Dentsu makes about 50% sales from digital
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.