WHAT’S GOING ON AT DENTSU?

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Back in 2017, Dentsu Aegis Network which has globally changed its name to Dentsu International had released a statement calling itself the number two agency network in India, and their advertising campaign #2ndPlaceGreatPlace made them the talking point of the industry with rivals vehemently refuting the claim. They are once again in the spotlight, this time over the slew of exits, most of them comprise the top leadership at the network, which many are calling the big ‘clean up’ exercise and what Dentsu is referring to as the ‘consolidation’ gameplan.
But what changed so drastically in the past four years. Back then IMPACT had published a cover story on the big acquisition plan of Ashish Bhasin, then CEO of Dentsu Aegis Network, South Asia. Years later many of the heads of the agencies, the network acquired under his leadership are no more with Dentsu. The last two weeks sent the ad industry into a tizzy when Agnello Dias, Creative Chairman, DAN & Co-founder of Taproot Dentsu made a full exit after turning Consultant with the Group first, followed by senior leaders like Rubeena Singh, CEO, iProspect; Vivek Bhargava, CEO, Dentsu Performance Group; Gautam Mehra, CEO of Dentsu programmatic, and Chief Data Officer of Dentsu Asia Pacific; Gopa Menon, COO, Isobar; Anand Bhadkamkar, CEO, Dentsu India; Shamsuddin Jasani, Group Managing Director of Isobar South Asia; Santosh Padhi, CCO & Co-founder, Taproot Dentsu, Haresh Nayak, President, Posterscope APAC and a few more.

There have also been new hires in top positions like Vinod Thadani as Chief Digital Growth Officer and CEO, iProspect; Anita Kotwani as CEO, Carat; Ajay Gahlaut as Group Chief Creative Officer; and Rohit Suri as Chief HR Officer, South Asia, while expanding the role of some existing leaders, such as Divya Karani, CEO, Dentsu Media, South Asia. Dentsu went on to align its OOH business into Amplifi under Karani after Nayak’s departure. Also earlier, Amit Wadhwa was made the CEO of Dentsu Creative. The plan is to focus on the company’s India 2.0 transformation journey, which will accentuate the leadership agenda and talent pipeline. The announcement for it was made in December, 2020 where they wanted to whittle down their 160 brands globally to six i.e. Dentsu Mcgarrybowen, Isobar, Carat, dentsu X, iProspect and Merkle. The consolidation was meant to be sealed by the end of 2022.

IMPACT spoke to one of the biggest Dentsu clients whose relationship with the agency goes back 15 years, Shashank Srivastava, Executive Director, Maruti Suzuki says, “So far we are seeing no impact on our dealings. I am fairly confident Dentsu will give us whatever resources are required for servicing a client like us, despite any change in the nature of their operation. As far as the question of consolidation of creative agencies is concerned we normally insist on firewalling, which at the operational level before wfh meant different systems, separate teams and different floors. Once we know the exact outline of the restructuring that happened on the creative front, we will be in a better position to comment, but definitely we will want a safe distance maintained between such teams and strategy when handling clients of a competitive nature.”

The dissent
In the run up to the exits, some of the agencies complained of excessive interference from the network. But what has really stuck out like a thorn for most of the top leaders whose agencies had been acquired by the Group, insiders say, is the plan of doing away with their brands, especially in the case of Dentsu creative agencies blending into Mcgarrybowen.
As per a Dentsu insider, “It’s a bad business strategy to replace Webchutney or Taproot with a brand like Mcgarrybowen, with a name like that one doesn’t know if they are a creative network or if they are selling burgers and a majority of advertising professionals can’t even pronounce it right. The global decision makers are Americans and MGB is an American agency which churns out a lot of money for the headquarters. Somehow Wendy Clark and Tim Andre are convinced about leading with brand Mcgarrybowen even in India but who is to say that the strategy will work equally well here. Just as we are obsessed with brands, brands are obsessed with agencies who are cool, young, vibrant, and who have proved themselves in that country by working in many categories. So why will they associate with Mcgarrybowen when the clients don’t know who they are. And in India it definitely won’t work as the only creative Dentsu brand.”
Remember in 2016 Kartik Iyer’s Happy Creative Services was acquired by Dentsu and rebranded as Happy Mcgarrybowen, joining the global Mcgarrybowen network of agencies but here on Mcgarrybowen will be one of the only two creative entities of Dentsu in India (in addition to the Isobar Group) by merging five brands ---Dentsu Webchutney, Taproot Dentsu, Dentsu One, Dentsu Impact and Dentsu Mcgarrybowen (Sidharth Rao was elevated as chairman of Mcgarrybowen in India in 2020). Isobar Group will be the other creative brand which will bring together Isobar, WATConsult and Perfect Relations while Media will have Carat India, dentsu X India, iProspect India and Posterscope and lastly CXM will have agencies like Merkle B2B, Sokrati and Fractal Ink Design Studio.
Another leader IMPACT spoke to explains that the name change to Mcgarrybowen was to happen by end of next year but the network suddenly decided to advance that and just last week there was a meeting where they decided to implement the replacement of Webchutney, Dentsu One, Dentsu Impact etc with Mcgarrybowen everywhere immediately. “In fact the recent Onam ad for Facebook is an excellent example of that, Facebook is clearly not a direct Mcgarrybowen client yet the credits attribute the work to it,” the source adds.
If one were to compare the five creative agencies which are to come under Mcgarrbowen Group on a scale of popularity, both Taproot and Webchutney are believed to soar higher and have earned the network a fair share of accolades in the past few years at various advertising festivals, experts say converting them to Mcgarrybowen means that the global heads have no idea about how big these two brands are in India.

What happens to competitive businesses?
IMPACT spoke to an existing Taproot client which has an app based platform and he said, “I am reading about the top level exits and I would say that this is something that bothers or affects us.” With the spate of exits that are happening, there is also a concern that the network may lose a substantial amount of business as we have seen to be the case when the client chooses to retain his loyalty with the individual and not the agency. Same goes for talent.
Another question that other leaders in Dentsu are asking is what happens in the event there are competitive businesses to service for which a network creates multiple agencies. If the reverse happens, will a Toyota which was aligned to Dentsu India, Honda which was handled by Dentsu One and Suzuki by Dentsu Impact agree to be serviced by the same agency?
IMPACT spoke to one of the biggest Dentsu clients whose relationship with the agency goes back 15 years, Shashank Srivastava, Executive Director, Maruti Suzuki says, “So far we are seeing no impact on our dealings. I am fairly confident Dentsu will give us whatever resources are required for servicing a client like us, despite any change in the nature of their operation. As far as the question of consolidation of creative agencies is concerned we normally insist on firewalling, which at the operational level before wfh meant different systems, separate teams and different floors. Once we know the exact outline of the restructuring that happened on the creative front, we will be in a better position to comment, but definitely we will want a safe distance maintained between such teams and strategy when handling clients of a competitive nature.”
In response to IMPACT’s query on handling of competitive businesses after multiple creative agencies are aligned into one, Dentsu India spokesperson said, “By the end of 2022 our creative service line brands will be integrated into Dentsu Creative’s leadership brands, dentsuMB and Isobar, with bespoke client conflict solutions. We respect and adhere to the controls put in place to manage client conflicts through separation of client’s business knowledge and their execution plans.”

When did the stir start?
As per industry sources, the flurry of exits began after Fountainhead, one of the successful acquisitions of Dentsu was dissolved after its revenue tanked owing to the pandemic and the agency heads took Dentsu to Court over its decision. When the top leadership at Dentsu started falling like a pack of cards, widespread speculations began about the books of the individual Dentsu agencies not being in order and a possible internal audit. It certainly didn’t help that Dentsu has several CEOs each solely in charge of his/her agency’s P&L. In fact sources also say that it was found that the agencies were doing markups as a regular practice.

A top industry leader on the condition of anonymity says, “I feel many of the acquisitions have turned sour for them. Acquisitions are great, but when you have made too many acquisitions at one point in time, and then you try that old strategy of stashing them together, you’re actually destroying them. For instance, you destroyed brand Fountainhead, Happy and Taproot, the last one was acquired when Dentsu had no creative reputation in India and it signaled a resurrection of Dentsu’s creative ambition. One should look at acquisitions as capability building, they should be nurtured and their capabilities must be multiplied, but if the whole approach instead is revenue aggregation then you have got it terribly wrong. Dentsu Webchutney performed well but have Isobar, iProspect and the others too? Another aspect is that Dentsu has a 60-70% dependence on the automotive sector for revenue be it Maruti, Honda Cars, Toyota, Honda two wheelers, TVS etc. Across the board, these companies have cut their spends which has become a huge challenge for the network. As an offshoot of that they are cutting down on people, cutting brands, merging them, creating a new structure which is actually quite sketchy at this point. You can never shrink yourself to greatness. That’s exactly what they’re doing, becoming smaller to hopefully keep the margins in place.”

The new structure
The biggest casualty of a consolidation exercise is that heads will roll, and CEOs/heads of some units will be asked to report to the chosen one from them. Some leaders were thus clearly driven to resignation while others were simply asked to go. Interestingly the case of top leaders leaving the network didn’t start recently, some of the first exits included Malvika Mehra, then CCO, Dentsu India; Harjot Singh Narang, then GM, Taproot Dentsu and President, Dentsu One; Nabendu Bhattacharyya, CEO, Milestone Brandcom; Soumitra Karnik, CCO, Dentsu Impact, Dentsu India and Happy mcgarrybowen, who incidentally was elevated just five months before his exit and there was also Anand Murty, EVP and Head of Strategy, Taproot Dentsu. 15+ high profile exits in roughly a year sends a wrong message to the industry even if one argues that these earlier cases may not directly be related to the current churn within the Dentsu network.

One of the Dentsu leaders who exited the company and didn’t wish to be named says, “It is strange that Dentsu handed over the top job of the CEO of the joint Creative unit to a relatively young and less experienced leader. I am aware that many of the senior leaders and those heading the acquired agencies which have always had a digital thrust being in the Dentsu ecosystem were uncomfortable with the idea of reporting to someone with a background which was not as digitally sound as many of the other Digital stalwarts in the Group. Ashish himself is not an advertising man, he comes from a largely media background, in fact questions were also raised two years ago when the role of the India CEO of the Group was given to someone from a finance background and not with an agency background prior to this. Most of the creative guys find it difficult to work in such an environment. Not sure what is the message the agency is trying to convey here.”
Highlighting another aspect of the new structure Azazul Haque, CCO, Mullen Lintas says, “Group CCO reporting to the Group CEO sounds like a structural change is happening. Looks like the organization has decided to orient itself as a business led agency.”

Consolidation plan
When Ashish Bhasin took over Aegis Media after a long stint at Lintas his two big focus areas were Digital and OOH+ activations. While on the digital front, the agency may have been able to cover substantial ground, the latter has certainly been on a downslide since COVID’s onslaught. In a 2011 interview with IMPACT the company claimed to have cut down on losses and grown revenues to the tune of 800% from 2008-2011. Then came the spate of acquisitions. Japan’s biggest advertising agency Dentsu first entered India in 2003 through a partnership with media entrepreneur Sandeep Goyal, but it was in 2012 that everyone sat up and took notice of Dentsu when it managed to outdo the big guys and acquire a 51% stake in the hottest independent agency, Taproot, The initial two acquisitions were made by then head of Dentsu, Rohit Ohri – Taproot and Webchutney, after that came WatConsult, Fountainhead, Perfect Relations, Milestone Brandcomm and many more under Bhasin’s leadership. In fact between August 2012 and April 2017, Dentsu made 11 acquisitions and DAN said then that in numbers its revenues had grown by 2200% since 2009, business grew by 2100% and the head count was above 3300 up from just 45-50 when Bhasin took over and that the Group had crossed Rs 4500cr in billings which was also heavily publicized in an ad campaign. Many of the then leaders confess that the ad campaign idea had not gone down too well with them but it was released nevertheless. Dentsu has 15+ brands as part of their acquisitions in the past 12-13 years, Sokrati which is one of the most expensive ones is believed to have come at a cost of Rs 800cr.
Some of the industry leaders IMPACT spoke to were of the opinion that the reason for the rapid exits is that the acquisition gameplan of Dentsu backfired. Sudhir Nair, Founder & CEO, 21N78E Creative Labs says, “I personally am a little perplexed by Dentsu 2.0 and the linked India exits. They are all people who have done their time in the industry, added to the organization and proved themselves. Whichever way you look at it, it is Dentsu’s loss. There will be movement of talent at mid and junior levels too. If consolidation of agencies is the reason being cited, I feel it’s more indicative of acquisition strategy gone wrong. If in the interest of short-term gains similar existing capabilities are acquired and not consolidated immediately; it is bound to create issues in the long run. While the big consulting firms are acquiring what they lack in the advertising and communications space, the advertising networks continue to acquire what they already have instead of scaling up organically!”
Others are more hopeful, Anil Nair, CEO, VMLY&R says, “All organisations go through cycles of change and evolution. It is always difficult when so many senior leaders exit at one time but am sure Dentsu management have a succession and continuity plan in place. I believe some ‘planned change’ can be healthy and can always allow for green shoots.”
Meanwhile the industry is busy speculating on who will be the next to go in the Dentsu scheme of things and Ashish Bhasin’s name tops that list, especially now that most of his trusted men like Anand Bhadkamkar and Haresh Nayak are gone. What is also to be noted is that just last week Bhasin resigned from the BARC Board of Directors. When questioned about whether more heads will roll in the places of power and whether the acquisition plan gone wrong has been the reason for accelerating the transformation process, a Dentsu spokesperson told IMPACT, “We are unable to comment on individual plans and exits. As we accelerate our transformation towards Dentsu India 2.0, there will be more movement within our brand portfolio and our teams. We will retain our local-market specialisms as platforms of differentiation and growth, but the optimisation of our brands and operational structure will result in changes to the way our business operates, as well as the removal of duplicate roles. Having said that the India business is not being optimised ahead of time and none of our agencies have been considered sub-optimal.”