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I think there’s always been friction between Japan leadership and US leadership especially with the media agencies.
We all know how different the cultures are, and how Japanese leadership is very conservative, extremely bureaucratic, slow moving and generally not trusting they are of their US counterparts. Every strategic decision and big decision needs Japanese leadership approval.
With the way the industry is insanely changing and how other hold cos are rapidly changing as well, Japan doesn’t move fast enough nor truly understand the US and global ad market.
In Japan Dentsu literally owns the market, dominates it vertically and basically has tons of conflict. They own and have stakes in media while at the same time buy that media as an agency for their clients. Overt kickbacks, back room deals etc happen all the time, the conflict of interest is insane. Their margins are insane and don’t understand how small the margins are in the US and globally. They basically set the pricing and fees. There is no negotiations with procurement depts and clients.
They don’t understand how procurement depts and clients each year squeeze fees.
They don’t understand and find it difficult to believe you have to pay for talent and how competitive the market is. Because in Japan wages have not risen in 30 years. Only the very top execs aka the old men, are paid well while everyone else have low wages compared to their US and global counterparts.
They don’t know the concept of paying market rate for talent. Because in Japan they are Dentsu and people will gladly accept whatever their salary is just to have a job.
They don’t need to change and adapt as quickly in the US and globally because they are the dominant player in Japan.
They can’t do that in the US at the level they do in Japan.
You can’t apply the same business principles and think they will be success outside of Japan.
As they have continued to lose in the US and globally, Japan leadership have even more distrusting of their US and global counterparts.
US and global leadership have been banging the drums that change is needed and things need to be done but Japan doesn’t move fast enough.
On the media side divesting of the US and global business will be welcomed by everyone. The media side has great agency brands and talent that can do well but need to be freed from Japan.
That’s the most thoughtful and comprehensive answer I’ve ever seen on fishbowl. Thank you.
No different from all the other network steam. Very unlikely and surprising if they settle for a Japan only model after years of building the network (but we need juicy news headlines right?) so expect they'll flog some, reduce some (the 8% they mentioned) and reorg the rest. Tactical times...
They just lost T-Mobile in the US.
We actually lost them 2 months ago … it’s just getting out now
Then there’s this:
https://archive.md/9Fu4p
While I think leaning into individual media agency brands and their specialties can work, (brands don’t care about conflict of interests as much anymore, if a competitor is in the same agency), they have to ensure it’s truly one team.
Essentially with remuneration. Meaning paying one fee for one team aka one P&L to work on one client.
You cannot have a client pay multiple teams aka multiple P&Ls, this is not as competitive fees wise vs other hold cos, especially Publicis that have one P&L teams.
IPG Mediabrands made the mistake of not having one P&L teams therefore their fees where higher va others, thereby losing clients and pitches. Although the argument can be made that they should have leaned more into principle media buying that could have offset it somewhat.
It will be interesting to see if Dentsu Japan sells off the US and global assets and what happens to Carat, iProspect, DentsuX/Merkle.
The cultures and people within these media agencies are very different, so it does make some sense to differentiate but we will see.
I’d like to see iProspect and DentsuX/Merkle succeed bc they were some of the long standing search agencies. But this industry is rapidly changing and just bc you have history in this industry doesn’t necessarily mean success today and tomorrow.