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Dentsu narrows gap with IPG

The Japanese advertising powerhouse is flexing its muscles beyond its home turf with Aegis' heft

Viveat Susan Pinto  |  Mumbai 

Ashish Bhasin
Ashish Bhasin

While the world's attention was held by the Publicis-Omnicom merger announced in July last year, the world's fifth-largest marketing communications company Dentsu was quietly integrating Aegis with itself. Dentsu paid nearly 50 per cent premium for the British media group and owner of agencies such as Carat and Vizeum, acquiring it for $5 billion (Rs 31,000 crore) in 2012. The combine, Dentsu-Aegis Network (DAN), which began operations in India last month, signalled the Japanese major was now a powerful force to reckon with on the global stage. Its recent annual revenue forecast bears this out.

When releasing its second quarter results in November, last year (its third quarter numbers are yet to be announced), Dentsu had said it is raising its revenue forecast for 2013-14 to $5.9 billion (Rs 36,000 crore). This, advertising experts say, was on the back of Aegis, which had given it significant reach beyond its home turf of Japan, into UK and North America. The jump in revenue forecast is 40 per cent more than Dentsu's 2012-13 numbers. It closed 2012-13 with revenues of $4.2 billion (Rs 26,100 crore).

The nearest rival, Interpublic Group or IPG, closed the calendar year 2012 with revenues of $6.96 billion (Rs 43,200 crore). It is yet to declare its full-year numbers for 2013. The US-headquartered holding company of agencies such as McCann-Erickson, Lowe Lintas & Partners and DraftFCB, had not given an annual revenue forecast for the calendar year 2013. But if its third-quarter revenue, which stood at $1.7 billion (Rs 10,550 crore), is annualised, then IPG's topline works out to $6.8 billion (Rs 42,200 crore), a shade lower than the $6.9 billion (Rs 42,800 crore) it did in 2012.

Fight for the number three slot

With the Publicis-Omnicom merger upending the advertising pecking order led by Martin Sorrell's WPP, the fight for the number-three slot will intensify between Dentsu and IPG, experts say.

In India, IPG is a significant force with agencies that have a strong footing in the market. It consolidated its media entities such as Initiative and Lodestar UM under Mediabrands last year, putting veteran Shashi Sinha in charge of operations.

DAN is also being helmed by a media veteran Ashish Bhasin, who is CEO of the combine in South Asia.

Rohit Ohri, executive chairman, Dentsu India Group, has the additional responsibility as CEO of Dentsu's operations in Asia-Pacific's southern region.

Besides Carat (media buying and planning agency), Vizeum (media specialist) and Dentsu, the combine in India, like in other parts of the world, includes iProspect (search engine marketing agency), Isobar (digital marketing agency) and Posterscope (out-of-home agency). Aegis had specialised in media duties for clients rather than ad creation.

Bhasin says, "The operating model for DAN will be of one P&L per country. This way the agency brands within DAN would not compete with each, but work alongside each other to ensure that the single P&L account grows."

While this operating model can be compared once the contours of the Publicis-Omnicom merger become apparent later this year, Bhasin says he is not worried. He says, "The single P&L model is something that the Aegis Group had first put in place prior to the acquisition by Dentsu. Following the acquisition and integration of Aegis, this concept was adopted by the combine as a whole."

Ad industry experts say that the single P&L model makes sense for DAN in India, since it is smaller than rivals WPP, Publicis-Omnicom and IPG. Estimates put the revenues of DAN in the region of Rs 200-250 crore. WPP's revenues are estimated to be in the region of Rs 2,500 crore, while IPG's are Rs 700, and Omnicom's Rs 300 crore according to industry sources.

Bhasin says that his priority remains exploring growth opportunities in all areas of marketing communications. Areas such as digital, social media and search-engine marketing would be targetted by DAN for acquisitions. Globally, it has been reported to have about 50-60 acquisitions in the pipeline.

In India, Dentsu has already made a few smaller acquisitions - buying 80 per cent stake in the digital agency, Webchutney, and a 51 per cent stake in the creative agency, Taproot, last year, to strengthen operations.

Globally, the combine has been snapping up small but growing units. It just announced the acquisition of a Chinese social media agency called Verawom. Last month, it acquired a Polish social media agency called Socializer. Both acquisitions have been integrated with Isobar. In January, it also acquired an Australian creative hotshop called Oddfellows.

First Published: Wed, February 12 2014. 21:45 IST