The sky isn’t falling, but brand value in the ad agency sector is plummeting fast. Here’s the latest news on this front from Japan.
Dentsu will be restructuring its operations into four operating pillars after deciding to consolidate its brand agencies into six global brands. The new plans will come into effect in February 2021.
Announcing the move, Toshihiro Yamamoto, president and chief executive officer at Dentsu Group, said: “We simply have too many brands almost, 300 across both Japan and internationally. This radical new structure will be more logical and transparent for our clients, enabling us to serve them better.”
It’s hoped the new efficiencies will allow the holding company to “reduce costs significantly”.
Dentsu is currently the largest advertising agency and the fifth largest advertising agency network in the world in terms of worldwide revenues. The agency reported a 14.8% organic revenue decline for the third quarter, with its Japan and international businesses both in line with that result. For the total group, that was a slight improvement over Q2, when the drop reached 17.3% with the international business falling 20%.
“Champions for Meaningful Progress” Or Holding On for Dear Life?
This is how Dentsu speaks: “We are dentsu international. In good times and bad, we partner with brands to achieve meaningful progress as a force for growth and good. Our teams of optimists, entrepreneurs and first-movers coalesce around the needs of our clients, unlocking unique possibilities for sustainable value and lasting change.”
In the past, an agency like Dentsu may have had too few reasons to humble themselves and adjust their tone accordingly. Today, the words don’t land well with intended audiences because it’s imperative to take care of your own house first. IN other words, it’s hard to hire someone to “unlock unique possibilities” when they’re busy keeping many roofs over their many heads.
Wendy Has Heavy Lifting To Do, And She’s Doing It
Wendy Clark is one of the highest-profile and most well-liked leaders in the ad industry. On Sept. 1 this year, she started a new role as global chief executive of Dentsu Aegis Network.
Observatory International notes: “The reality is that Clark will need to work within the limits she is being set by the global recession brought about by the Covid-19 pandemic, as well as the constraints the Dentsu business finds itself in.”
The company has outlined four key priorities:
- Simplifying the business for both clients and operations
- Structurally lowering operating expenses
- Enhancing the efficiency of our balance sheet
- MaximiZing long-term shareholder value
I don’t see “make the most kickass creative solutions the world has ever seen” in this shortlist above. First things, first.
Last April, when Clark was named the new leader, The Drum touched on this theme. “The general zeitgeist seems to be that Dentsu is bringing Wendy on to improve creative, but I don’t really see that being her main mandate,” said Tom Denford, co-founder of media consultancy ID Comms. “Wendy Clark is someone you hire when you need to rethink and simplify the role of a media agency.”
“Media agencies – and Dentsu is among the worst at this – have grown so complex that even internally senior people can’t explain the structure or know how to navigate it.”
PREVIOUSLY ON ADPULP: Clark’s Stock Continues To Climb