No advertising agency dominates its home market as comprehensively as Dentsu, which controls around 30% of all mass media advertising in Japan and has a staggering portfolio of more than 6,000 clients. Despite the best efforts of its competitors to erode its dominance, it remains almost twice as big as its closest domestic rival. Until recently, Dentsu's influence outside Japan was limited to say the least. In 2000, though, the giant began to spread its wings, backing the merger of Leo Burnett and D'Arcy, and then swapping that stake for a sizeable minority stake in the newly expanded Publicis Groupe in a concerted bid to increase its share of Western advertising budgets. The benefits of that partnership were limited, and it was terminated amicably in 2012. In the mean time, Dentsu had begun to bolster its resources in the US with selective acquisitions. Until recently its biggest success was the purchase of the New York shop McGarryBowen, one of the most admired agencies in the US, which has now expanded its footprint internationally. In a bold new move, Dentsu announced plans in 2012 to acquire Aegis Group, parent to the Carat and Vizeum global media networks. That deal finally completed in March 2013, giving Dentsu a fully global profile for the first time. It has continued to build its profile with additional acquisitions.
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|Dentsu Public Relations||Ad Dentsu Osaka|
|Dentsu Research||Creative Associates|
|Phoenix Comms (Korea)||&c China|
Adbrands Weekly Update 5th Jan 2017: Dentsu CEO Tadashi Ishii announced his resignation after five years in that role, acknowledging personal responsibility for the "death by overwork" suicide just over a year ago of young recruit Matsuri Takahashi. Ishii admitted in his resignation announcement that the company's work ethic had been "excessive". The company is still under investigation over the death, though it has changed some internal policies to discourage employees from working long overtime hours. Ishii's resignation came a few hours after regulators referred the case to prosecutors and recommended charges against both Dentsu and its CEO for violation of labour laws. Ishii's successor will be named later this month, and will take over officially as CEO at the end of the current financial year in March.
Adbrands Weekly Update 17th Nov 2016: Dentsu was the last of the big beasts to report results for 3Q. Strong growth by the international Dentsu Aegis Network, comprising Carat, McGarryBowen and others, was undercut by flat performance in Japan itself. Overall organic growth for the quarter was 2.7%, lower than Interpublic, Omnicom and WPP. However, DAN alone scored an impressive 5.2% lift, putting it ahead of all its international rivals. Dentsu in Japan, on the other hand, managed only 0.3%. Another negative influence was the surging value of the Japanese yen against other currencies, which caused reported gross profit (equivalent to other groups' revenues figure) to decline by around 1.5% year-on-year.
Adbrands Weekly Update 20th Oct 2016: Dentsu's Tokyo HQ and three regional offices were raided by Japanese labour bureau officials investigating the tragic suicide of a young female executive, apparently as a result of overwork. Suicide prompted by overwork is a typically Japanese problem; it even has its own name, "karoshi", and companies already officially discourage excessive overtime. However the Japanese work ethic is such that employees customarily disregard such guidelines in order to curry favour with managers. In this case, poor Matsuri Takahashi, just 24, had been working for Dentsu for only nine months but had logged more than 100 hours of overtime per month in the period leading up to her suicide. The raid on Dentsu offices was to determine whether this was a one-off case or part of a deeper underlying problem. Dentsu pledged to reduce the maximum paid overtime to 65 hours per month (though the previous cut-off of 70 hours per month hadn't stopped Takahashi from regularly exceeding that level). It also said it would turn off office lights at 10pm to dissuade late-stayers. However other companies who have tried this found that some staff simply purchased desk lamps to get around the regulations. Unfortunately, as Japanese media noted this week, a set of guidelines drawn up by Dentsu in the 1950s included the rule: “Once you take on a task, never let it go, even if you are killed." Today, Dentsu disavows that advice but the attitude remains deeply entrenched in Japanese corporate culture.
Adbrands Weekly Update 22nd Sep 2016: The brouhaha rumbling within the industry over non-transparent media practices was inflamed further by an admission from Dentsu that it had discovered evidence of "inappropriate operations" in connection with digital media buying on behalf of multiple clients over the course of the past four years. The story was first reported by Australia's AdNews outlet, which suggested that the operations in question related to subsidiary agency DA Search & Link and that Toyota - Dentsu's most important global client - was among the accounts affected. A subsequent statement from Dentsu admitted the error, which it said included over-billing on bought media, false reporting of performance results and, in a small number of cases, charging for media that was never purchased. Total value of the errors was around $2.3m, and 111 different clients were affected. Dentsu said that the discrepancies were "either made consciously or by human error". Japan is widely acknowledged to be one of the world's least transparent media markets, with agencies such as Dentsu acting as both media buyer for advertiser clients and also a media broker on behalf of TV, out-of-home and other media channels. Former Dentsu executive Takeshi Miyazawa, now MD of UM in Japan, told Mumbrella that the local market is slowly beginning to adopt Western-style best practises but that for the time being media trading is still usually conducted under a "gentleman's agreement" arrangement, with no questions asked about mark-ups or profit margins.
Adbrands Weekly Update 19th May 2016: Dentsu reported a strong set of results for 1Q 2016, beating most of its major global competitors for organic growth, though not all of the gains were generated by traditional advertising or media. Sponsorship sales related to the 2020 Olympics were a major factor in a 5.6% lift in Japan, while international arm Dentsu Aegis Network contributed 4.5%, averaging out the total to 5.1%. Only Interpublic did better out of the big six marketing groups. However, there were some dark clouds. A sterling performance by Dentsu Aegis Network in the EMEA region offset declines in the US as a result of account losses at McGarryBowen. The group also cut its forecast for the current year as a result of the strengthening Japanese currency.
Adbrands Weekly Update 18th Feb 2016: Dentsu released another slightly confusing set of results for fiscal 2015. Like previous quarters this year, the figures were complicated by the transition from Dentsu's traditional Japanese year-end in March to the Jan-Dec term used by its Aegis subsidiary and most other international marketing groups. On a pro-forma calendar year basis, gross profit (equivalent to other group's revenues) rose almost 13% on a reported basis to the equivalent of $6.3bn. On an organic basis, Denstu Japan reported 3.9% annual growth, while the international Dentsu Aegis network managed an impressive 9.4%, including 8.2% in the final quarter. The best performance came from the Asia Pacific and EMEA regions, both up 11% in the final quarter, while the Americas region managed only 2.1%. Dentsu's statutory net profit rose 2% to the equivalent of $687m.
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Dentsu was founded in 1901 by journalist Hoshiro Mitsunaga as a news wire service to cover Japan's war with China. Denpo Tsushin (or Telegraphic Service) filed war reports to newspapers, who paid by donating free advertising space which a separate company, Nippon Koukoku (Japan Advertising) sold on to clients. In 1907 the two businesses were merged as Nippon Denpo-Tsushin, shortened to DenTsu, and Mitsunaga was able to secure exclusive rights to syndicated material from US news service UPI. This power allowed him to negotiate even more favourable advertising rates from newspaper clients. In 1925, to instil a fighting spirit, Mitsunaga initiated a tradition, leading his entire team of employees on a hike up Mount Fuji to Japan's highest peak, some 12,400 feet above sea level. That same climb is still re-enacted with near-sacred devotion every year, although nowadays only selected employees join the expedition. Only for four years during World War II have Dentsu employees not made the climb.
In 1936, Dentsu was forcibly annexed by a Japanese government keen to control the flow of news reporting in and out of the country, and it was merged with state-owned rival Domei. After intense negotiation, Mitsunaga was granted permission to spin out both companies' advertising divisions as a separate unit, although Domei remained the controlling shareholder. However the advertising business was overshadowed over the next eight years by war, first with China and then with the United States and other Allies. At the end of the Second World War, Domei was broken up to form two new news bureaux, Kyodo News and Jiji Press, who between them shared control of Dentsu. Sadly, Mitsunaga did not live to see the post-war resurrection of the business. He died in 1945.
A new president, Hideo Yoshida, was appointed in 1947. He had served in the company's advertising department before the war, and had been greatly influenced by American marketing techniques. A brilliant organiser, he recruited former government officials and military officers as well as members of Japan's best-connected families to oversee a massive expansion of Dentsu's operations. Most significantly of all, he almost singlehandedly led the introduction of commercial broadcasting in the country, investing in several of the start-up networks and establishing extensive production facilities within Dentsu to churn out first radio and then television programming, and forcing clients to transfer their budgets from traditional forms of newspaper and poster advertising into these new media. As a result, the company came virtually to control the domestic networks. At one point during the late 1950s, Dentsu handled as much as 60% of all television advertising, and Yoshida himself sat on the board of directors of no less than 20 broadcasting companies. Crucially, he was able to persuade clients to overlook the fact that Dentsu worked for their rivals as well, splitting the accounts of Honda and Nissan, for example, or Toshiba and Matsushita between different floors or buildings.
This immense power earned Yoshida the nickname of "Oh Oni" or "big demon". (It was a reputation he enjoyed. In 1960, he told Time magazine, "If I am the big demon, then my men will have to work like little demons.") Another key skill was to persuade rival companies The huge increase in earnings allowed Dentsu to establish its first overseas office in New York in 1960. Other outposts followed in Bangkok, Chicago, Los Angeles, Paris, Melbourne and Taiwan. Two years later the agency established a joint venture with Young & Rubicam. Although this initially foundered, it was resurrected in 1981 as Dentsu Young & Rubicam. In 1975, Dentsu joined forces with General Electric to create Information Services International Dentsu, a global IT services consultancy. (GE subsequently sold its shares when the business issued an IPO in 2000).
Further joint ventures with Y&R followed in 1985 with the formation of healthcare agency Dentsu Sudler & Hennessey and direct marketer Dentsu Wunderman Direct in Japan. There was a brief liaison with France's Eurocom in the late 1980s, subsequently dissolved when Eurocom became part of Euro RSCG, and also a partnership with PR agency Burson Marsteller. In 1990, Dentsu bought UK agency Collett Dickenson Pearce.
Dentsu finally woke up to the competitive threat posed by its international rivals in 1999. Although the company had worked hard to expand its overseas operations in the 1980s and 1990s, virtually all of its revenues still came from Japan. With admirable foresight, Dentsu announced plans to renounce its private status in 2001, its 100th anniversary, with an IPO. The agency promised to use the resulting funds to mount a global expansion drive, in particular to boost its US profile. More significantly still, in 1999 the group took the plunge into the global mainstream, backing Leo Burnett's takeover of MacManus Group with $400m for a 20% stake in what was briefly marketing services group BCom3. In 2000 Dentsu announced several new partnership deals. In the first, the agency formed a joint venture with telecom group NTT to develop and sell advertising for the hugely successful i-mode service operated by NTT's DoCoMo mobile operator. The following year the group increased its presence in the US, taking a 10% stake in Harmonic Communications, a San Francisco-based internet ad effectiveness firm chaired by former USWeb/CKS founder Mark Kvamme, and also acquired small ad agency Oasis International. It also bought a 40% stake in Sony's inhouse agency in Japan, Intervision, with plans to help build the business into a broadband communications and marketing agency. (It was later renamed Frontage).
In early 2001, Dentsu confirmed that it would proceed with its IPO before the end of the year. As promised two years earlier, Dentsu's IPO went ahead in November 2001. The group offered around 20% of its equity for free-float, raising around $325m in cash and valuing itself at $4.7bn. A few months later, the group gave its blessing to the acquisition of BCom3 by Publicis. The Japanese company paid a further $500m to end up with a 15% stake in the combined business. See full profile for current activities
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