Dentsu is seeking a “partnership” solution, and has avoided talking about a sale of its tanking international business.
Rather the global advertising group, with its profitable domestic Japan business carrying the rest of the world, sees media as a “flywheel” in its international business.
It calls this its Media++ strategy, integrating CXM, creative, and data & technology capabilities into the core media business.
This will be a "key growth driver to restore our competitiveness".
Dentsu told analysts in a briefing that Media++ is designed to drive clients' business growth by integrating media with CXM, creative, and data and technology, while elevating the core value of media services by harnessing the power of AI, data, and new insights.
Dentsu says Media++ has already contributed to a new business win with Dollar General, one of the largest discount retail chains in the US in the retail media category.
And it has won major media pitches such as Vodafone and BMW.
Dentsu plans to focus internal investment on Media++.
Japan, the largest region accounting for 42% of the group's net revenue, saw organic growth at better than 5% in the September quarter.
But all regions of the international business recorded negative organic growth rate for both the three months of the third quarter and the first nine months of the year.
That includes Australia, which continued to “face difficulties” and “continued to decline,” which is part of the APAC region which posted a 10.1% drop in growth.
Dentsu has maintained its guidance for consolidated organic growth rate at broadly flat.
However, it updated its forecast for Japan to 4% from 3%. The international business was revised down to negative 3% from negative 2%.
On what to do with the international business, dentsu said it was working on “comprehensive and strategic partnership”.
Dentsu hasn’t ruled out selling agencies, or taking an investment partner, in its international operations.
But the latest from dentsu indicated seeking a partner.
In the meantime, dentsu is reorganising, cutting 8% of international staff, some 3,400 people, mainly back office and headquarters headcount. The indication is that sales staff will be kept mostly intact.
And the company has hired consultants to see what else can be done with the international business.
“We have been working on the various initiatives that we are trying to rebuild our business foundation,” dentsu told market analysts in a briefing on September quarter results.
“We are focusing on internal investment as well. To ensure strong growth is something that we are focusing on.
“In that regard, we want to work with partners who are able to contribute that. To be able to secure that element is an absolute necessity. In what areas are we going to enhance? Where are we able to secure growth? This is what we are currently looking into and reviewing right now.”
Slides from the presentation to analysts:
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