Japan Interactive Agency Roster, part 2

Part 2: The global perspective

In part 1, I listed the major interactive agencies in Japan and noted which ones are part of a global network. Now I want to look at the market the other way around—that is, list out all the major global agency holding companies and interactive agency networks and show how each of them covers the Japan market. This will give some indication as to which of the global players is especially strong or weak in Japan. And, for the firms who have no Japan presence at all, it might also hint at which foreign interactive agencies—if any—are most likely to be thinking of entering the Japan market.

Sections below:

World’s top 10 marketing organizations
Top 10 U.S. interactive agencies
Top 10 U.K. interactive agencies
What conclusions can be drawn?

The world’s top 10 marketing organizations… and their interactive presence in Japan

(“World’s Top 50 Marketing Organizations” ranking copied from AdvertisingAge’s Agency Rankings, published April 25, 2007)

1 Omnicom Group (New York)
Interactive presence in Japan: Tribal DDB Tokyo, Tequila Japan

2 WPP Group (London)
Interactive presence in Japan: Ogilvy Japan, Wunderman Dentsu, JWT Japan, Grey Group Japan

3 Interpublic Group (New York)
Interactive presence in Japan: MRM Worldwide Japan, DraftFCB Japan

4 Publicis Groupe (Paris)
Interactive presence in Japan: Beacon Communications, Business Interactif Japan (Acquired by Digitas, June 2007)

5 Dentsu (Tokyo)
Interactive presence in Japan: Dentsu TEC, Beacon Communications, Wunderman Dentsu, Dentsu | Avenue A | Razorfish

6 Havas (Suresnes, France)
Interactive presence in Japan: EuroRSCG Tokyo

7 Aegis Group (London)
Interactive presence in Japan: (none)

8 Hakuhodo DY Holdings (Tokyo)
Interactive presence in Japan: Hakuhodo i-Studio

9 aQuantive (Seattle)
Interactive presence in Japan: Dentsu | Avenue A | Razorfish

10 Asatsu-DK (Tokyo)
Interactive presence in Japan: ADK International

The top 10 U.S. interactive agencies… and their interactive presence in Japan

(“Top Interactive Agencies” ranking copied from AdvertisingAge’s Agency Rankings, published April 25, 2007)

1 Avenue A/Razorfish [aQuantive]
Japan office: Dentsu | Avenue A | Razorfish

2 Sapient [Sapient Corp.]
Japan office: (none)

3 Digitas [Publicis]
Japan office: Business Interactif Japan (Acquired by Digitas, June 2007)

4 Wunderman [WPP]
Japan office: Wunderman Dentsu

5 Rapp Collins Worldwide [Omnicom]
Japan office: (none)

6 OgilvyInteractive [WPP]
Japan office: Ogilvy Japan

7 Organic [Omnicom]
Japan office: (none)

8 AKQA (independent)
Japan office: (none)

9 DraftFCB [Interpublic]
Japan office: DraftFCB Japan

10 IMC2 (independent)
Japan office: (none)

The top 10 U.K. interactive agencies… and their interactive presence in Japan

(“Top 100 Interactive Agencies” ranking copied from NMA’s Top 100, published September, 2007)

1 Sapient [Sapient Corp.]
Japan office: (none)

2 LBi [LBi International]
Japan office: (none)

3 Conchango (independent)
Japan office: (none)

4 AKQA (independent)
Japan office: (none)

5 Netstore (independent)
Japan office: (none)

6 Avenue A/Razorfish [aQuantive]
Japan office: Dentsu | Avenue A | Razorfish

7 Detica (independent)
Japan office: (none)

8 MRM Worldwide UK [Interpublic]
Japan office: MRM Worldwide Japan

9 TBG London (independent)
Japan office: (none)

10 WTG-Web Technology Group
Japan office: (none)

What conclusions can be drawn?

A. Foreign interactive agencies hold a weak position in Japan

Of the global agencies, Dentsu is the leader in Japan’s interactive market. No surprise here. Dentsu has its hands in several pots, taking part in multiple interactive joint ventures and child companies.

Although Dentsu is the leader, a very large share of interactive agency work in Japan is being done by domestic independent shops that are not part of any global network. This is a non-obvious conclusion because it can’t be seen by looking only at the global players. But if you read part 1, you will see that some of the largest interactive agencies in Japan are independent domestic shops with no formal relationship to any global network: IMJ, Septeni, Mitsue-Links, Members, Netyear, Kinotrope, etc.

Of the top 10 U.S. and U.K. interactive agencies combined (17 agencies total), only 6 of them have offices in Japan: Avenue A/Razorfish, Digitas, Wunderman, Ogilvy, MRM Worldwide, and DraftFCB.

The number one marketing organization in the world, Omnicom, has a relatively weak presence in the Japan interactive market. Of the foreign holding companies, WPP appears to be the strongest with 4 well-established agencies that provide digital services in Tokyo.

The largest interactive agencies in Japan with foreign ownership are joint ventures. Judging purely by office headcount as compiled in part 1, the joint ventures are all relatively large: Beacon with over 300 staff, Dentsu | Avenue A | Razorfish with almost 200, and Wunderman Dentsu almost 100. (To be fair I should note that these ventures may possibly be unprofitably overstaffed, since in the absence of financial data it’s impossible to know.) But of the foreign affiliated interactive agencies, only MRM even dares to declare their staff headcount (they declare a staff of 60). The rest do not publicly disclose their number of staff. I tend to believe they keep it secret because the truth is their operations remain relatively small.

All of the above points to this well-known fact: Although Japan has the 2nd largest economy in the world, it is a notoriously difficult market for foreign companies to enter successfully due to language and cultural barriers. This is doubly true for the advertising and communications industries, where the product itself is highly dependent on, well, language and culture.

B. Which foreign interactive agencies—if any—are most likely to be thinking of entering the Japan market?

Aegis. As far as I can tell from their own publicly available documents, Aegis currently has no interactive agency in Japan. In Asia their Isobar network owns wwwins Consulting which has outposts in China, Taiwan, and Hong Kong; and Ion Global in Korea (Ion Global’s former Tokyo office was dissolved in a management buyout in 2003).

Sapient. According to AdvertisingAge, Sapient is the 12th largest marketing organization in the world—digital or otherwise. Sapient closed its former Tokyo office in 2002 following the dotcom crash.

LBi. Europe’s largest digital agency, LBi has offices in the US and India, in addition to 20 locations in Europe. LBi announced a new strategic roadmap in March 2008 which states their objective “to be the first company able to look after the entire spectrum of digital needs in the Asian market.”

AKQA. This major independent digital interactive agency has expansion plans for 2008, according to NMA, and has already entered Asia with an office in Shanghai.

Omnicom. Omnicom may conceivably try to beef up its coverage of Japan by introducing Agency.com or Organic. If so, Agency.com seems the more likely candidate because it already functions in Asia (Shanghai) and Europe, while Organic’s current operations are limited to North America.

However, there are two factors that greatly reduce the likelihood of any foreign interactive agency attempting a Japan market entry in the near future:

• Current economic climate: recession fears in the US and a sluggish Japanese economy.
• Concerns that Japan is hostile to foreign capital due to recent rulings against foreign takeover attempts (here and here).

(Please note: This discussion is limited by the fact that there are no publicly-available financial statements for the Japan operations of most of the firms mentioned. I don’t claim to be a professional source of audited market data—this is the best I could do given the general lack of 3rd party information on the market. If you know of a better source for this information, please by all means tell me about it by leaving a comment.)

Posted by David Zienowicz