Dentsu X bills itself as an ‘integrated growth partner’, offering end-to-end solutions including content, consumer experience, commerce, and data solutions as part of its parent holding company. But the jury is still out on whether the agency is actually delivering the measurable and fully integrated media solutions that address its clients’ needs.
Amid rapidly changing media trends with more ad-blocking and consumer self-reliance, media agencies’ ability to unlock new capabilities in delivering brand voices to the world is uncertain. Never mind Dentsu X’s even loftier self-proclaimed ability to go beyond business problems and drive sustainable growth for clients, society, and the environment.
While Dentsu X reports over 100 new business wins and high client retention rates in Asia, the agency still has work to do in this region to help it maintain its position as the “fastest growing agency globally for the fourth consecutive year, according to RECMA.
Dentsu X reported over 100 pieces of new business from both new and existing clients in several countries, including Index Living Mall, Isuzu, and True Money in Indonesia, Tata and Bosch in India, and Krungsri Auto and Shopee in Thailand.
The agency claims to have a client retention rate of over 95% while converting new business opportunities, with 100% retention in several key markets such as Malaysia, India, Thailand, Indonesia, and Taiwan.
Dentsu X won Blizzard Entertainment in Taiwan, Bosch in India and Scenic Tours in Australia. It retained Facebook in Singapore, Heineken in Malaysia, Alibaba Cloud in China and Ajinomoto in Indonesia.
According to Campaign AI, which taps into data from consultancy R3, Dentsu X finished 8th place in the 2022 APAC media agency rankings, slipping down one position from 2021. The agency had an estimated YTD net revenue of $13.4 million and recorded 184 wins.
Like its sister agency Carat among others, Dentsu X also struggled in China. Strict Covid policies put pressure on clients who, in turn, demanded more agility from agencies. As China gets more competitive, the agency says, the strategy and work presented can be the difference between winning or losing a pitch. The media agency ended up losing several accounts there, including Levi’s, to OMD China. Going forward, Dentsu X says it will focus on local big bets and retaining clients in the market.
Despite the disappointment in China, the agency insists it performed well on many targets and delivered on key ambitions. The recent partnerships with GoTo Group (Gojek) and Henderson Land Development Company are noteworthy since they integrate creative and media while leveraging influencers and digital data to help brand performance.
However, without an agency-level revenue breakdown, we must look to parent-holding group Dentsu’s 2022 results as guideposts. They paint a similar picture, with China weighing heavily on organic growth for the APAC region, limiting it to just 2.5% for the year.
Given the difficulties in China and a slight drop in the rankings, we are keeping the business grade at ‘average’.
Dentsu X launched some useful new tools in 2022, like its M1 Planner and Dentsu Marketing Cloud (DMC).
M1 Planner is a cross-media planning tool with different communication objectives. The agency says M1 Planner can provide objective optimisation that extends beyond reach. If setting product category, target, budget, and communication objectives (KPI), the tool simulates the best budget allocation across the channel to maximise KPI.
Dentsu Marketing Cloud (DMC) uses Facebook data and tools to optimise targeting and budgets to improve return on ad spend. It uses insight-driven targeting to optimise performance per each interest level in real-time within the same audience segment, which the agency says will maximise the performance. Using this for Isuzu in Thailand, the brand achieved 15% better costs per acquisition.
Dentsu X also taps into group-level Dentsu solutions like Dentsu Good, Dentsu Insights, Dentsu Gaming, and Dentsu Cloud Studio.
Jumping onto the metaverse trend in 2022, the agency partnered with Microsoft to build the Dentsu campus in “Moon Valley”, a digital twin of the moon created by HeadOffice.Space, the metaverse for productivity. The space was designed to be more accessible through any web-enabled device, including mobiles and VR.
Dentsu X says this is where clients and the agency can innovate, test ideas, experiment with hypotheses, and learn how evolving technologies and platforms could be used within integrated campaigns or future business models. However, the cooling of metaverse hype and brand ROI on Web3 projects makes this one look less attractive in hindsight.
We are increasing the grade to ‘average’ as the scope of innovative work for clients has increased, even though it does not appear to be game-changing.
DEI & Sustainability (C+)
While Dentsu X reports 60% of its permanent staff are female, the percentage of females in senior management positions is an abysmal 20%. While the agency has improved female hiring since 2021, it is still far off its 2025 target of 50% for female leadership.
APAC CEO Prerna Mehrotra insists the agency is still committed to its gender balance goal, which is to reach 50% parity by 2025. She says the agency's stretch goal in 2022 was 36%, and it has achieved that. Due to privacy laws, no other statistics can be shared.
Unsatisfied with its current representation, the agency works toward change in multiple ways, including external hires and internal talent development programs. Dentsu X has several initiatives to help employees grow into senior management roles. The agency also plans to conduct a pay gap audit by gender or ethnicity in 2023.
Dentsu X reports that they invest in continuous learning and have employee resource groups and allyship conversations, including a "WeMen for Women" initiative to discuss how men can support women in the workplace. They also share that they support daily mental health through initiatives like Sound Mind and work on challenging perceptions of autism through events.
For sustainability, it is essential to note that, like its sister agency Carat, sustainability is led at a group level.
Dentsu X is keen to highlight its efforts in various areas, such as reducing emissions from flights, increasing data accuracy and transparency, decarbonising its operations, empowering digital citizens through their schools and early careers program ‘The Code’, and partnering for racial justice.
According to the agency’s social impact report, Dentsu X’s Scope 1 and 2 emissions were cut by 53% against its 2019 baseline and 22% compared to 2020. In 2021, its market-based Scope 1 and 2 emissions were 4,450 tonnes of CO2 equivalent (tCO2e), compared to 5,728 tCO2e in 2020 and 9,416 tCO2e in 2019.
Dentsu X says this far exceeds the 8.4% reduction target it planned to meet in 2021, surpassing its 2030 target of 46.2% nine years early.
Given the slow progress towards improving the percentage of females in its leadership, we are sticking with ‘average’. While the agency has made some progress towards its DEI goals, there is still much room for improvement. It is only through its sustainability progress that we are not moving the grade lower.
Creativity & Effectiveness (B-)
Dentsu X’s awards haul did not stand out. However, it still picked up a Silver for ‘China Media Agency of the Year’ at Campaign’s Agency of the Year 2022, despite its struggles in the country, as discussed in the business section. It also won Gold for ‘Best Pandemic Response’ at Campaign’s Digital Media Awards 2022 for its work with Volvo.
A stand-out campaign for 2022 is Dentsu X's work for Pokémon in Taiwan to encourage people to leave their homes post-pandemic. The campaign attracted attention and social media posts because of Pokémon Jets (Pokémon-wrapped aircraft) and ‘Pokémon Air Adventure’ themed metro trains.
Dentsu X also worked with the local government, Taipei City Government, to offer 10 various photogenic spots across the city so that people travel to scenic places. People could enjoy discovering photogenic Pokémon on the walls or streets.
The campaign saw over 10,000 social media posts created within a month after launching. The number of Metro passengers on Taipei Metro increased by 5,060,395 (110%), and Taoyuan Metro increased by 337,317 (126%) compared to the same month of last year, though this could be because people are leaving homes as restrictions relaxed, and not because of the campaign.
While The Pokémon Company did not want to link the campaign to sales, its latest game title for Nintendo Switch recorded the highest sales in Taiwan. The sales results for Taiwan are also the highest worldwide.
Another effective campaign was for Ajinomoto-owned seasoning brand Masako which reached over 20 million people and improved market growth from January to May 2022 by 101% versus last year within each target area. Dentsu X's sister company Isobar creatively collaborated on the hyper-personalised campaign.
Finally, for Nescafe Tin Can, Dentus X partnered with Tencent's famous game Honor of Kings to design a holistic campaign around the gaming community to engage social media, KOLs, and product placement. The video playback for this campaign reached 3.8 billion, with the highest number in a single day being 223 million.
The campaigns shared with us seem to have been successful in their respective goals and generated significant engagement and buzz for the brands. Therefore we are upgrading our grade in this category to ‘good’.
Dentsu Media APAC CEO Prerna Mehrotra continues to lead Dentsu X and grow its footprint.
While the agency hired 371 new employees in 2022, the agency had a very high staff turnover rate of 42%. Dentsu X admits it lost many performance employees enticed by more lucrative opportunities at Meta and Google. Many expats also left China and Australia due to the impact of the pandemic. However, the agency claims the attrition rate has decreased significantly, and all open positions are filled. The agency is confident it will see a significant decline in turnover in APAC in 2023.
For Dentsu X’s people initiatives, agency leaders encourage employees to bring themselves to work and build deeper connections with the agency’s ‘B-Side’ initiative, a thought-leadership workshop.
The agency says 300 employees joined from 70 of its offices in the world met in 2022 to share their clients’ and their thoughts about great campaigns. The agency believes this will lead to a more creative and collaborative work environment.
Dentsu X's X5 Certificate program aims to upskill employees and encourage new experience-driven ideas to differentiate the company. It’s available to all employees, regardless of seniority.
The agency's Check-In Survey results showed an overall improvement in employee engagement by three points to 71, the highest score since the survey began in 2019. Dentsu X's specific results for APAC were 73, a 5-point increase from 2021, with a 95% response rate, up six percentage points compared to last year, with no declines in any category
Like its sister agency Carat, It would be remiss to ignore how Dentsu X’s parent Dentsu is currently embroiled in a bribery and bid-rigging scandal involving the Tokyo Olympics and Paralympics Games. Several of its employees have admitted to these charges during voluntary questioning by the Tokyo District Public Prosecutors’ Office.
The agency reveals clients have raised questions about Dentsu’s involvement in the Olympics but claims the agency’s communications team ‘has done a great job in addressing clients' questions and providing clear responses’.
We are keeping the score at ‘average’ because while Dentsu X has reported improved employee engagement and stabilised its leadership, the parent company's management missteps and high staff turnover rate are a cause for concern.
Consumer insight 40%
B: The agency declined to provide an explanation.