Dentsu, with revenue retreating, has a plan to return to profitability but it may have to deal with clients keeping ad spend lower well into 2024.
The Japan-based global advertising group posted a 6% fall in organic revenue for the September quarter and revised down its full year guidance again, this time to -5% (from zero and -2% previously).
The problem, the company says, is that technology and finance clients have delayed advertising spend, a common refrain in the media industry.
In response, the company has frozen hiring, cut external spending and reduced travel and entertainment costs.
Dentsu is in the middle of a major restructure, One Dentsu, announced last year with more details and appointments revealed this month.
However, the company believes the trend of reduced ad spend is likely to continue until the end of the year and will be at a certain lower level for the first half of next year.
“Therefore, we hope that there will be a recovery from the second half of next year,” CEO Hiroshi Igarashi told a briefing of analysts.
“But having said that, for some tech companies in the second half of this year, there are signs of recovery of advertising spend.
“Therefore, this could stimulate the overall sector to lead to momentum in advertising expenditure. We hope that will be the case.”
A dentsu survey of CMOs found that more than 70% want to increase ad spend.
“So overall, we believe that ad spend can be expected to recover next year," says Igarashi.
“Looking to the long term, our competitive differentiate remains unchanged.
“We will drive growth for our clients through a deep understanding of their businesses as we partner with them to deliver integrated growth solutions centred in the convergence of marketing, technology and consulting.
“Clients continue to prioritise speed, access to talent and the integration of services.
“And One Dentsu allows us to deliver this by simplifying and integrating our offerings into an ecosystem, which makes sense to clients, allowing us to serve them better and empower us to innovate with speed, agility and scale.
“Our One Dentsu model unites us as a global network. The changes we are making to improve our services to clients include adopting a client-centric accelerator model.”
Igarashi says the macro environment remains challenging.
“But I and our new leadership team announced today have an unwavering focus on returning to growth," he says.
“With One Dentsu, we are creating a unified global network that combines client centricity with speed, agility and scale, ensuring we deliver against our clients' need for growth.
“The continued implementation of our One Dentsu strategic priorities will support our return to growth in 2024 with our positioning at the convergence of marketing, technology and consulting.”
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