JAPAN'S LARGEST AD AGENCY PLANS MORE U.S. ACQUISITIONS

Dentsu Expansion Strategy Targets U.S. Specialty Shops

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NEW YORK (AdAge.com) -- Dentsu Holdings USA is merging two small New York shops, DCA Advertising and Oasis Advertising, today as one of the first steps in a strategy to grow
Nick Kobuse, chairman of Dentsu Holdings USA, said the advertising conglomerate is planning to acquire specialty ad agencies in the U.S.
more aggressively in the U.S. through acquisitions and new-business wins.

Canon, Toyota, Sharp
The new $150 million DCA agency will handle Canon U.S.A. and Toyota Motor North America. To avoid a conflict between DCA’s $100 million Canon business and a $40 million Sharp account at Oasis, Dentsu’s Colby & Partners, based in Santa Monica, Calif., recently opened a New York office to take over Sharp. The moves give DCA a slightly bigger presence, and Colby a New York base for growth.

Nick Kobuse, New York-based chairman of Dentsu Holdings USA, said the holding company is looking at agency acquisitions in the U.S. and Canada, as well as the possibility of buying North American agencies specializing in areas such as nontraditional advertising, below-the-line advertising and the U.S. Hispanic market.

Worldwide revenue: $1.86 billion
Dentsu dominates Japan’s ad market, the world’s second largest, to an extent that is difficult for Westerners to comprehend. Dentsu is by far Japan’s biggest ad agency, controls almost half of all media buying there and even owns the only ad trade publication and the main advertising awards show. Ranked by its 2003 worldwide revenue of $1.86 billion, Dentsu is the world’s largest agency network, 50% bigger than the No. 2 network, Omnicom Group’s BBDO Worldwide. But 90% of Dentsu’s revenues come from Japan, and the remaining 10% make Dentsu barely a player outside Japan.

"We’d like to do at least 15%," Mr. Kobuse told AdAge.com.

Right now Dentsu owns five small North American

Map Image: Dentsu
Dentsu, which is Japan's largest agency, controls half of the media buying there. It even owns Japan's only advertising trade publication. Click to see larger map of Dentsu world operations.

agencies -- DCA, Colby, Dentsu Communications, Renegade Marketing Group and Toronto-based DCC Communications -- with total billings of about $500 million. Client conflict is not an issue in Japan, allowing Dentsu to handle rival marketers at home that it must handle through separate agencies in the U.S.

Major management change
In a major management change, Dentsu a year ago hired a longtime Leo Burnett account executive, Al Roehl, as CEO of Dentsu Holdings. Dentsu has an 18% stake in Burnett parent Publicis Groupe, and tapped Mr. Roehl in the hope that an experienced Western ad executive would help speed Dentsu’s U.S. growth.

"Our strategy is to become a more local agency," Mr. Kobuse said.

One likely U.S. acquisition for Dentsu is Marina del Rey, Calif.-based Ground Zero, an agency Dentsu introduced to Toyota and helped to secure a youth marketing account from the Japanese carmaker in March, in a pitch against Saatchi and Publicis & Hal Riney. Right now the two agencies have a strategic alliance, but if Ground Zero’s relationship with Toyota prospers, Dentsu would like to buy the agency next year, Mr. Kobuse said.

Toyota ad accounts
In the U.S., Publicis' Saatchi & Saatchi has about 90% of Toyota’s business. Dentsu bought Oasis three years ago for its Toyota accounts, only to see Oasis lose the Prius model last year to Saatchi when Toyota decided to assign the brand globally. In that review, Oasis teamed with Dentsu to pitch against Saatchi and a third contender, Delphis, a Toyota in-house agency that also hopes to win more Toyota business outside Japan. Oasis kept a smaller, $35 million corporate branding account from Toyota Motor North America.

Although Dentsu and Saatchi have long been rivals around the world for Toyota business, Mr. Kobuse said Dentsu’s goal is not to steal existing car models from Saatchi but to take advantage of Toyota’s U.S. growth and pitch for new business as Toyota introduces younger and more upscale cars.

"If there is new business, Saatchi & Saatchi or Dentsu will get it," he said.

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