Gently does it in Asian
alliance. The Dentsu and Leo Burnett link-up could give both sides a boost in Asia
by David Kilburn
Almost a year has passed since news of Dentsu 's proposed alliance with Leo Burnett first
leaked out, but comments from a Dentsu official last August that "there's nothing to
report because nothing is happening" still seem valid.
Both sides continue to talk, but prospects of a deal being signed this side of the
millennium are increasingly doubtful - unless Dentsu can show Leo Burnett that an alliance
can generate significant new business.
Dentsu 's domestic clients in Japan include almost all major Japanese advertisers, but few
have any formal agency alignment policies, preferring to let local managers make
appointments within loose guidelines. Notable exceptions include Toyota, Kao Corporation,
and Canon, which uses Dentsu in several markets.
A breakthrough may come later this summer in Korea where, according to sources, Dentsu and
Burnett are in final stages of negotiations with Procter & Gamble. The goal is to
persuade P&G to switch its media budget or Korea to a new, tailor-made media
specialist tentatively called Unison PDS.
PDS stands for Phoenix, Dentsu , Starcom after the names of the three main players: Dentsu
, already a major P&G agency in Japan; Phoenix, Dentsu 's agency in Seoul; and
Starcom, Burnett 's worldwide media operation headed by chief executive officer Jack Klues
and chief operating officer Bob Brennan.
P&G's billings in Korea are not large. In the first six months of this year it spent
GBP2.5 million, however sources say spending is set to increase significantly.
If the deal goes through, it would help Burnett rebuild a viable position in Korea. For
Dentsu , it would mean another assignment from a major Western advertiser outside of
Japan.
Despite recent economic difficulties, Korea is the third largest advertising market in
Asia (after Japan and China) and ranks 10th worldwide. It is a market where Burnett has
met with little success.
Its Seoul agency lost almost a third of its billings last year, ranking 32nd with billings
of GBP7 million. By contrast, Dentsu 's GBP25 million main agency in Korea - Phoenix
Communications - saw its business grow more than 250% last year and ranks 13th.
Dentsu officials decline to comment on plans for the media company. They also shed no
light on the role DY&R Korea - a tie-up between Dentsu and Young and Rubicam - may
play.
Since the agency's inception the custom has been for Y&R to appoint the agency's
president while Dentsu nominated the chairman. Matthew Asinari, DY&R's most recent
president, packed his bags and returned to Y&R in New York some months ago and will
not be replaced "any time soon".
According to Dentsu , the network's Japanese chairman now also acts as president.
How DY&R might fit alongside Burnett in Dentsu 's big picture remains to be seen. And
speculation that Y&R may even seek to establish its own independent presence in Asia
refuses to go away, despite repeated denials.
Note:
After this piece was published, Dentsu and Y&R did indeed announce a restructuring
of their relationship. For the record on August 4th Y&R said it took a
controlling interest, about 67%, in the Asian offices outside Japan of the Dentsu Young
& Rubicam partnership. It paid $10 million to Dentsu of Japan and gave the Japanese
agency a controlling 51% of the Tokyo office, leaving Y&R with
49%. The partnership, created in 1981, had ad billings of more than $700 million in 1998,
about 55% from the Asian operations
and the rest from Japan. Equity arrangements in the USA were unchanged. |
