Dentsu Eyes Expansion in US and Europe

18 January 2002

Agency giant Dentsu is looking to end its reliance on the ad industry of its native Japan and is eyeing America and Europe as targets for expansion in 2002, judging by comments from senior managing director Fumio Oshima.

A colossal 95% of the group’s revenue is generated in Japan, where it handles nearly one-quarter of total adspend, and a hefty proportion of the remaining 5% comes from elsewhere in Asia. However, the continued decline of the Japanese ad market – second only to the US in terms of size – has prompted it to seek further overseas growth.

“The US and Europe are going to be the biggest areas of growth this year,” declared Oshima. “Our level of existence there is too low and I can't stand that.”

A key to this expansion may lie in last year’s purchase of American shop Oasis International Group, which handles US corporate advertising for Toyota Motor, a major Dentsu client in Japan.

“As a target, we would like to get more car accounts,” continued Oshima. “If Dentsu becomes a global player, we need companies like Toyota.”

However, there is no guarantee that Toyota will ask the group to pitch for its business, the bulk of which has been in the hands of Saatchi & Saatchi for over twenty years. “We are working very hard, so when the opportunity comes, we'd like to make sure that we'll be invited,” he said.

Outside Japan, Dentsu depends on two alliances – a 20% holding in Bcom3 (owner of Leo Burnett and D’Arcy) and a joint venture with WPP Group’s Young & Rubicam in Asia.

Oshima stressed that it was the tie-up with Bcom3 – described as Dentsu’s “primary global partner” – that would be the vehicle for expansion, with plans to increase the Japanese group’s stake to 25%. When asked if the Y&R alliance would grow beyond Asia, he declared: “We have no intention to do something big, or new. This is not our policy.”

Dentsu and Bcom3 already have a number of jointly owned operations, among them Magellan in London, D’Arcy Australia, Tokyo’s Beacon and PDS Media in South Korea. The US group’s senior vp–worldwide corporate affairs Walter Peterson revealed that the duo would seek similar opportunities market-by-market, and would set up a fresh ad network based on unaligned shops in their respective portfolios.

Despite Oshima’s comments, many analysts believe Dentsu’s global growth will be gradual – not least because, after the consolidation of the last few years, there is not a great deal left to buy.

News source: Wall Street Journal