Dentsu Japan's disgraced digital arm committed more errors to fewer clients

Arvind Hickman
By Arvind Hickman | 19 January 2017

An extensive probe into Dentsu Japan's digital search business has found billing and reporting irregularities were more prevalent than initially feared but affected fewer clients and had a smaller financial impact.

A five month internal investigation into Dentsu Japan's digital advertising transactions between November 2012 and July 2016 found 997 instances of errors - well above initial estimates of 633 - had affected 96 clients during the period. This is 15 clients less than previously thought.

Of these, 40 cases relate to inflated reporting of digital postings, 537 cases of reports with incorrect posting details, and 416 cases of inaccuracies in invoices.

The total amount owed to clients is YEN114.8 million, about half of the YEN230 million initially attributed.

"The impact on business performance and financial status related to these issues are not material. All clients have been informed. Furthermore, this was confined to Japan and Dentsu is confident that these practices will not occur again due to the measures put in place," Dentsu Japan president and CEO Tadashi Ishii says.

"Dentsu offers sincere apologies for the great concern and trouble that this matter has caused its advertisers, shareholders and other stakeholders."

The investigation also shed light on how the errors went undetected. This included insufficient checks and balances to detect errors and poor communication with advertisers, who were given "unclear definitions of services scope or disclaimers".

Dentsu also admitted a disconnect between its digital business units and corporate HQ.

To fix the problem, Dentsu will add an independent layer of oversight to monitor digital reporting and transactions, automate reporting postings and reform programmatic operations, including training 1,000 staff. 

Last September, AdNews revealed that Dentsu Japan's digital search business had engaged in “suspicious transactions” over several years.

This was first flagged by Toyota, a cornerstone client, and an initial probe found irregularities had affected more than 100 clients, rocking Japan's largest and most influential media company.

Dentsu Japan's swift action to communicate with clients and take responsibility helped contain the crisis from spreading to other parts of the business.

The road back for its tarnished digital business, however, is less certain. It could take considerable time and effort to rebuild client relations in a country where personal trust can take several years to nurture and is deeply-rooted in business culture.

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