The struggles of independent advertising agencies: A sector in crisis

In the ever-evolving world of advertising, the pressure on independent agencies has reached a boiling point. Veteran ad executive Prathap Suthan, Managing Partner and Chief Creative Officer of BangInTheMiddle, offers a stark assessment: "Nobody wants to work in advertising anymore because there is no money, no respect, and the industry feels like a pressure cooker ready to burst." The mounting frustrations within the ad world, particularly for smaller agencies, are compounded by systemic issues ranging from late payments to idea theft, a lack of industry representation, and exploitative client demands.

While large, established agencies have the financial clout and media access to weather these challenges, smaller, independent firms are left vulnerable. "Big agencies have the power to demand upfront payments from media companies, and even in cases of alleged plagiarism, they can rely on legal muscle," says Suthan. He points to high-profile instances, such as the Ogilvy-Vivo case over alleged plagiarism, where legal action was taken by the larger agency, despite similar occurrences going unaddressed for smaller firms. Suthan underscores the absence of safeguards for smaller agencies when they face unscrupulous clients or delayed payments, a situation that further isolates independent players from meaningful protection.

The lack of a formal mechanism to address grievances exacerbates these issues. Suthan emphasizes that the absence of an industry body to resolve disputes leaves agencies without recourse when their ideas are stolen or when clients default on payments. "There is no one to complain to," Suthan notes, "and with no clear processes or formats to follow, agencies often find themselves fighting a never-ending legal battle." Without a collective voice or industry standards, smaller firms are left to shoulder the burden of bad debt, while their larger counterparts can afford to stay above the fray.

The financial instability of smaller agencies is further compounded by the relentless undercutting of fees. “I’ve seen junior marketers yell at CEOs of ad agencies with decades of experience, demanding services that cost a fraction of what they should,” Suthan says, illustrating the growing disconnect between the value agencies provide and what they are compensated for. The expectation to deliver complex services for pennies on the dollar has drained talent and morale, particularly for small and independent agencies that cannot afford to operate on such thin margins.

For many independent agency owners, the lack of representation is a critical concern. The Advertising Agencies Association of India (AAAI) and local ad clubs, organizations meant to offer support, are often seen as serving the interests of the large networks rather than smaller firms. Access to these bodies is often financially prohibitive. Membership fees range from Rs 5 lakh to Rs 15 lakh, a sum many smaller agencies cannot afford. Divya Pratap Mehta, founder of Intertwined Brand Solutions, notes that while the industry bodies focus on the larger players, smaller firms are left to fend for themselves, with little recourse to protect their interests or recover unpaid dues.

The AAAI, for instance, claims to represent a broad spectrum of agencies, but its efforts are largely seen as geared toward the top 20 firms in the industry. Smaller agencies, particularly those operating outside of major metropolitan areas like Delhi and Mumbai, feel sidelined. "The money spent in cities like Nagpur or Cochin doesn’t align with the dynamics of bigger cities," Suthan explains. "There’s no consistency in how agencies are treated, and there’s no standardization of professional etiquette across the industry." The lack of a unified voice, he argues, leaves independent agencies vulnerable to exploitation, with little support from the very bodies meant to protect them.

Thampoo Jacob, National Creative Director, ANAROCK Creative & Digital Agency, says the Ad Club has "lost its bark and bite over the decades." He recalls when his agency was a member of AAAI as it used to help firms come together on many issues. Jacob is rueful now. "Today, AAAI is more of a premier club than anything else, protecting their own flock," he says.

For some, like Gautam Reghunath, founder of the independent agency Talented, the problem goes beyond the structural challenges of the industry bodies. Reghunath attributes much of the sector’s struggles to a broken business model. "Why are we acting as banks, financing our clients’ credit?" he asks, highlighting the absurdity of agencies fronting the costs of advertising campaigns while clients delay payments. He points to the issue of agencies often offering their creative work for free in the pitch process, which sets a damaging precedent for undervaluing their services from the outset. This systemic undervaluation, Reghunath argues, perpetuates the larger cycle of exploitation.

In this environment, many smaller agencies find themselves squeezed from all sides. They are forced to compete with freelancers who undercut prices, driving down rates across the board. "Clients now see advertising as a commodity," says Anisha Singh Motwani, founder of QED India. "It’s all about who can offer the cheapest rates, even if it means compromising on quality." As a result, Motwani says, many independent agencies struggle to secure fair payment and are often forced to wait months, sometimes years, for compensation. When payment is delayed or withheld entirely, there is little recourse for smaller agencies.

Motwani’s own experience speaks to the power imbalance in the industry. "We worked with a global agency that simply didn’t pay us for the work we did," she recalls. "Taking legal action would have been futile. The larger agencies hold all the cards, and the smaller ones are left to fight for scraps."

Despite these systemic challenges, there is a growing desire for reform. Many believe the solution lies in the creation of new, more inclusive industry bodies that prioritize the needs of smaller agencies. "We will support a new body if it is formed, but the focus needs to be on internal solutions first," says Reghunath. Others, like Mehta, argue that industry bodies should be more proactive in creating spaces for collaboration and mutual support. "We need a structure that allows smaller agencies to join, share knowledge, and fight for fair treatment," she says.

Yet, the hope for change is tempered by a deep sense of frustration. "The advertising industry is self-destructive," says another anonymous agency head. "We push clients to grow with purpose, but we can’t even stand up for ourselves. The industry lacks unity, and that’s the real problem."

As the pressures mount and the barriers to survival grow steeper, the future of small and independent ad agencies hangs in the balance. Whether the industry can come together to protect its own or whether the divide between large networks and smaller firms will continue to widen remains uncertain. What is clear, however, is that without a collective effort to address these systemic issues, the heart of the advertising world—the independent agency—will continue to bleed.