This is election year in Nigeria. Oil prices have gone down while the naira has been devalued. Experts say these developments would worsen the woes of the economy. The Chief Executive Officer, X3M Ideas, Mr. Steve Babaeko, says the economy will be negatively affected by the coming general elections because, according to him, politicians will hold back the cash which would have been used to oil the engine of the economy. He says the advertising industry is operating at “subsistence” level when compared to what obtains in other countries. Babaeko laments the dearth of trained manpower in the industry and how to reposition it. Senior Correspondent ADEDEJI ADEMIGBUJI met him.
How will you describe 2014 for the advertising industry. What were its high points both for the industry and its practitioners?
The advertising industry in 2014 was neither black nor white; it’s somewhere in between. To that extent, you can clearly say that so many positive things happened, while some things also happened at the macroeconomic level that were not so positive which affected the integrated marketing communication industry. Some of the positives for the industry last year include the emergence of young and new agencies. There has not been any time in our history, until last year, that we witnessed a couple of younger agencies coming up strong and competing with the more established players. The new generation agencies came out strong last year and I find this commendable unlike in the past when it’s always same old players calling the shots all over the industry. At the macro level, with the drop in oil price, especially in the last quarter of the year, and its negative effects on the economy, it was an indication of tougher times for the industry and the economy in general. This will definitely affect the whole business climate and of course the advertising segment is not insulated from what happens at the macro level. Again, politics seems to gain the loudest share of voice especially in the last quarter; so this translates to the fact that if money is not being spent at the centre, more money is going into politics and political activities. Therefore, the economy will slow down because everybody is holding unto the cash at hand. These are the two indices I saw both on the negative and positive sides.
What are these new generation agencies bringing to the table that is creating the shift?
It is a normal shift; the kind of shift you are seeing in Nigeria and it is normal everywhere. If you look at the American, United Kingdom or European markets, there is always a cycle that a new agency emerges – Crispin Porter + Bogusky, Droga 5 and the likes. There is always the rise of some new agencies that is giving everybody sleepless night. This business is about regeneration. What the new agencies are doing in my own opinion is their approach to business that is different.
Though, I cannot speak for the other agencies, in 3XM Ideas, for instance, the way we look at this business is totally different from what most of these other agencies have done in the past. Let us now isolate advertising from the business landscape. We dismantled the business model of advertising in Nigeria and we put it together again. How did we do this? Well, we looked at the big picture. Then we asked ourselves: In creating communication and not just advertising, what are the things you need? We found the answers very simple: You need the brain power for strategy, and creative fire power to turn the strategy into workable ideas. You need music and production.
We took this business approach and we set up business units, usually with normal advertising agencies, they only control the strategy and the creative development. We own a record label and production company and some other collaterals that go into developing communication. It is,therefore, easy for us to be in control of some of the other allied elements in creating communication. From that basic point of view, we have revolutionised this market.
How easy is it to come in and shake the industry? Does this presupposes that agencies have a life circle?
The truth is that every brand has a life circle. But what happens is that you need to infuse an element of regeneration in building the brand. If you are a brand and the bulls-eye of your consumers is 30 years and above, it would be wrong of such brand not to create a pipeline that leads to people who are 18 years old or thereabout to begin to build the next wave of consumers for the brand. When you create the pipeline, you have corrected what would have been an ageing crisis for your brand down the line that supplies your main demography. It is the same thing with agencies. Agencies are not about buildings or structures, they are about people. Believe me, this business is not for old people, it is for young people. As an agency, if you want to live long, keep regenerating your people, keep the pipelines of young people coming into your agency fluid and open. An old man can have an agency, yes, that is why we have agencies that are 100 years old and the likes out there but they keep regenerating their people. If one fails to do this, the agency will die. There are no two ways to this.
This year is an election year. What are its likely effects on the economy and advertising? How will this impact on the industry?
In the Western world, election time is always a boom time for the advertising industry. Saatchi & Saatchi handles the Labour Party’s multi-million pound campaign in Britain. In Nigeria, it may not be so. This is because the bulk of campaigns here are run and executed by Association of Advertsisng Agencies of Nigeria (AAAN). That is why we see horrible campaigns and terrible posters and election materials. At the macroeconomic level, the issue of holding money for elections will impact on the larger economy. Whether the economy captures the money in the hands of politicians or not, it means that there are certain money that would have otherwise been injected into the system that would have made the economy more buoyant that is missing. If it affects the economy, it will affect the advertising industry. This is because advertising is not living in a silo insulated from the larger society. Like they say in show business, the show must go on no matter what the economy brings. Advertising is here and people need advertising and it is actually when the economy is down that clients need to advertise the more because people need to be aware of their products and services. This is what has kept the industry going.
Do you see any shake up in the advertising industry this year?
It probably would happen. Right now, there is a paradigm shift happening, especially with younger agencies emerging. The people who were in the fore front are no longer on the driver’s seat. A new power block is emerging. I will not be surprised if there is more shake up this year. Now, for the first time in a long time, we are seeing mergers and people buying into an existing company in the industry. We are likely to see more of these this year. What we have had were big fishes in small ponds for a long time. People don’t want to be smaller fishes in a bigger ponds and that is the kind of arrangement that pays. People such as Sir Steve Omojafor have talked about merger but no one was taking him serious. It is happening now and I think we are going to see more mergers this year.
Why is the advertising industry is not going public? What are the fears of practioners?
In Kenya, there is advertising group that is quoted but it has not happened here yet. I will tell you why? What we have done here is what is happening in the agric sector where farmers are practising subsistence farming. What we are doing is subsistence advertising instead of mechanised advertising. People create business for themselves and their family unlike the WPPsof this world, which are quoted companies. However, it takes time to grow above the mentality of remaining a small agency just for subsistent living. So, if you really want to play in the big league, you can open it up for others to take up shares in the market. Some don’t even want to give their staff who has worked for them up to 15 years any share not to talk of listing. It is about mind-shift and this needs to happen to the advertising entrepreneurs in Nigeria to get the industry to that place we are talking about.
What is likely to trigger the mind-shift you just mentioned?
At some point, the economy will open up more. Nigeria is the biggest economy in Africa. Power generation is very abysmal compared to most other African countries. If we are able to get electricity right and the level of output goes up, the economy will open up more, then more people will come to Nigeria to do business. Already, we have vehicle assembly plants and then we will have no choice but to run this business as it should be run. Now with Advertising Practitioner Council of Nigeria (APCON) reform, there is a limit to which foreigners will buy shares in advertising industry. May be that law will change when the economy opens up. For this to happen, we need massive amount of capital. How much is the capital base of most agencies in Nigeria? Very negligible, that is why we gave the example of subsistence and mechanised farming.
Does this mean the new APCON law is defective?
I respect APCON, and there is need to protect the local industry. However, water will find its level. The industry needs to be protected. I know what the law is trying to say because the outsiders have heavier war chest to run riot over the entire industry- buy up any and kick out the ones they desire to and bring in foreigners to work here. Then we might have killed the baby before it has the chance to grow up. But at some point, the baby needs to grow up and stand on its own, then it won’t need too much protection. I look forward to that time when we will be able to say “may be we have out grown this law and we need to upgrade it.”
Talking about regeneration to keep the industry growing, where are the schools to close this gap?
Unfortunately, we have not been able to kick-start the advertising academy. The AAAN had this vision many years ago, but in fairness to the new administration, it is working so hard to ensure the school gets off the ground. But what I have done in the past six or seven years ago is to go to the University of Ibadan (UI) and give lectures and do workshops. There is a young man who now runs a small digital agency, he was part of a workshop I did at UI many years ago. I understand the need to create the pipeline that will create talents. The talents pool is drying up. As an agency today, if you are looking for copy writers, you are going to look for months. There are no copy writers anywhere and it’s just about the short sightedness of not creating that pipeline that brings young talents into the industry. What we do is to use the small clout that some of us have to tell young people that there is an industry called advertising in Nigeria that provides employment where you can catch so much fun building brand and you can also earn a decent living. Young ones need see us, look up to us and get excited wanting to join the business.
3XM is not affiliated. Do you see anything wrong with affiliation?
Affiliation is like marriage. Nobody will just walk into my agency and take it without showing me what you can offer. I can’t talk to you if you cannot offer me something different that we are not doing. I have decided that I will take some of the best practices of old agencies to run my business and learn from their mistakes.
Last year, what did you do right or wrong?
What we did wrong was that we did not join the bandwagon to do anything for any business. For instance I cannot join anyone to defraud the citizens. For me to support your business I must believe in what you stand for. If we had jumped on the bandwagon we probably had made more money but its all about value and principles. We must share values. We have dropped accounts either because the value was not just right or the client is not willing to partner. We want to be partners; we don’t want to be anybody’s donkey. If you look at the brands we work with now, it is like equal seat at the table, we are partners. That is why you see the progress on those businesses. An agency dictated to is like sending a soldier to war with his hands tied behind him. We have been fortunate enough to have found valuable partners to work with. But the ones who would not allow us do what are trained to do and what we believe in we gladly resigned such businesses instead of roasting in there and saying we’ll manage.
