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The powerful advertiser Dentsu faces a major challenge such as the Olympics


As soon as the first solid Olympic campaigns first appeared on Japan’s first summer TV show, Dentsu’s advertising giant told investors to expect a gross profit of $ 800m.

Unfortunately for the company – a history that is known to be the most powerful in Japan – the good news was not in line with his big business, his hopes for growth, or a game called Tokyo 2020 how it has been most affected.

Instead, the profits come from selling $ 3bn at the Dentsu headquarters in Tokyo: a 48-dimensional, tear-jerking photo that matches the company’s growing share Japanese advertising market $ 55bn.

The sale of the skyscraper could be like the biggest project in Japan ever built, according to experts, investors and long-term Dentsu customers. But it also hides internal harassment in a company whose problems may be more serious than its own.

“Like selling its headquarters, the company is a segment that shamelessly lowers its costs to make money in the future,” said Citigroup analyst Hiroki Kondo. “There are real challenges in Dentsu.”

According to a former Dentsu official, a strong but self-governing group struggles to adapt to the changing times, digital transformation in advertising and the home market with a share of 28% but this is very different from what the rulers had for more than a century.

At the same time, the Tokyo Olympics, which were supposed to raise money to buy the company to address its challenges, have become more difficult to manage.

Sponsors signed by Dentsu are included bringing in foreign expertise exploring the damage that could continue to trust the company in their campaigns and remain popular with an event that experts warn could lead to medical problems.

“Dentsu is losing his job in Asia [as management diverts to the Olympics], and for the past six months it has been losing all old customers and a place to run a new business. Customers need advertisers to be able to be transparent and flexible, and when they look at Dentsu, they don’t see this, they see the company behind the scenes, “said the former official.

Dentsu responded that it was “stabilized”, noting that its first quarter of advertising for foreign journalists had doubled since last year due to increased revenue from existing customers and new acquisitions.

Prior to the plague and before the Olympics, Dentsu’s problems seemed complex, but simple. In 2016, the company was liquidated multiplying customers, including Toyota, an online advertiser. Later that year, a student’s suicide was officially designated as “Death by overwork” and forcing the resignation of the President of the company.

French researchers, for six years, have been investigating Tokyo’s success in participating in the 2020 Olympics. The allegations include that large sums of money were withdrawn from the donation committee to people who appear to be able to influence voting results through companies and individuals. which had a history associated with Dentsu. The former duke of Dentsu, who rejected evil practices, told Reuters he distributed gifts and helped to support the former power broker at the suspicious Olympic Games. Dentsu declined to comment on the French investigation.

The price-sharing chart is a revised index until Jan 2020 to show how Dentsu works

But the Olympics were also a critical source for the world’s largest advertising company and a symbol of continued domination at home. Dentsu was brought to Tokyo after winning the Olympics and was able to persuade more than 40 Japanese companies to be sponsors and performers. “Secular work” potero. The result was a historic event, a record $ 3.1bn sponsored mainly by Japanese corporations that pay, in some cases, $ 100m each.

But while this has benefited Dentsu, the real prize would have come sooner and later in the game, with campaigns run by various sponsors and what would have been a highly competitive television advertising campaign, many of which Dentsu is directing. Citigroup analysts say all of this would have contributed about ¥ 10bn ($ 90m), or 9%, to the group’s operating profits.

But this came to a head now, with organizers banning the advertising of Olympic television out of fear of publicity stating its opposition to the group.

“The real risk is the speculation that the Olympics get – at the moment there is a hint that it could happen without a hitch, but the risks are very high,” a company close to Dentsu said.

If the Olympics end without a legacy of the Covid-19 disease, Dentsu could make some money through commercial advertising after the game. But even so, Kondo thinks the company will not lose any profits from dating for fourteen years and what the former boss said is part of the company’s “raison d’être”.

Researchers and company executives say the long-term consequences could be that Dentsu is being forced to repair relationships with companies that have been frustrated by the limited profit in supporting the Olympics by offering discounts in advertising.

“This is a little detrimental to Dentsu, as he was saving money for all the campaigns and TV commercials that will come out in the Olympics – not just initial donations but all the services that the commercial will guarantee,” a person close to Dentsu said.

The Salees bar chart, 2020 ($ bn) shows the world's largest advertising agencies and currency

In addition, the plague has caused serious problems. The decline in global advertising revenue has brought great joy since the overthrow of the UK’s Aegis in 2013 and the burning of nearly 200 companies’ purchases since then, resulting in a $ 1.4bn loss last year.

“There were disadvantages to Dentsu’s purchase… The problem was that they could not be included,” a former Dentsu official said.

The group is also cutting back on funding, especially in Japan, to focus on innovation and digital age. Although it now generates more than half of all its profits from digital advertising and other affiliate services, industry executives say their improvements in such issues have led to a gradual change compared to non-Japanese.

The sale of headquarters, say people who are well aware of the deal, is a sign of turmoil at the top.

The buyers say they made the decision quickly, mainly because the design of their new home would be expensive because the house was designed for Dentsu.

A group of Dentsu’s executives spoke to a financial group that was not the company’s main bank for selling the house to the Japanese housing company Kenedix, according to people who are familiar with the project.

The second group moved to block this, and asked another giant Hulic house to take action. Hulic was a success, said people familiar with the deal, especially since he was offered cheap money by Dentsu Mizuho’s central bank.

The company declined to comment on the buyer but said the sale was part of a series of years-long experiments, not for financial reasons.

Dentsu officials say they will use the money they have just earned to buy goods, but analysts remain skeptical of the company’s growth at home and beyond beyond the temporary growth of profits.

“We think the redevelopment could be a problem in the near future, including finding new jobs, and we hope it will take time for this to contribute to growth,” said JPMorgan expert Haruka Mori.


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