WPP Group and Japan’s third largest agency Asatsu are forging a strategic alliance.
WPP is to take a $208m (130m) stake in Asatsu – 20 per cent of its shares – and will give the Japanese agency an equivalent number of WPP shares in exchange, accounting for a four per cent stake in the company.
The alliance, subsumed in a holding company called WPP Japan Holdings, was announced just a week after Asatsu said it would merge with Dai Ichi Kikaku to create Japan’s third largest agency, operating under the Asatsu name.
The WPP Group’s strategic alliance with Japan’s third-ranked Asatsu agency gives WPP Group chief executive Martin Sorrell an opportunity to build business with Japan’s fastest growing agency – a company that has persistently challenged the status quo in Japan’s moribund ad industry.
The two have yet to define which new ventures they will start together, but the first is likely to be MindShare Japan. This will enable Asatsu to add the latest media planning techniques to its buying power, while allowing the far smaller JWT and O&M agencies in Tokyo to take advantage of clout they could never achieve themselves.
At the same time there will be opportunities to develop relationships with a number of blue chip Japanese advertisers, both within Japan and elsewhere, while enjoying a 20 per cent share of the revenue streams Asatsu generates as it pumps up shareholder value.
It’s no longer business as usual in Japan. Seven years of deepening recession have sapped advertiser confidence in the skills of many large Japanese agencies, and obliged some agency investors to cash in. And so Asatsu is also buying Japan’s seventh largest agency, Dai Ichi Kikaku, much as Omnicom was earlier able to buy eighth-placed I&S Corp – both fading grandes dames.
The wisdom of WPP’s deal is that it is based on partnership rather than any plans for acquisition and thereby enlists entrepreneurial forces at least as ambitious as those of Sorrell’s. It is a sharp contrast to the “Omnivore’s” more conventional approach. While Hakuhodo may be Japan’s second largest in billings, it is now relegated to third place, behind Asatsu, in its ability to cope with Japan’s harsh new realities.