Dentsu, which reported record revenue for 2022, is banking on customer transformation and technology -- organisational capabilities and data -- for growth.
The Japan-based global advertising group forecasts organic growth of 4% in 2023, with underlying operating margins at 17.5%.
In APAC, the company expects a "smooth" recovery from economic headwinds.
Dentsu last year announced a new global management structure, integrating international and the local Japan business.
This followed a major restructure, confirming the departure of Wendy Clark as CEO of the international division, in a move called "One Management Team" and now One Dentsu.
Dentsu, like many global advertising groups, has been transforming capabilities to be less dependent on straight advertising.
The company over the last year has made five acquisitions, with a focus on expanding capabilities.
One was Australian consultancy Aware Services, which further builds on dentsu’s Salesforce capabilities.
Aware, a Salesforce, MuleSoft and Tableau consultancy started in 2018, and its 115 staff are being integrated within Merkle, a technology-enabled, data-driven customer experience management (CXM) company within dentsu.
Dentsu CEO Hiroshi Igarashi told a briefing of market analysts: “Our acquisitions bring a mix of consulting expertise, cloud engineering knowledge and customer experience capabilities.
“All of which allow us to expand our offer beyond advertising to deliver growth, driving solutions for our clients, as well as continued value creation for our shareholders.”
A slide from the briefing of analysts:
Igarashi says the elevated and ever-growing level of consumer expectation means brands must invest in transformation of data, technology and organisational capabilities to deliver differentiated customer experiences.
“It is through this blend of diverse capabilities that we find are true competitiveness, our differentiated position and unique client offer,” he says.
“Not only can we implement, integrate and activate technology platforms, we can bring them to life through our creativity, our content and entertainment offer.
“In other words, we become a growth partner for our clients through the integration of our capabilities.
“By converging marketing, technology and consultancy, it fits precisely with our competitive advantage as one of the very few global innovators, who offer end-to-end solutions.
“This remains a significant opportunity for the group as we enter 2023.”
Dentsu CFO Nick Priday says the company will now report as one group going with no specific guidance between Japan and international.
“But … we do see growth across Japan and international being reasonably equal in 2023,” he told the briefing.
And the driver of that is customer transformation and technology, which grew 17.5% in 2022 and now represents 32% of group revenue.
Jacki Kelley, chief global client officer and CEO Dentsu Americas, is confident of the business pipeline.
“When you look overall, we feel very good about the opportunities that we're seeing,” she says.
“In media specifically, we secured GBP1.3 billion in billings, which includes the major client wins that Igarashi-san referenced at the top of the call. We have a pipeline of GBP4.7 billion in billings and of the media pipeline, 85% is offensive, which is stronger than a year ago at 80%. So we feel very good about the meaningful opportunities in the pipeline.
“In terms of the Creative pipeline, we've gained GBP388 million in revenue. Major wins include Electrolux in Spain, Orchard Health Care in India and then recently reported Apple+ work in the US.”
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