The wheels have indeed come off at Japanese ad giant Dentsu – no great surprise as the ad conglomerate has been cutting back all year – posting a $737m loss for 2019. Organic revenue growth was down across the board, 12.3 per cent in Asia Pacific, home territory.
Dentsu Aegis Network (DAN) its business outside Japan based on media buying network Carat, made heavy losses which it blames on underperformance in Australia, France, Brazil, China and the UK, which doesn’t leave very much apart from North America.
Quite why Dentsu should be performing so much worse than its peers isn’t clear. The Japanese home market must clearly be one reason but media buying margins across the world have been tightened as clients redraw contracts and take more media functions in-house.
Dentsu has alread been reported as seeking job cuts of about nine per cent across the board and it seems inevitable that more will follow.
CEO Toshihiro Yamamoto says: “The international business suffered from a continuing weak performance in a number of key markets, leading to the decision to announce a restructuring in December.
“I am confident the restructuring of the International business will deliver the necessary savings and changes to our organisational structure that we need to deliver growth and margin improvement in 2020 and beyond.
“2020 is an exciting year for our business. In January, Dentsu transitioned to a new group structure, bringing the Japan and the international business closer together under the shared understanding of ‘One Dentsu’. This structure will create a solid foundation to allow our people to work across markets and across brands, to deliver growth for our clients.”
DAN looks like the biggest problem and these results are bound to spark interest from potential predators, should Dentsu decide to concentrate on its home market. Accenture Interactive, which has pulled out of media auditing to concentrate on its wider media business, is one of the most likely buyers.