The rise of Dentsu Aegis: A lesson in moving from domestic domination to global player

24th June 2015

Sometimes ad agencies and networks are like the proverbial London bus: you never hear from or about them for ages, then all of a sudden they engage in a flurry of activity.

So it is with Dentsu. In the three years my colleagues and I have been writing this blog, we hardly ever wrote about Dentsu – at least, not until it swallowed up Aegis for £3bn and became Dentsu Aegis Network in 2012 (although the deal was not finalised until March 2013).

Of all the big agency groups, Dentsu has always been the most enigmatic. Founded in 1901 by one Hoshiro Mitsunaga as a telegraph company, it almost immediately started specialising in advertising; indeed, it created the first newspaper ads in Japan before the First World War, and in the 1950s it was making the first radio and TV ads there.

By the end of the 1950s, it was a giant, completely dominating the advertising market (creative and media) in what was to become, until the 2000s at least, the world’s second biggest economy. Last year, Dentsu controlled a quarter of all ad spend in Japan – the third biggest advertising market in the world.

But despite its power at home, Dentsu had virtually no presence outside Japan, and attempts to establish bridgeheads in lucrative western markets were few and far between – a notable exception being the Steak Group (advised by Green Square). Perhaps the reasons were cultural – they do things differently over there: in Japan, client conflicts are not regarded as an issue (Dentsu works for both Honda and Toyota); nor is it seen as odd or unethical that Dentsu (a major media buyer, remember) owns a majority stake in Video Research, a TV ratings agency that’s the Japanese equivalent of Nielsen.

Everything changed with the Aegis deal. Now the company’s domestic and non-Japanese revenues are about equal, and the agency is the fifth-biggest in the world by revenue, and looks fairly certain to overtake IPG, the number four, at some point soon.

But it’s also been buying up agencies outside Japan over the past couple of years, particularly operators in the digital and media (often both) fields. Last year Dentsu was even named as a potential buyer of IPG – and while executive chairman Tim Andree denied any interest in Michael Roth’s US-based network, the speculation hasn’t really gone away.

Just last month, there were two important acquisitions – that of publisher John Brown Media and last week, the purchase of a majority stake in Media Fuse, a highly-rated full service agency network in Nigeria.

The Media Fuse group provides integrated communication strategy, planning and implementation, digital media creative and production, digital performance and optimisation, social/community media engagement as well as specialist out-of-home communication services. Its local and multinational clients include P&G, MasterCard, WAMCO, Total, British Airways and Old Mutual, among others.

Despite its many problems, Nigeria is perhaps the most attractive place in which to invest in the whole of Africa. As well as being the continent’s most populous nation, it also has the largest and one of the fastest-growing economies, a vast amount of oil and mineral wealth, a comparatively well-educated population and a growing middle class – not to mention a huge media and film industry. The new, merged company, Media Fuse Dentsu Aegis Network, will have – so I’m told – one of Africa’s most sophisticated media buying and planning operations.

Dentsu has also been merging media and creative agencies to come up with something that looks like the old full-service model of yore – think back to the merger of technology specialist Vivid Group with digital creative agency Isobar in Australia about three weeks ago.

More interesting perhaps, and certainly more significant, was the news on Monday (1 June) that Dentsu Aegis had bought out Publicis Groupe’s 19.37 per cent stake in digital behemoth Razorfish.

So what was once a joint venture company is now a fully-owned subsidiary of Dentsu and as a result the old Dentsu Razorfish will be rebranded as Dentsu iX (‘innovative experience’, apparently) from July onwards.

Dentsu iX will, according to the press blurb, be “a specialised one-stop agency that provides digital solutions. The new name reflects the company’s desire to create innovative experiences”.

Intriguingly, the same media release also hinted that “amidst the progress of globalisation in the digital marketing domain, [the agency] will seek to further expand its operations through cooperation with the Dentsu Group’s international digital network”.

The agency will be run by Hidetoshi Tokumaru (as president and chief executive), who told the Japanese media that business development activities would now be carried out in collaboration with Dentsu Group’s global network of digital agencies.

Make of that what you will, but despite its reputation in some quarters for conservatism and caution, Dentsu, particularly post-2013, is actually a pretty innovative company, and the idea of a digital agency using its considerable technological muscle across the globe is rather exciting.

Japan’s sleeping giant has now fully awoken – can we expect it to rampage across the globe like some avenging advertising Godzilla? Who knows, but I suspect rivals will be paying the 114-year-old network rather more attention than they did hitherto. Very interesting times ahead…