At advertising giant Dentsu, people worry about huge job cuts and mull the growing influence of data agency Merkle

  • Japan-based ad holding company Dentsu is laying off 6,000 people, or 12.5%, and restructuring.
  • Employees are worried about job cuts and speculating that the moves show Dentsu is placing its bets on its performance-marketing business Merkle while folding or merging most of its other agencies.
  • Dentsu has struggled to transcend Japan's traditional ad industry and adapt to the digital world and was hurt by the pandemic delaying the Summer Olympics, which Dentsu had a deal to promote.
  • As part of the restructuring, Dentsu will create three practice areas to be led in the Americas by executives from Dentsumcgarrybowen, Merkle, and 360i.
  • A Dentsu spokeswoman declined to comment.
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Japan-based ad holding company Dentsu is laying off 6,000 people, or 12.5% of staff outside its home country, and restructuring.

The move has caused jitters inside the company, where people say the moves are a clear sign Dentsu is looking to double down on its successful performance marketing network Merkle while folding or merging most of its other agencies. Ernst & Young is managing the process. 

Dentsu acquired a majority stake in Merkle in 2016 for $1.5 billion and the rest in April. Merkle collects data from credit cards and other interactions to target ads and create personalized experiences, and its clients include Procter & Gamble, Microsoft, GM, and Intel.

Its work that's in demand as advertisers increasingly become performance-focused, and one insider said Dentsu saw Merkle as the key to growth after it failed to transcend Japan's traditional ad market and adapt to the digital world.

Over time, Merkle's influence has grown at Dentsu; after Merkle was fully acquired, around 25 execs got both equity and senior roles at Dentsu; CEO David Williams is now the holding company's single largest individual shareholder, according to knowledgeable sources.

With Merkle's rise, Dentsu has forced out some longtime execs elsewhere at the company, angering some longtime leaders. Two people said Dentsumcgarrybowen founder Gordon Bowen threatened to resign when his global chief creative officer Ned Crowley and global chief strategy officer Jennifer Zimmerman were moved into consulting roles in November.

Bowen did not immediately respond to a request for comment.

A Dentsu spokeswoman declined to comment for this article. An EY spokesman did not respond to a request for comment.

Dentsu will restructure each region into three practice areas

The reorg and cuts have left some employees across Dentsu calling the Merkle focus overdue and others anxious about their jobs.

Dentsu owns Carat, Dentsumcgarrybowen, and other agencies. 

Dentsu is splitting into three practice areas: creative advertising, media planning and buying, and CXM, or customer experience management, which is dominated by Merkle.

Each practice area and geographic region will have a single P&L to simplify things for clients who had multiple arrangements with Dentsu agencies; one executive said clients have responded positively to the new structure.

In the Americas, the creative division will be led by Jon Dupuis, global president of Dentsumcgarrybowen; 360i chief media officer Doug Rozen will head up media; and Michael Komasinski, former CEO of Merkle in Europe, the Middle East, and Africa, will lead CXM.

The leaders of the other regions are unclear at this time.

Insiders noticed that Dentsu and its agencies, which are usually active on social media, stopped posting after news of the layoffs became public, and one insider questioned why Dentsu International CEO Wendy Clark hadn't spoken to employees or the press about what comes next.

"There are a lot of nervous people in the company right now," another said. "Wendy Clark is an impressive leader, but realizing her vision [for Dentsu] will cost good people their employment."

Streamlining has been expected — Dentsu announced in November it would consolidate its 160 global agency brands into six, with the new arrangements to be made public in February — and some execs said they thought leadership used the pandemic to justify planned changes. Some believe this wave of layoffs was so large in part because they included some reductions scheduled earlier this year in Europe that were delayed due to the pandemic.

One executive said Dentsu hired Accenture to oversee earlier stages of its reorg in late 2019 and early 2020. An Accenture spokesman did not immediately respond to a request for comment.

The pandemic has also been especially challenging for Dentsu. The company had a multi-million-dollar contract to promote the 2020 Summer Olympics. Wth the games delayed, Dentsu has been forced to make deep cuts.

Others said that parts of Dentsu's business, like its successful media agencies, could be largely spared from the layoffs — and that Merkle might not have layoffs at all. One Dentsu veteran predicted Merkle leadership would get more senior positions in coming months: "It's a reverse takeover."

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