Dentsu (Japan)

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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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Adbrands Company Profiles provide a detailed analysis of the history and current operations of leading advertisers, agencies and brands worldwide, and include a critical summary which identifies key strengths and weaknesses. Adbrands Account Assignments tracks account management for the world's leading brands and companies, including details of which advertising agency handles which accounts in which countries for major markets. See also:

Dentsu Aegis Network
McGarryBowen
Dentsu Y&R
Dentsu America
Beacon Communications

The Adbrands Company Profile of Dentsu summarises the agency's history and current operations. Subscribers may access the following website links:

Dentsu website

Brands

Dentsu Public Relations Ad Dentsu Osaka
ISID Dentsu TEC
Dentsu Research Creative Associates

Worldwide

Phoenix Comms (Korea) &c China

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 9th Mar 2017: With all the marketing groups' results now in, here's the final ranking for organic growth for 4Q and full year 2016. The full year ranking is led by Dentsu (5.1%), followed by Interpublic (5.0%), Omnicom (3.5%), Havas (3.1%), WPP (net sales 3.1%, revenues 3.0%), MDC Partners (2.3%) and Publicis (negative 0.7%). The table for 4Q alone is topped by Interpublic (5.1%), ahead of Havas (4.2%), Dentsu (3.9%), MDC Partners (3.8%), Omnicom (3.6%), WPP (net sales 2.1% revenues 0.5%) and Publicis (negative 2.5%).

Adbrands Weekly Update 16th Feb 2017: Not even strong results from Western rivals like Interpublic could take the shine off another dynamic performance for Dentsu, and especially the international Dentsu Aegis Network business. Full year gross profit (effectively revenues) of Y838bn (around $7.27bn) represented organic growth of 5.1% for the year, narrowly beating Interpublic. It would have been higher still were it not for a weaker final quarter of 3.9%. Dentsu's domestic business was up just 1.0% in 4Q and 4.5% for the year, compared to 5.8% for 4Q for Dentsu Aegis and 5.7% for the year. Group net profit was up only marginally year-on-year to the equivalent of $770m. Profits in both years were undercut by a raft of adjustments, impairments and special charges. The group warned that it expects current year profits to decline as a result of costs associated with reducing employee workloads in keeping with its new HR policies.

Adbrands Weekly Update 26th Jan 2017: Dentsu named Toshihiro Yamamoto as its new CEO, to replace current leader Tadashi Ishii with immediate effect. Ishii offered his resignation at the start of the year after prosecutors recommended charges be brought against the company for its gruelling work culture which prompted the suicide of a young recruit just over a year ago. Yamamoto has spent 36 years at Dentsu and has experience working in all three main areas of media, account management and business development.

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.


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Background

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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