Credit: Julian Gentile via Unsplash
Denstu, which has had to lower expectations of a recovery in revenue, is seeing a fall in spend from large clients.
The Japan-based global advertising group reported organic growth at 0.3% for the September quarter and downgraded its guidance for full organic growth forecast to 0% from 1%.
“Recovery is slow, but we are on a recovery trend,” CEO Hiroshi Igarashi, told analysts in a briefing.
“If we take a look at peer groups in the industry as well as tech companies, the industry as a whole is in a challenging situation whereby recovery is slow.
“Clients are very careful in their spending. Compared with before, there's a decline in large client spend.
“These are the main trends that we are observing. Specific projects and deals, up until they close, it is taking more time. That's another reason for the delayed recovery. Under such circumstances, we are thoroughly revisiting our assets.
In response, dentsu is revisiting clients, looking at cross selling.
“Although it is taking time a bit longer than we originally expected, we expect we could see some recovery towards the second half of next year,” he said
Both Japan and EMEA performed well but APAC, and particularly the business in Australia, faced “difficult” market conditions.
Revenue in the Americas was down 3.1% and APAC dropped 11.6%.
Michael Komasinski, CEO, dentsu Americas & global president – data & technology, said clients had been pulling back on large transformational investments and projects for the CXM business.
“We're just not seeing the same kind of deal flow for that type of work that we saw in 2021 and 2022, off the back of the pandemic,” he said.
“The business has been stabilising, and we expect that progress to continue into next year.
“Where we're starting to see demand come back into the business really around the areas where there's some kind of AI-related innovation taking place, areas like data platforms or data strategy where clients need to understand what disparate data sets they have to train models on or to be able to power large knowledge networks for various use cases across the enterprise
“We'll go to where the demand is. That's basically what we're doing, is repivoting the business to where we see demand pockets and continuing to follow what our clients are asking us for.”
Igarashi said the business pipeline has increased, especially in Japan, with the Media's pipeline slightly arger than others including creative.
The pitch win rate in Japan has a “quite a high winning ratio” with the September quarter higher than usual.
“Regarding the other regions, they are putting in their utmost efforts,” he said. “However, it's not that we win everything.”
Komasinski said eBay and Adobe are good examples of how dentsu is winning in the marketplace.
“eBay is a media win and I think a handful of the reasons that we were selected were the strength of our global operating model.
“I think it was clear to them that we could provide service in their key markets and that we could bring that model together globally and keep it coordinated and tight.
“We definitely demonstrated a level of innovation in our approach to media and our ability to capitalise on some of the trends and new opportunities across the media landscape, a focus on business outcomes and our ability to drive their marketing KPIs and the outcomes that those support.”
Adobe was more creative and scaled production services.
“Similarly, the global operating model was part of our selection,” Komasinski said.
“We were able to really show strength and the depth of team resource in key regions like EMEA and APAC as well as the Americas, of course.
“I think we demonstrated that we were best-in-class on their stack and their set of tools. Our understanding of how to use the new Firefly solution in conjunction with more established solutions like Adobe, Asset Manager, Workfront, and some of the other tools and bring those together for clients in kind of a content supply chain concept really, I think, resonated.”
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