Hiroshi Igarashi is out, and Takeshi Sano is stepping in.
The Tokyo-based advertising group posted a tremendous loss this year, in financial terms. It’s one of the worst in Dentsu’s history, so much so that it isn’t even paying dividends to its shareholders.
But this wasn’t sudden.
The stark difference between its international and domestic operations has been evident for some time now. Dentsu has eliminated 2,100 jobs and is due to cut 3400 more positions from its international arm.
Dentsu is stuck inside the perfect storm. But also going through a split personality problem.
Its Japan-side operations are growing and doing quite well overall. Is it an international side? Not so much. Dentsu even tried to sell this side of its business operations, but the buyers didn’t stick around.
Why is such a huge agency, such as Dentsu, struggling?
All the money is actually going into very different pockets- AI tools, in-house teams, and other tech platforms. While agency trust is dwindling. The sludge of AI is mostly responsible for Dentsu’s smooth descent, but it’s not merely that. All of the advertising agencies have taken the hit.
Clients prefer to reallocate their agency spending to in-house, AI-savvy teams that also offer them control over their own first-party data. It’s a win-win situation. But if you look at the other side of the coin, businesses have observed a steep growth in their ad spending, not actual revenue growth.
The money isn’t flowing through ad agencies but around them.
If you think of it- the digital ad landscape is actually growing smoothly. It’s just that traditional agencies are the ones being squeezed out. Brands are doing it themselves, and independent agencies that are quite handy with AI and data infrastructure.
The market has a clean preference.
Dentsu is losing ground because it has little competence in everything AI-first. But it’s not the only one. Even other significant advertising holding companies (such as WPP and Omnicom) are struggling.
The traditional model hasn’t disappeared. The client needs, and AI onslaught has rendered it obsolete. And Dentsu happens to be one of them.
