James Hollow
Jul 10, 2014

The Japanese market decoded, at last

Here's why Japanese ad agencies still hold such an incredibly dominant position.

James Hollow
James Hollow

It’s long been one of the marketing industry’s most enduring mysteries. Despite the major global agency network’s massive success across Asia and beyond, why do Japanese ad agencies still hold on to such an incredibly dominant position in their home market?

Over the years I have heard numerous explanations for this state of affairs. Most common is the idea that local competition is so historically strong and immovable, particularly Dentsu, that there is no shifting them. The challenge of hiring top talent as a foreign company in Japan (even though foreign companies in other industries manage it) and the nepotistic relationships between domestic brands and agencies are blamed.

Of course there is some truth to all of these, but a big new agency and media player has sprung up in the last decade, reaching second spot in terms of revenue, refuting the argument that the Japanese market is locked down.

The real answer as to why the huge international networks have failed to capture much of the market is quite simply the fact that the traditional western advertising planning model does not work in Japan.

The local industry is indeed dominated by old-school media in the shape of Dentsu and its old rivals. Their persistent strength is usually put down to the fact that they have long-standing exclusive relationships with much of Japan’s biggest media properties, as well as old-boy-network-type relationships with Japan’s biggest ad budget spenders.

But the truth is that Dentsu’s monopoly is actually based on not on access to media, but celebrity. In contrast to western audiences, with Japanese consumers it is aesthetic novelty, rather than hit-you-on-head ideas, that wins in brand building. And celebrity is the easiest way to auction novelty to the highest bidder.

This does not imply that Japanese culture is shallow. It is just that it is deep in a different way. In Japan’s aesthetically rich and personality-centric media culture, celebrities will always win out. And this works just fine for Dentsu since access to trending celebrity is (relatively) easy to control, and they have nailed this as their business model.

In the west as agencies vied with each other to produce the most novel creative, the onus has been to create more and more conceptual originality. But for Dentsu, the polar opposite has been true.

It’s worth remembering that in a near monopoly when an agency handles competing brands as Dentsu does all the time, creating run-away successful campaigns based on creative novelty is unsustainable. Creating a cycle of creativity only serves to anger the competing brands, increasing their expectation and potential dissatisfaction in the future.

Instead, it is much easier to maintain control of both the market and client expectation by selling access to celebrities at a ranked pricing hierarchy. This is what Dentsu does, and knowing that they live and die by access to celebrity they will go to any extreme to capture and control their assets.

Today the company that threatens Dentsu most is Cyber Agent, the web media goliath. They catapulted up off the back of Ameba, their social blogging platform that, far from being technologically innovative, rose to ascendance in the micro-blogging bubble of 2007~2010 by capturing celebrities.

They hired a talent agency golden boy to woo the magazine fashion models, TV celebrities and old-world media celebrities onto their digital platform to write (or have ghost written) celebrity blogs. This attracted fans, endorsements and the advertising revenues that followed. So although an upstart, Cyber Agent really played Dentsu at their own game, only in a different media space.

However I do not want to leave the impression that there is no art in Japanese advertising. It’s just that instead of conceptual creativity, executions need to present a novel aesthetic space, and using a celebrity to pull this together is the safest option.

Why would any westerner be inspired to work in such a market? Well, because it’s fascinating and infinitely challenging. And although we do not have access to the top domestic celebrities, there is a lot of scope for designing communications that do not conform to the talent cookie-cutter formula. Not least when you begin to delve get into Japan’s diverse digital landscape.

And remember, talents come in many shapes and sizes in Japan, character-based communications are common, and social media offers a new and exciting third way of building brand credibility.

So if you take the time to nurture a hybrid approach, that combines rigorous insight-based strategy with deep knowledge of the highly-contextualised media landscape, with executions crafted by creative talent who live and breath the cultural zeitgeist, you can potentially get the best of both worlds.

James Hollow is president of Lowe Profero Tokyo


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