Japanese advertising giant Dentsu

Japanese advertising giant Dentsu

Regardless of your chosen advertising style, you will have to consider the effects of Japan's largest ad agency, Dentsu.

Dentsu is the world's largest ad agency, with annual billings of nearly $10 billion. This is 60 percent higher than the billings of Young & Rubicam and Saatchi and Saatchi, Dentsu's closest competitors.

Dentsu has dominated Japanese advertising for a long time, and it has consistently collected one quarter of Japan's total advertising billings. In the area of network television, Dentsu dominates to an even greater degree by collecting half of national prime time billings. In contrast America's largest ad agency, Young and Rubicam, controls only seven percent of the US market.

Dentsu's dominance has roots in its history. Dentsu was once part of the Domei news agency, which put out government news and propaganda from 1936 to 1945. Dentsu still has a cross-shareholding relationship with Kyodo News Service and Jiji Press, and these two news services control 48 percent of Dentsu's stock.

Dentsu, for its part, has noteworthy shareholdings. Dentsu's chief executive helped establish the Tokyo Broadcasting System, and Dentsu remains the network's largest non-financial shareholder. Dentsu also holds minority interests in other TV stations and owns 37 percent of Video Research, Japan's equivalent of the A.C. Nielsen TV rating service.

In spite of Dentsu's power, its market share has been dropping slightly over the past few years. Dentsu was shocked when Nissan switched its $76 million account to rival Hakuhodo after being with Dentsu for 40 years. It is not clear why Nissan jumped ship, but Dentsu still handles Toyota. Nissan may have thought that a different agency would work harder to get sales in the current recession.

The news of course was good for number two ad agency Hakuhodo, but Hakuhodo still trails Dentsu by a wide margin. Hakuhodo controls 10 percent of Japan's total advertising billings.

Foreign agencies have had mixed results in Japan. Many agencies that tried to go it alone in Japan have not done well, but joint ventures seem to be working. McCann Erickson's joint-venture with Hakuhodo is Japan's ninth largest agency, and Young and Rubicam's joint-venture with Dentsu is doing well.