In 2013 Japan’s Dentsu, huge in Japan but mostly becalmed outside it, agreed to pay £3.2bn to buy media buyer Aegis, owner of the Carat, Vizeum and Isobar networks.
30 months on the deal looks like one of the winners of the century.
Dentsu has just announced its Q1 numbers showing big increases in operating profits, organic growth and margins. Dentsu Aegis Network, the media buying bit, is the standout, showing organic profit growth of over 11 per cent for the half year (down a little in Q2) while Dentsu, the advertising part, showed Q1 organic growth of just 1.9 per cent (the reporting periods are different in Japan).
Dentsu is about as big as it’s possible to be in Japan so its growth (or not) replicates the Japanese economy as a whole. So the real growth is coming from Aegis, outside Japan. International revenues at Dentsu Aegis are now 54 per cent, up from 48 per cent last year. So it’s been a truly transformational deal.
What’s the secret of Aegis’ success? It’s partly because Aegis sticks to its last: media planning and buying. And it’s very good at it, having an enviable record of winning big global accounts – General Motors and Microsoft – and keeping them. It also has, tucked away, its Posterscope out of home buying agency which delivers the biggest margins in the media game.
But, under CEO Jerry Buhlmann, Dentsu Aegis Network, is also adroit at positioning itself. A growing part of the business is digital agency Isobar. Isobar does its own thing but also seems happy to work with independent agencies when it suits. Which means that Dentsu, although a big agency operator itself, also benefits when clients decide the likes of WPP and Omnicom are not for them and prefer more local solutions.
Dentsu is still carrying a lot of debt from the Aegis buy and it has failed to crack the international creative market. Mcgarrybowen in the US has had its moments but its sharp spurt of growth seems to be over. Buhlmann, who may one day run the whole shebang if Japanese business culture allows, might argue that it doesn’t need a bigger creative presence. It’s doing quite nicely staying out of such things, intentionally or not.
In the meantime the company has been busily buying small to medium-sized digital and media businesses in Asia and Africa. Will they be tempted to roll the dice again – maybe with a bid for Interpublic – to overtake Publicis Groupe and rival WPP and Omnicom?
Update
Isobar, Aegis’ digital agency, has just won Burger King’s digital account. Sister agency Vizeum handles Burger King’s European media business.
Burger King has had about as many agencies in recent years as it’s flipped burgers. Even so it’s an important win for Isobar.
BK is most famous for its weird ‘Subservient Chicken’ digital campaign through Crispin Porter. That seems an age ago now. Can Isobar produce something as off-the-wall?
