of the curve, they have to stay a stepahead of the industry.
Mobile phones are a hugeopportunity. Today a smartphone can be bought for 150 USD, with internetaccess. You no longer need to buy an 800 USD computer to access the webor surf Facebook.
For us, this is of particularinterest as we now have a way to engage with "mass" audiences in theMekong or Myanmar via digital. Not many people know that Cambodia wasthe first country in the world where mobile phone penetration exceededfixed phone penetration, or that mobile phone penetration in Vietnam isfive times higher than desktops.
The biggestadvantage of digital advertising is the ability to target messagesspecifically to certain audiences and the ability to measure what theconsumer do when they see that message.
At times,TV can often result in excessive wastage and offers no way of measuringthe behaviour of viewers right after they see a spot or magazine ad.
I don't see any real challenges to digital advertisingexcept that we need to realise that it may be low cost, but it's notfree.
* Could you give us your projections for the market?
In Vietnam, digital advertising accounts for about 3-5 percent oftotal media expenses, and we project it will double in the next threeyears. That will happen. Digital has to grow.
WithinIndochina, Vietnam is the number one market in terms of population,market readiness and mobile penetration, followed by Cambodia andMyanmar.
Myanmar actually has a larger populationthan Cambodia, but it lags behind in internet development and mobilepenetration. Once the market develops, I believe Myanmar will surpassCambodia.
* Some say that there are too many digitalagencies struggling to establish a foothold in the local market byundercutting each other. How does this affect the big players?
There are more digital agencies in Vietnam than the market warrants,and when supply exceeds demand, it pushes prices down.
There are hundreds of small digital start-ups that often undercutlarger agencies because that is the only differentiator they can offer.
But clients would never want to work with a bunchof kids who may not have the depth of knowledge or experience they needto fulfill expectations.
As a digital agency youmanage critical assets owned by clients such as a website or a Facebookpage. The last thing a client wants is disruption to these serviceseither because a young team lacks experience, or worse still, that theycan't renew a hosting contract for instance.
Ourcompany has been in the industry for the last five years and we are oneof the few agencies who have managed to remain stable. We don't competewith low cost companies; we focus on where we can add value for ourcustomers.
* People often complain about spam ads?What are your recommendations for both market players and theauthorities in Vietnam?
Spamming is a big no-no. Ihave not come across spam ads here, but I do get spam messages on mymobile phone. Clients need to know that this is illegal in Vietnam, soanytime an agency promises a database, it is important to check if thisis really an opted in database or not.
Myrecommendation to clients would be that they must focus on buildingtheir own databases. This can be a highly competitive advantage whichwill pay dividends if used correctly.
* What do you think Vietnam can learn from the development of more advanced markets?
One of the main challenges we face in Vietnam is the short-termapproach to digital marketing. At Riverorchid Notch, we believe incontinuous consumer engagement.
What this means isthat we take a long-term strategic approach to digital and not acampaign-centric approach, although that is built in within thelong-term approach.
The other challenge is relatedto production budgets. Clients in Vietnam carry a perception that"digital is cheap". I have sat in meetings where the client is referringto digital ideas from the US or Europe and expecting similar results,yet when it comes to digital production, they fail to allocate adequatebudgets.
An idea like Gangnam Style didn't simplygo viral by itself. It was well engineered to go viral. It had the rightmix – an already popular K-Pop singer, a giant record label (UniversalMusic Group) behind it, and big production and media investments topromote it.
Digital media is relatively cheap, butif you want to provide your consumers with a great online experience, bethat a Facebook app or a website, it requires a certain degree ofinvestment.-VNA
