Dentsu makes about 50% sales from dig­i­tal

Mint ST - - CORPORATE - Saumya Te­wari [email protected] NEW DELHI

Ad­ver­tis­ing firm Dentsu Aegis Net­work (DAN) said that 48% of its rev­enue comes from its dig­i­tal agen­cies a decade af­ter it re­struc­tured its op­er­a­tions to be­come dig­i­tally fo­cused. The net­work owns eight dig­i­tal agen­cies across search, cre­ative, me­dia buy­ing and so­cial func­tions.

“Nearly half of our rev­enue is com­ing from dig­i­tal. Out of the 3,500 peo­ple, 1,700 are in dig­i­tal agen­cies and out of 23 agen­cies we op­er­ate in In­dia, eight are pure dig­i­tal agen­cies. We have be­come the largest buy­ers of dig­i­tal in In­dia, in­clud­ing for Google and Face­book,” said Ashish Bhasin, chair­man and chief ex­ec­u­tive of­fi­cer, South Asia, DAN.

Dentsu’s claim is sig­nif­i­cant as it shows that dig­i­tal tech­nol­ogy, once con­sid­ered an ad­junct plat­form to mass me­dia chan­nels such as tele­vi­sion, is be­com­ing more pop­u­lar, help­ing ad­ver­tis­ers achieve bet­ter re­turn on in­vest­ments on their dig­i­tal ad spends.

With deeper smart­phone pen­e­tra­tion and af­ford­able data, con­sumers are spend­ing more time on dig­i­tal plat­forms, forc- ing brands to take dig­i­tal ad­ver­tis­ing se­ri­ously and in­vest in it. This has led to a sig­nif­i­cant rise in the dig­i­tal ad rev­enue of many ad­ver­tis­ing agen­cies that have re­lied heav­ily on tra­di­tional me­dia for a long time.

Dentsu claimed it has closed 2018 with a to­tal billing of over ₹6,000 crore, in­clud­ing main­line and dig­i­tal busi­nesses. In­dus­try es­ti­mates that the Dentsu has won more than 50 dig­i­tal ac­counts last year in­clud­ing Uber, Color­bar, Marks and Spencer and Tata Mo­tors Pas­sen­gers Ve­hi­cles.

“Ul­ti­mately you have to go where the con­sumer is go­ing and they are mov­ing to dig­i­tal much faster than what agen­cies and brands have pre­dicted. Our ob­jec­tive is to cre­ate so­lu­tions for our clients which help them con­nect with their con­sumers,” said Bhasin.

Aegis Me­dia (ac­quired by Dentsu to cre­ate DAN) started the dig­i­tal trans­for­ma­tion jour­ney in 2008 with the launch of global dig­i­tal agency Iso­bar in In­dia. It made its first ac­qui­si­tion with Com­mu­ni­cate 2 Pvt Ltd in 2012. Re­branded as iprospect In­dia in 2015, it ac­quired mul­ti­ple dig­i­tal and so­cial me­dia firms in­clud­ing Sokrati SVG Me­dia, WAT Con­sult, Foun­tain­head-mktg We­bchut­ney, and Frac­tal Ink. De­cem­ber and the 10 largest com­pa­nies ac­counted for 38% of them.

Some ex­perts say last year’s jump looks more like a tem­po­rary re­cov­ery as the in­dus­try un­der­goes a struc­tural change from a peo­ple-led model to a plat­form-based ap­proach.

“I see the global econ­omy slow­ing this year, and IT hir­ing will slow with it. Plus, the emerg­ing IT ser­vices mod­els will ul­ti­mately re­quire fewer peo­ple to sup­port it with smarter au­to­ma­tion and the use of plat­forms,” said Phil Fer­sht, CEO of Us-based HFS Re­search, an out­sourc­ing-re­search firm.

For now, stable macroe­co­nomic growth in both the US and Europe has made more com­pa­nies across in­dus­tries spend more on out­sourc­ing tech­nol­ogy work, re­sult­ing in higher de­mand for ser­vices of­fered by IT out­sourc­ing com­pa­nies.

Un­sur­pris­ingly, a few an­a­lysts ex­pect the sec­tor to grow at faster pace in 2019 than in the re­cent past. “(A)nnual growth rates in CC (con­stant cur­rency) slowed in CY (cal­en­der year) 2017 by ~250bps (ba­sis points) y/y across the In­dian IT ser­vices in­dus­try, and im­proved in CY18 by ~90bps across the in­dus­try. Based on cur­rent Street es­ti­mates, we ex­pect the In­dian IT ser­vices in­dus­try rev­enue growth rates to con­tinue to re-ac­cel­er­ate in CY19 at 9.3% y/y growth,” Keith Bach­man, an an­a­lyst with BMO Cap­i­tal Mar­kets, wrote in a note dated 6 Fe­bru­ary.

Mum­bai-based TCS is ex­pected to grow its rev­enue by more than 11% in con­stant cur­rency terms while In­fosys ex­pects full-year rev­enue to grow, at best, 9% in the year end­ing 31 March.

A large num­ber of big IT

Ashish Bhasin, CEO, South Asia, Dentsu Aegis Net­work.

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