Global agency groups Q3 report card: Dentsu gets Olympics boost amid Covid recovery

Dentsu: the Olympics in Tokyo helped improve the agency's fortunes
Dentsu: the Olympics in Tokyo helped improve the agency's fortunes

Dentsu’s recovery from Covid has received a performance-enhancing Olympics boost from the rescheduled Tokyo Games, which were held a year later than planned in Q3 2021.

The Japanese-owned group, which under-performed in the run-up to the pandemic and remained a laggard in 2020, reported organic revenues increased by almost 28% in the July to September quarter this year, eclipsing all of the other “big six” agency groups.

Dentsu Japan Network had 49.7% organic growth in Q3, but its international part of the business grew in line with peers with 13.4% growth.

Campaign’s analysis of financial information released by the agency groups shows all of them enjoyed double-digit organic growth – chiefly because of the easy comparisons with a year earlier during the worst of the lockdowns.

Significantly, a number of agency groups saw revenues bounce back so rapidly in Q3 2021 that they rose above 2019 levels.

Many of the companies, including Dentsu, Interpublic, Publicis Groupe and WPP upgraded their annual forecasts.

Dentsu’s 27.8% growth compared favourably with a 14.8% decline at the same point last year. Similarly, Havas has seen a large revenue boost recently, of 17.8%, but it also had suffered a significant decline of 10.4% in 2020.

WPP’s like-for-like revenues less pass-through costs were up 15.7% following a decline of 8.4% a year earlier. Interpublic’s revenue performance was up 15% and, impressively, that came after a decline of just 3.7% in 2020.

Publicis Groupe grew 11.2% but that also followed a resilient 2020 when revenues fell only 5.6% in the same quarter. By contrast, Omnicom’s recovery fell short. Although revenue went up 11.5%, it compared to a fall of 11.7% in 2020.

Dentsu’s results “show a company that’s recovering"

At the half-way point of this year, Dentsu’s revenue increase was behind the other holding groups’.

The Japan-based company reported a year-on-year organic revenue increase of just 5.4% in the first six months of 2020, yet in the three months to September it was up 27.8%.

Outgoing president and CEO Toshihiro Yamamoto said the past 12 months had seen the organisation lay “the foundation for the company to achieve sustainable growth”.

He added that the third quarter results “show a company that’s recovering, capitalizing on the market opportunities with rebounds across all business lines”.

Leaving aside the Olympics, the business outside Japan saw the best growth in the Americas on 16.3%, followed by EMEA on 12.9% and APAC on 7.6%.

The group, which made significant redundancies in both 2019 and 2020, also improved margins. Operating profit rose 161%.

Investment advisory firm Edison said Dentsu had shown a “very strong performance” and noted the company is now projecting a better overall performance for the 2021 fiscal year – with the expectation it will deliver about 12% organic growth for FY2021.

Solid recovery across all disciplines

In revenue terms, WPP remains the biggest group with £2.6bn ($3.6bn) of net sales.

Omnicom posted $3.4bn in revenue, Publicis reported $2.9bn and Dentsu $2.5bn. Interpublic pulled in $2.3bn and Havas $0.67bn.

A striking feature of the Q3 results was that recovery appears to be solid and across all major disciplines.

At Omnicom, CRM experiential marketing saw near-50% growth as live events returned. For CRM precision marketing it was up 24.3%, CRM commerce and brand consulting increased 18%, public relations revenue grew by 10.5%, advertising by 8.6% and healthcare by 6.6%.

At WPP, within the key global integrated agencies division, which includes creative and media, revenues were up 13.5%. Group M, the media arm, was up 19% and the creative agencies, which have struggled in the recent past, were also up nearly 10%.

Mark Read, the WPP chief executive, also pointed out how like-for-like growth was 6.9% higher than the same point two years ago.

That is evidence “we’re going beyond a cyclical recovery from 2020”, he told Campaign. “The bear case on WPP was all we’d see is a cyclical recovery in 2021 and 2022 and we’d see if the business could grow sustainably in 2023.

“Our Q3 results do indicate the longer-term opportunity for the company and for the industry overall.”

Interpublic had the fastest growth on a two-year basis – with organic revenues up 10.7% on a “two-year” stack basis versus 2019.

Analysts at JPMorgan said: “We continue to believe that the slowdown in the advertising agency space [before and during the start of Covid] can be explained by a number of short-term factors, that structural concerns are overstated and that the role of the agency – to help clients optimize their marketing spend across the marketing funnel – remains just as relevant as in the past.

“In fact, digital advertising spend grows the overall market, allowing agencies to move beyond traditional marketing to drive consideration, intent and purchases."


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