The news: Japan-based agency holding company Dentsu is considering selling its international business, ending its goal to compete against rivals Publicis and WPP. The company has enlisted Nomura Securities and Mitsubishi UFJ Morgan Stanley to assess possible buyers, with the hope of raising billions to sustain its domestic business, per the Financial Times.
Dentsu is exploring numerous options that would see the company fully sell its overseas operations or sell a minority stake, with a decision expected by the end of the year.
International struggles: Despite its top position in Japan, Dentsu is struggling overseas. The company lowered its full-year outlook in Q2, citing struggles in the US, Europe, and Asia, and already plans to cut over 3,400 jobs internationally in response to instability. Combined with an anticipated operating loss of ¥3.5 billion ($23 million), Dentsu is falling behind.
Falling behind: Rapidly changing market trends and mergers in the ad sector as competitors make global moves that Dentsu is struggling to keep up with.
- AI innovation is rapidly spreading throughout the industry—and while Dentsu is making investments, its revenues show it’s struggling to scale at the same pace as its competitors. While Dentsu is using genAI for predictive intelligence and investing in tech companies, it’s too soon to tell if investment will have a measurable impact.
- Larger rivals are ahead in the North American market: Publicis has been investing millions in AI toolsets and internal tools while making key acquisitions of US-based companies like Lotame to strengthen AI capabilities.
- US companies Omnicom and Interpublic Group are set to become a powerhouse in North America through an impending merger. Without a solid foundation in the region, Dentsu is getting left behind and turning to its core market to remain afloat.
Our take: Selling its international business could allow Dentsu to reposition itself as a specialized player in its core market rather than stretching itself thin internationally where it can’t match competitors. The change could make the company more sustainable in the long run, but even if it focuses solely on Japan, rapid adoption of emerging technologies in the ad sector will still necessitate innovation.
Doubling down on localized AI investments will help Dentsu remain the top player in the Japanese market, giving it the technological edge needed to anticipate consumer shifts faster than smaller competitors.