PowerFM Radio Interview – Transformation In The Advertising Industry

16 Feb PowerFM Radio Interview – Transformation In The Advertising Industry

Ayabonga: I am Ayabonga Cawe. Thank you for downloading this Power Business podcast. Twenty-seven minutes it is before the top of the hour. We now shift our sights and our attention to the advertising industry, which according to a Nielsen AdEx survey in 2016, total spend in that sector was about R42 billion, certainly a lucrative industry by all accounts. And hence today we want to hone in on it, not necessarily from a content perspective, but talk to some of the entrepreneurs who run commercial interests in the space and talk about, of course, some of the barriers to a transformation in the sector.

More importantly, how is this particular sector enhancing, or even limiting the prospects of newer entrants who also want a piece of that R42 billion pie. I’m joined now in our studios by Lufuno Makungo, who is the founder of Media, and also joined by Bongani Gosa, the founder, and creative director at BWD Advertising. Gentlemen, good evening to you, and thank you so much for joining us.

Lufuno: Thank you.

Bongani: Thank you. Thank you.

Lufuno: Thank you for having us.

Bongani: Good evening to you.

Ayabonga: Bongani, let me start off with you. You know, I’m quite interested in something that you mentioned this week in the piece that you pinned. Actually it wasn’t this week, over the weekend. But I guess it relates to the process of RFPs. Now, anybody who has ever tended for anything will know what we mean when we talk about RFP or RFQ, right?

Bongani: Yes.

Ayabonga: The request for proposals in the advertising space and, of course, some of the sunk costs that are associated with pitching for something without any guarantee that you are actually going to get it. Just maybe paint a picture for us of, in the advertising business, how do you make your sales? How do you make your revenue? What does that process look like?

Bongani: I suppose maybe before I jump into that, you’ve mentioned quite an interesting fact to say that annual spend on advertising is 42 billion per annum, sorta. So, of the 42 billion spent, less than 1% is spent on black-owned black-run agencies, less than 1%. Does that make sense?

Ayabonga: Well, it doesn’t make sense to me in the absence of understanding how the other 99 is cut across. Yeah?

Bongani: Yeah.

Ayabonga: So, yes. I mean, you know, less than 1% is what? Less than 4 billion of that, right? Oh, sorry, less than 400 million.

Bongani: Hundred percent.

Ayabonga: Less than 400 million, which I guess is a drop in the ocean when you think about the R42 billion. But before we get, of course, to how the pie is cut up, I think it’s important for you to explain to us how you get business. For instance, if I sell cell phones, I would either be importing the cell phones from somewhere and then, of course, getting them and then selling them at a retail level, whereas you are in a service industry which potentially would have a different operational mode.

Bongani: So, typically how it would work is that an RFP would go out, maybe they’ll put it either on the internet or maybe they would email you and then there would probably be some kind of briefing where they tell you what is it that they want, and then you would need to put together some kind of a proposal. So, a proposal will pretty much include your credentials. And besides that, they’ll also ask for some form of free creative, like how would you tackle something like this? In simple terms, that sounds a bit simple but it gets a little complicated because if you’re going to come up with some kind of campaign, it’s not like a quick, quick thing that you can do.

So, typically, let’s take at the office, for argument’s sake, to create something, to make something nice, it will take us about maybe a week, if we were working hard, maybe you’d have a team of four people working on this thing full-time. So, if you take like an hourly rate of about 4 people, multiply that…I mean hourly rate of 4 people, multiply that by, let’s say, hypothetically the number is 500, and then you take the 500, you multiply that by 8, which is the day rate per person. And then you take that number, you multiply it by 40, which is because 5 days is 40 hours. So, you take that 2,000, you multiply it by 8, which is day rate. You take that number, you multiply it by 40, then it’ll give you a number.

So, the cost of actually pitching it’s quite a little bit expensive. This does not include printing or if you are going to pull in some kind of a consultant that doesn’t have maybe some skills that you don’t have. So, it becomes a little bit expensive when it comes to pitching. And then also, they would also have interesting requirements like you may say they’d want you to make X amount of revenue per annum. This then puts a lot of black agencies out of the game because, like I said, of the total 42 billion, we only get less than 1%. So, it means that our revenues are a little bit lower than the others.

Ayabonga: And yet, of course, you still have the sunk cost of having to pitch for this work. I mean, if indeed we say huge pitch, say to the tune of about R100,000, that’s R100,000 down the drain that’s lost as a sunk cost and without any guarantee that you’re actually gonna get the work?

Lufuno: Exactly. Just to add also in your introduction, Ayabonga, I’m also head of advertising at Dzuguda Digital. Just to go back to that point because you see, pitching is a very expensive exercise, and often I don’t think even when those RFQs are put out people consider how much labor it’s actually required to do the pitching. What I know is that, in other countries, what usually happens is that they often won’t necessarily ask you to pitch with creative ideas because that’s already an IP that often you actually won’t get paid for.

So, actually they will ask you to pitch with an offer in your profiles. They look at the experience of each individual and then they can actually be able to make a decision on that. But when it comes to the actual IP, they don’t ask you to do that. It’s just that when you don’t factor the resources that are asked to be put behind it, or when you don’t have that information as to what that process takes, it becomes a problem.

So, there’s an issue of maybe also just a knowledge gap in terms of what some of our prospective clients understand and the process that we understand on our side. So, if we kind of also regularly engage, I think some of the gaps will actually be easily covered.

Ayabonga: Yeah. I guess the other dimension of this particular one, Lufuno, is that there’s somebody in this conversation, yes, there’s the advertising industry, the established industry and some of the major players there, but then, of course, there’s the recipient client there and their brand. I’d be interested to hear from you guys how that relationship is between black agencies and some of the big brands who put out all of these briefs and these RFPs. Are those RFPs in terms of how the specifications are laid out? Are those specifications laid out in a manner that implicitly excludes a black agency?

Lufuno: You see what, I’m not sure how, because that problem is actually very layered in terms of how we need to address it. Because I mean, late last year, we actually had a meeting with the CEO of one of the big government institutions, trying to unpack some of those issues. And what we’ve realized is that some of the things that he was sharing from his side was that he has actually identified a lot of things that are put on those RFQ form that actually shouldn’t be part of them, that end up excluding, I think, large portion of people who are capable of doing the actual work. Where they will say, “We’re looking for an international agency.” But that guy, what he’s realized is that he awarded the business on the basis of the fact that is an international agency, but he’s being serviced by one or if his studies based in Johannesburg.

So, they are leveraging on the international thing, whereas it’s actually just doesn’t add any value to doing the actual work. I think it’s basically us engaging more often, understanding as to what should be the key criteria when you’re looking for a creative agency. Because I think just to add on that, one of the things that people kind of maybe ignores is that the success of maybe some multinationals is actually built on the same talent that is running their own black-owned agencies. So, those are people who are way more skillful in terms of what they have to offer that have actually contributed to the same success of the competitors who may be considered better.

Ayabonga: Bongani, the other thing that for me was quite unsettling are some of these turnover requirements, right? How do you ask, in a country like South Africa, for 20 years of agency experience and a turnover of R50 million commercially, right? Let’s maybe just for a second. Commercially, right, you’re saying you want 20 years experience and you want an R50 million in turnover.

Now, already, that says to you, you potentially are either going to get an international agency or a white agency in a country where the majority of the people that you’re trying to send your brand message to come from the black community. And so, surely from a commercial perspective, the lights should go on and say, “Hey, even if we do get this contract, potentially if indeed we do want an impactful campaign, we’ll have to either rope in a black company and sub-contract a big chunk of this project to them, or scrap the sub-contracting one and actually give the contract directly to the black agency.”

Bongani: That turnover, I’d suppose it’s just one of many issues that we have to tackle. Because what we’ve decided to do, Lufuno, myself, and a couple of other guys, we’ve set up a lobby group to address these issues. So, if a big corporate puts out a tender with some requirements that just don’t make sense, then we would approach them as a collective to say, “But what is the objective of this? Are you deliberately excluding us or is this some kind of oversight?” So, we just engage them on that level. Because what we’ve realized is that if we’re going to sit and do nothing, or maybe just complain to each other, we’re not going to change anything. But if we complain directly to the people that are making these mistakes, because maybe sometimes they’re not aware, then they can take corrective action and we can be included.

Ayabonga: Let’s pause this slightly. I think you are correct, it is indeed an issue of greater organization within ourselves as black people in that sector so that we are able to speak in one voice and potentially pull in all of our efforts, expertise, and our talent even to respond to some of the bigger projects. But we’ll come back to that. JD, what’s happening on those roads?

Fourteen minutes is before the top of the hour. And, you know, Bongani, I like the point that you were making, which was around with much greater organization you’re able to ask much more difficult questions and you have a bigger critical mass to not only engage some of the brands themselves who are issuing these briefs and who are issuing these RFPs but also from a policy perspective. It surprises me that in the creative industries in our country, we really haven’t taken seriously to this issue of transformation, and some of the sector charters, and even some of the approaches to that, nor have we raised some of the advocacy and political voice and political noise that ideally we should be doing. And that doesn’t only apply to advertise, I would venture to add that it even applies to the record businesses, to businesses like photography, phone, and all manner of other creative industries that have become the sole preserve, I should say, of white professionals.

Lufuno: Yeah. I think one of the things we’ve realized is that when it comes to transformation, actually those who seek it actually need to put more effort to ensure that it happens as opposed to maybe heavily relying on those who are happy with the status quo. So, for us, we’ve kind of identified that previously there will be policies that are generated when we inquire and they say, “Oh, actually we consulted with the industry.” But you find that Bongani and myself and other senior guys within the industry may not be familiar with that consultation. So, for us, even the establishment actually of a lobby group of black agencies is actually trying to push that voice and actually creating awareness of, I think, the amount of talent that we have within the black advertising space.

Ayabonga: Yeah. Let’s pause this slightly, gentlemen I’d like you to put your headphones on there, we’ve got one of our callers here who’d like to weigh in on our conversation. Rose, you are calling us all the way out in Ran Park Ridge. Good evening to you.

Rose: Yes, it’s rainy around Ran Park Ridge. How are you doing there?

Ayabonga: Very well thanks. Well thanks, Rose.

Rose: How are you doing, Lufuno?

Lufuno: I’m doing well, and you?

Rose: I’m fine, thank you. Yeah. I sat off with your team for a couple of years and a couple of pitches and things like that, and yeah, you guys really bring it when you present. Your diligence, and professionalism, and thoroughness and things like that. A couple of things I wanted to say with regards to when production companies take the proposal to agencies in order to get funding. What I come across a lot of the times is they lay everything out to the agencies and, unfortunately, as is the nature, I guess, of the business all over the world, what happens then is the agency retains the idea, give it to their own preferred providers who obviously would be friends and nefarious dealings happen. So, you sit with your idea and somebody else is executing it on another platform. It’s one of the very sad things that I’ve found.

So listening to the difference between preparing a creative as opposed to your portfolio speaking for itself, and whether or not it exists within the team to be able to execute what lies there, looking for a middle ground somewhere between laying out your entire creative or putting out just enough to say, “We are able to do this because of this, that, and the other,” but not laying it out altogether is so I’m saying. As well as if the business does not have current, does not have a life, their salary bill in terms of the creative that are there around the table, then use only the core team to draw up the documentation so that you don’t outlay as much in the run-up to presenting the idea you have.

Ayabonga: Rose, just a quick one on that. I mean, I don’t know much about this particular industry, but would that not be seen to, I guess, compromise the quality or potentially, the kind of impact that you would want to make in a proposal process? Or do you think you’d be able to get the same kind of impact but at a lesser cost?

Rose: I think that the most important thing, and one of the things that I do commend about Lufuno’s companies that they constantly keep the lines of communication open. So, they do understand the head-space of the people as well as they’re not subsequently of most of the panel that they are dealing with without any funny business sort of under the carpet or the table. But fundamentally, communicate and ask how much do you want us to put out?

Are we able to, in the interest of both ourselves and yourselves in the protection of both ourselves and yourselves so that tomorrow you don’t have comebacks on anyone saying, “No NDAs or nondisclosure agreements were signed, so, therefore, our idea is not protected.” But I guess it is, you know, as per the specs and if there’s anything about understanding the specs of a particular tender if the company allows engagement then do, but most of the time it is in the diligence reading of the stakes that are put out for it.

Ayabonga: Rose, we’ll have to leave it there. I really appreciate your comment. Bongani, your response to what Rose is saying there. And I guess she does raise the issue of IP protection and maybe as the organized black caucus in the advertising space, maybe we should be speaking to some of these IP lawyers and see how we protect some of the things we pitch.

Bongani: Yeah. IP theft is not going anywhere, so I suppose…

Ayabonga: Is that a fight you want to take on?

Bongani: Not necessarily, I suppose we can try because we always sign NDAs and sign all sorts of fancy papers. The issue is, when someone steals your IP, they kind of tweak it and make it difficult for you to chase after them. So, I suppose that one we’ll probably just maybe need a lawyer to help us see how we can best take a look. But it’s not one of our focus points, if I have to be honest, because our main focus is just how do we grow as black agencies? How do we get more business as a collective? Not necessarily just BWD getting business. So that’s kind of where we focus on.

Ayabonga: Okay. And some of her other suggestions that certainly when you pitch, try and maybe get as lean a team as you can potentially, to be able to respond to those RFPs.

Bongani: Yeah, we do try. Suppose I can speak for myself and my company, we do try to do that, but in some instances, you must remember how these things work. You need… as I said, typically we would need like maybe a week to put together something. So, if you have four people working on something that’s not paying, you need other people working on something else that’s paying. So, you need to make a trade-off. Because sometimes then you have two pitches, so it means now you need eight people. Does that mean now that the other, I mean, production work or the work that pays the bills is not being paid? So, it’s kind of difficult. Unless maybe you get a pitch in December when it’s slow, then you can just use your internal resources, but typically it’s not that simple.

Ayabonga: Okay. Lufuno, I’ll come back to you quickly. I’ve got, I don’t know if it’s Emile or Emile calling us all the way out in. Good evening to you Emile or Emile?

Emile: It’s Emile, brother.

Ayabonga: Emile.

Emile: Yes. Don’t do that. Don’t do that. Just say hi.

Ayabonga: Go ahead. Go ahead, Emile.

Emile: Look, Bongani’s agency…I just want to mention Bongani’s agency did work for me. So, my whole issue regarding this is, I cannot understand how talent is ignored, you know, or what is the problem? Because Bongani’s agency exactly captured what I wanted to say with my brand, the service was excellent. But just the talent, I gave them a brief and they, to the tee, communicated exactly what I wanted to say, and I see it in the feedback that I’m getting from my customers with regards to my product.

I constantly ask my customers, “Okay, what do you get from my brand? What do you get from my product?” And they’re saying they get nostalgia, they get really great products, they get happiness, it feels great. So, I don’t understand how these guys are being marginalized when there’s so much talent, and they understand, they understand the people, they understand people from the townships…I mean that Bongani’s agency totally understood what I wanted to say, and I’m reaping the benefits of it. So, really, the corporates and all of these big companies must really come to the table and board these agencies, because it doesn’t make sense how you can ignore talent like that.

Ayabonga: Awesome stuff. Thank you so much, Emile, for your call there.

Emile: Emile.

Ayabonga: Emile. Sorry man. Emile, next time you call, I’ll know how to pronounce it, man. Thanks, Emile.

Emile: Thank you, brother. Always a time to learn.

Ayabonga: Thank you so much, man. Lufuno, some kudos there for your brother?

Lufuno: Yeah. You see what? I think also some of the feedback that we’ve received as a lobby group, as black agencies as well, we’ve realized that this actually…I mean, previously, the issue has always been credited to lack of will, but we’ve realized that there’s also a lot of people who actually came to work with us. And some of them, the reason why they’re actually maybe not partnering with us is that they don’t really fully understand. And also from our side, we kind of understand that people don’t wanna just do the transformation for the sake of it because we’re talking business here. So, if it’s not good for their business, they won’t do it.

And also, it’s not like we come in here and sit saying, “Oh, give us business because we’re black.” No, no, we, we’ve been doing this for years, and we’re kind of seeking business in this space that we know we are experts in that field. I think the more regular we engage with these people, the more we actually finding the interest in people say, “Okay, we didn’t know that you guys exist.” We’re like, “No, no, we actually do exist and these are our service offering.” And some of those offerings we found that you may not necessarily find the same thing when you go to multinationals because they may lack the agility that Bongani and I have in terms of how quickly we can be able to turn around some of the projects that they gave us. So, for me, those are some of the benefits that when these guys discover that, “Oh, hold on, I actually didn’t know that you guys can do this within this period and as efficiently as you have actually done it.”

Ayabonga: Let’s talk about government work here, because I would think that government with the quanta of procurement that they have, some of that procurement would touch on your industry. Do you see the same kind of challenges with private sector brands that you’ve highlighted? Do the same challenges find expression in the government space?

Bongani: Yes. It’s a pretty much same problem across the board because remember what the big multinationals are doing, they are tweaking their BEE scores. You find a company that you know 100% that this thing there’s no way it can be level 1, but you hear that this company’s level 1 BEE. And they also have their people in the background lobbying government for stuff. So, it’s kind of the same difference government and not necessarily the same difference, the government it’s a lot better. But in terms of bigger projects, it would still be the big multinationals craving those.

Ayabonga: And I guess maybe, gentlemen, the last question on my end, many people in the political space often say you’ll never win in a boardroom what you can’t win on the streets. And I guess, in a way, it does apply to your own industry as well, that we’ve probably got a much greater critical mass than at any other time in the history of South Africa when it comes to the advertising industry of black firms, black agencies, and even black talent in that space. Maybe the big question is really now, how do you organize yourself beyond just black agencies themselves, but even organize some of the black people who are working in white-owned agencies? Have you considered that?

Lufuno: Yeah, we have. It’s just that the framework, the structure in terms of the transformation it’s a bit tricky because in the past there’s been a lot of emphasis on transforming the existing multinationals as opposed to creating new black agencies. That has been driven when people say we are trying to have diversity and all those kinds of things, but we’ve realized that some of those diverse people don’t have much of a voice.

But in a country that is dominated by black people, you can do as much research as you want but nothing beats the live-actual experience of you understanding your own people in terms of how to engage them, the tone to use, the way they are. So, I think slowly people are realizing that you can’t win to address communication, it’s something that will require a tangible solution, you can’t ignore because today with Twitter as well and social media, you’re easily gonna get attacked by just completely being off the mark when you’re considered being offensive. I think it’s common sense that if you live in a country that is black-dominated, you shouldn’t be thinking twice as to who are well or better positioned to actually do such work.

Ayabonga: Bongani, you have the last word, man.

Bongani: Yes. So, I suppose we tried as much as possible, as a lobby group, as a collective, not to focus too much on complaining about the industry. So, what we’ve done is that in the next…this year we’re going to do like four events. The event is called The Business of Advertising. So, those events will pretty much be trying to address some of the issues we’ve been chatting about now in the studio and trying to find solutions to those problems. Like I’m saying, if we’re going to just complain and nothing’s going to change, so we’re tackling these issues head-on with that Business of Advertising event.

Ayabonga: Awesome stuff. Gentlemen, thank you so much for joining us this evening. I really appreciate your time. Lufuno Makungo, who is the head of advertising at Dzuguda Digital, and Bongani Gosa, the founder, and creative director at BWD advertising, talking about the transformation in that particular industry.