Dentsu returns to growth as refitting customer experiences remains big opportunity

Dive Brief:

Dentsu Group reported organic revenue growth of 15% in Q2 2021, compared to a 2.4% revenue decline in Q1, per its earnings report. Dentsu Japan Network saw 12% growth while Dentsu International saw 17% growth.
The holding company expects high single-digit organic growth for the fiscal year, with a "line of sight" to delivering 2022 margin targets of 20% for Dentsu Japan Network and 15% for Dentsu International a year early.
Dentsu highlighted its July acquisition of LiveArea as it looks to generate 50% of revenue through growth areas of customer experience and commerce. While Dentsu has returned to growth, its organic growth rate of 5.4% in H1 lagged behind rivals IPG (10.6%), WPP (9.8%) and Publicis (9.7%), per The Drum.

Dive Insight:

Dentsu's 15% organic revenue growth was welcome news for the holding company after seeing revenue decline in Q1 amid the continued effects of the coronavirus pandemic. As the economy began to recover in Q2, Dentsu saw increased revenues as client confidence returned and spending levels became more resilient and predictable. In addition, the company maintains it is well positioned to capitalize on the growing need from clients for expertise around transforming customer experiences and data.

"These structural growth areas drive deeper client relationships as we become embedded within our clients' data and technology," President and CEO Toshihiro Yamamoto said in the earnings report. "The greatest opportunity for brands today, as they build strategies to re-emerge from the pandemic, is customer experience transformation."

To this end, Dentsu called out its July acquisition of LiveArea, a deal that supports its Merkle agency as the data unit continues to increase its focus on commerce. The acquisition came as the company looks to generate 50% of revenue through customer experience transformation and technology. Dentsu's ability to combine marketing strategies with data, technology platforms and analytics is where the company sees greatest demand, Yamamoto said.

While its organic growth rate lagged behind those of rivals including WPP, IPG and Publicis, Dentsu joins the other agency holding groups in focusing on digital and data to support customer experience transformation and e-commerce needs — often through M&A, which has returned alongside revenue growth.

Along with its focus on customer experience transformation, Dentsu has made moves to boost its diversity, equity and inclusion (DEI) efforts. Dentsu last week updated its payment terms to 30 days for all minority-owned media, a move that intends to help ease cash flow issues for smaller, minority-owned media businesses. Previously, the company appointed Pauline Miller its first chief equity officer for the EMEA region. Agency holding companies have made a number of internal and external DEI moves since last summer's protests for racial justice brought the issue into focus for consumers, brands and their partners.