What Dentsu’s woes tell us about Japan’s advertising industry and beyond

A British former advertising executive once told me that he and his counterparts in other ad agencies in Tokyo regularly held FUD drinking sessions where the D stood for Dentsu and the F and the U, well… But it does seem as if Dentsu’s iron grip on Japan’s marketing and advertising industry is coming to an end.

Dentsu is Japan’s largest advertising agency and has also recently entered our Top 30 Japanese companies in the UK thanks to the acquisition spree it has been on, consolidating multiple purchases of agencies in the UK and elsewhere into Dentsu Aegis Network, headquartered in London.

So dominant is Dentsu in advertising spend (although its rival Hakuhodo is traditionally stronger in magazine advertising) that you rarely get much critical coverage about it in the Japanese media.  Critical analyses are starting to appear now though, following the suicide of Matsuri Takahashi in 2015 from overwork and then revelations in the Financial Times (clearly undeterred by being owned by the Nikkei group) of Dentsu overcharging clients for digital advertising, both leading to the resignation of the President Tadashi Ishii in December 2016.

“Corporate culture at Dentsu is like the military”

Shinichiro Kaneda in the Nikkei Business takes a look at whether the culture of Dentsu has changed since, in the May 8th edition of the magazine.  “The corporate culture is like the military” according to Takahashi’s mother.  Kaneda says yelling can still be heard coming from the “sermon room” as one meeting room was known, for small mistakes or a lapse by junior staff.  New graduate hires have been threatened with the tonsure if they do not reach the peak of Mount Fuji in the top group during the new staff orientation programme.

This military culture is necessary to Dentsu says Kaneda, because it is based on Dentsu’s unique position with regard to its clients.  “What the head of the advertising section of a client says is an order which must be obeyed” says a former executive.  “Even if they give two contradictory orders, you have to comply with both.”

Crush new graduates’ pride

But the new graduate hires have all come from elite universities like Tokyo.   “People who think logically want to answer back.  So Dentsu have to, at the outset, crush graduate hires’ pride and personality.  That way, they will just fall in line with what other people tell them to do”.

Takahashi was a graduate of Tokyo and suffered when she found herself being sucked into this culture.  Dentsu bears responsibility for not changing this culture, but behind it is a wider problem across the whole of the business sector of Japan, says Kaneda.

A wider problem across Japan’s business sector

Dentsu’s clients are major companies with advertising budgets in the millions of dollars.  The head of the advertising section reports straight into the top executives of the company.  Requests from clients bypass Dentsu’s own sales force and go straight to the business units and in some cases to Dentsu’s top executives.  Everybody gets copied in and it becomes a “stamp rally” and if even one person opposes it, then the plan is overturned,” says a Dentsu insider.

This affects the shop-floor at Dentsu who are forever urgently redrafting proposals while at the same time having to keep an eye on costs.

The media is also very demanding.  TV stations try to sell advertising as a package of both late night spots and peak time spots which Dentsu has to persuade its clients with large budgets to swallow.

When economic times were better, money flowed around and budgets and manpower were generous.  Results were measured with a few qualitative surveys.

But now the Japanese economy is stagnant and with digitalization, large budgets covering everything are being subject to the scalpel and foreign companies in particular are asking for a much greater level of detail.

Traditional mass media is less influential and internet advertising is not only cheaper but results can be measured quantitatively.

Militaristic approaches do not work in this kind of situation.  “It has exposed the contradictions of the Japanese workplace” says a Dentsu executive.

In order to keep up profits and save the face of the advertising departments of clients, Dentsu keeps offering advertising services that they claim will sell, but then the results are measured quantitatively, and if targets are not made, harsh treatment is handed out.  This is particularly true of  digital advertising.

“Dentsu is a warning to Japanese companies who do not look at what is happening at the ground level, and just pursue profit” says Kaneda.

How Dentsu compares to Hakuhodo

Former Hakuhodo (the second largest ad agency in Japan after Dentsu) employee and now author of many books, Nakagawa Junichiro, was interviewed in the Toyo Keizai magazine regarding the “super elite” of Dentsu and Hakuhodo. “they are neither a normal company nor are they media.  They do anything that is related to communication.  They have both made a lot of money and the employees are paid well.  Yet they because they do not make their internal workings transparent, it is not clear what kind of companies they really are.”

“They will say yes to whatever the client asks for.  The employees are simply a mass of corporate slaves.  There are lots of internal organisations going by foreign sounding names or numbers.  For example, one local government was told their account was being looked after by the #13 section but then this section split off and changed its name.  This happens almost on a daily basis to meet client needs.”

“The human networks are complicated. For example if a magazine says it wants to write about Company A, the PR department of Company A will ask Hakuhodo if the magazine is respectable or just trying to blackmail them into taking advertising.   Hakuhodo will ask one of its sub contractors who know this area well.  But it’s not always so clear what the sub contractor’s own interests might be.”

Political campaigning

Both Hakuhodo and Dentsu run campaigns for political parties – usually Dentsu for the LDP, the centre right party that has been in power during most of the post war period and Hakuhodo for the DPJ (now the Democratic Party).  Since the election has moved onto the internet, the amount of money following around has become greater.  All kinds of media are now being used from videos to animated graphics and Dentsu and Hakuhodo try to offer the full range.

Learning to bow

Shazai press conferences (where executives have to bow in apology for some misdemeanour) are also good business.  A rehearsal generally is charged at Y1m to Y2m ($9000-$18000) – the agency role play being journalists, they create various scenarios and make a recording of it and guide executives on what to say.  “I am pretty sure you can see Dentsu’s influence on Sarah Casanova, the President of McDonalds Japan’s apology, if you look at the way she behaved the first time compared to the second time” says Nakagawa.

The amount the agencies earn from one client can be significant.  In 1996 when Hakuhodo won both the Nissan and the Mazda accounts, their turnover rose by Y130bn.  “So it’s tough on your career if you lose accounts like that. Retaining clients by being totally devoted to them becomes key and the sales executives are seen as the elite.  Although at Hakuhodo the creatives are the elite, and the salaries are about 70% of Dentsu’s, but still pretty good.  What’s true of both agencies is that sense that you cannot do anything in your own organisation or by yourself, you are nothing without the agency.”  So meetings tend to be full of people, and so as not to anger the client, instead of creating the trend, you tend to go with the flow.

Nakagawa left Hakuhodo because  “when I started working on the Amazon account, I realised I had become a typical agency salaryman who simply supports the career of some middle aged guy at the client’s, who I don’t even like.”

Overtime is a problem not just in the advertising agencies

“Overtime is a problem for all Japanese companies” not just advertising agencies.  “People take the “customer is god” idea too much too heart.  Both Dentsu and Hakuhodo try to achieve over 90% for their clients.  If they stop doing that then maybe overtime will disappear.”

“Dentsu is not that strong in the digital space.  There’s still things they need to learn.  They are good with TV for the World Cup and the Olympics, but they are being beaten on digital.  The specialist shops are stronger.   Unfortunately, with digital you can always keep adjusting and improving so the work never ends”

“Advertising executives are remote from real life.  They only hang out with the top few percent of income earners.  They are all graduates of top universities.  But they are not that corrupt.”

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