Asatsu-DK Inc.

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Asatsu-DK Inc.

1-13-1 Tsukiki
Chuo-ku
Tokyo, Japan
Telephone: (81) 03 3547 2111
Fax: (81) 03 3547 2345
Web site: http://www.adk.jp

Public Company
Incorporated: 1999
Employees: 2,850
Sales: ¥424,705 million ($3.78 billion) (2005)
Stock Exchanges: Tokyo
Ticker Symbol: 9747
NAIC: 541810 Advertising Agencies; 541870 Advertising Material Distribution Services

Asatsu-DK Inc. is the third-largest advertising agency in Japan, trailing only Dentsu and Hakuhodo DY. Formed in 1999 by the merger of Asatsu and Dai Ichi Kikaku, Asatsu-DK also ranks in the global top 10, with consolidated billings of ¥424,705 million ($3.78 billion) in 2005. The company is active in every advertising segment, including magazine, radio, internet, newspapers, and digital media, although its sales remain driven by its television division, which alone accounts for nearly 50 percent of the group's annual revenues. In addition to its television operations, Asatsu-DK has long been itself a producer of television content: the company operates two production subsidiaries, and its past efforts included the creation of such popular cartoon series as Doreamon in the 1970s and the global success Yu Gi Oh! in the 2000s. In 2004, the company led the creation of Sesame Street Partners in order to create a localized version of the popular television program for the Japanese market.

Asatsu-DK has long played the role of maverick in the traditionally rigid Japanese advertising industry, which has long been heavily dominated by Dentsu. Asatsu was the first Japanese advertising agency to go public in the late 1980s, and the company has also been one of the most active in developing an international network. In addition to its subsidiaries in Japan, the company is present in 15 other countries in the Southeast Asian region, with a particular focus on the mainland Chinese market. Asatsu has formed a partnership with the United Kingdom's WPP GRoup—the two companies swapped stock in 1999, in an agreement that gave WPP a 20 percent stake in Asatsu. In addition, Asatsu has set up alliances with a number of global agencies, including JWT, Young & Rubicam, Ogilvy & Mather, and RedCell, in order to provide services to the international operations of its largely Japanese clientele. Asatsu-DK also founded the Drill joint venture partnership with Dentsu, in order to provide integrated advertising campaigns. Listed on the Tokyo Stock Exchange, Asatsu-DK is led by chairman and Asatsu founder Masao Inagaki, and president and CEO Koichiro Naganuma.

JAPANESE ADVERTISING UPSTARTS IN THE FIFTIES

The rise of radio and television broadcasting in Japan in the post-war era opened up new opportunities for the country's advertising industry. Although the field was already dominated by a small number of giant companies—and especially by Dentsu, which continued to control a large portion of the country's radio, television, and newspaper advertising markets through the end of the century—the post-war period and the resulting economic boom nonetheless provided a fertile bed for a number of new players in the market.

Unlike Dentsu and Hakuhodo, which were independently owned companies, many of the new advertising companies were established by the country's industrial and distribution groups. These included Tokyu Agency, formed as part of the Tokyu retail group, and Saison, owned by another retailer. Other agencies, including Daiko, Yomiko, Asahi, and Nihon Keizaisha, were all formed in conjunction with the country's major newspaper publishers.

In 1951, the Mitsubishi company, on its way to becoming one of Japan's and the world's largest corporations, formed its own advertising unit, called Dai-Ichi Kikaku Senden Co. Founded in Tokyo by Naoya Sakai and Saburo Hotta, Dai-Ichi's initial focus was on the radio advertising market. The 1950s were to see a dramatic boom in radio advertising, particularly following the introduction of the first transistor radios. The new radio market also inspired an entirely new type of advertisement, which became highly popular with Japanese consumers. As a result, the country's advertising market quickly grew into the world's second-largest, trailing only the United States.

The strong growth of the market was reflected in Dai-Ichi Kikaku's own expansion during the decade as it followed the spread of local radio markets across the country. Dai-Ichi opened its first branch agency as early as 1953, setting up shop in Osaka. The company added a new office in Nagoya in 1955, followed by a branch in Fukuoka in 1958. In that year, Dai-Ichi Kikaku moved its headquarters to a new, larger site in Tokyo.

Dai-Ichi moved again in 1961, to larger headquarters in Tokyo. The company changed its name to Dai-Ichi Kikaku that year as well, and opened a new branch office in Hiroshima. By the end of 1962, the company had begun its ascent into the country's top ten, merging its operations with two other Tokyo-based advertising companies, Futaba Kigyou and Keishin-sha Co.

While the radio advertising market grew rapidly through the 1950s, the booming economy and increased leisure time in the country also inspired a boom in the country's magazine publishing industry. The fast-rising number of magazine titles provided another foundation for the new generation of advertising companies in the country. One new entrant into the market was Asatsu, created as part of the Asahi Tsushin publishing group in 1956.

Led by Masao Inagaki, who served as the company's CEO before becoming its chairman—a position he continued to hold into the mid-2000s—Asatsu initially focused on the magazine advertising market in the Tokyo area. The launch of Japan's national public television broadcasting network in 1958, however, provided the company with a springboard to a national level. Asatsu quickly began adding branches, opening offices in Osaka and Fukuoka in 1958, and then in Sapporo and Nagoya in 1959.

The development of the Japanese animation industry in the early 1960s provided a fresh opportunity for Asatsu, as the company became one of the only advertising agencies in the country to launch its own television production operations. The company's content creation effort, and especially its knack for developing popular animated characters, soon earned the company the nickname "cartoon Asatsu." An example of an early success of the company's programming unit was its Doreamon character, created in the early 1970s.

COMPANY PERSPECTIVES

What do we mean by "Management by All"? This philosophy simply means that, at ADK, everyone shares a management perspective and is encouraged to make full use of their individual talents. By doing so, we aim to contribute as much as possible to the success of our clients. Our long-term vision is to create a New Wave Agency. In other words, we don't cling to traditional thinking or try to maintain the status quo. We go all out to achieve maximum client satisfaction through the creation of next-generation advertising and communications. The "Management by All" philosophy and vision to create a New Wave Agency are infused with the challenger's spirit we've embodied since our founding. ADK refuses to be boxed in by conventional wisdom or become complacent because of past successes. Our raison d'etre as an advertising agency is to constantly create unique solutions for our clients.

By then, the company had moved to larger headquarters in Tokyo, and had continued its national expansion. In 1970, for example, the company opened a branch in Sendai, followed by an office in Hiroshima, opened in 1974. By the beginning of the next decade, the company had added offices in Okayama and Takamatsu as well.

INTERNATIONAL EXPANSION IN THE SEVENTIES

Dai-Ichi continued its own growth into the 1970s as well, expanding its range of advertising markets, and moving to still larger head office facilities in 1974. In that year the company also led the creation of DIK Network Partners, providing the company a link with the operations of a number of local agencies throughout the country.

The mid-1970s, however, marked the beginning of a new era for the Japanese advertising industry. The country's rise as an industrial and economic powerhouse, and its growth into a major exporter of increasingly sophisticated products throughout the world had transformed many of the country's top advertisers into globally operating companies. As a result, Japanese advertising agencies were increasingly called on to provide support for their clients' international operations. Rather than extend their own businesses, Japanese advertising companies began seeking out international partners to provide them with a presence outside of Japan. At the same time, the world's largest advertising groups had begun making an effort to enter the huge advertising market in Japan.

Dai-Ichi became one of the first Japanese groups to engage in a successful partnership with a foreign agency when it signed an agreement with Doyle Dan Bernbach, more commonly known as DDB (and later as DDB Needham Worldwide Inc.), in 1976. Dai-Ichi's initiative was followed by that of Asatsu, which formed its own partnership with BBDO International (later known as BBDO Worldwide) in 1984. That partnership was to last more than 15 years.

Asatsu made industry history in 1987, when it became the first Japanese advertising agency to go public, listing its shares on the Tokyo Stock Exchange. The company's shares initially traded on the TSE second section, before being transferred to the main board in 1990. Dai-Ichi's own public offering followed in 1996.

Asatsu continued to play the role of maverick in the traditionally rigid Japanese advertising industry. Despite the increasing number of international partnerships established among the country's largest advertising groups, their focus remained largely fixed on the domestic market. Asatsu, however, began developing its first international interests in the early 1990s, entering the mainland Chinese market with the formation of a partnership with the Xinhua News Agency. By 1994, the company became the first Japanese agency to establish its own base in the mainland market, forming a joint venture with the People's Daily group in Beijing.

Asatsu rapidly expanded its interests in the Chinese market, forming some 16 subsidiaries in markets including Shanghai, Guangzhou, Chengu, and Fuzhou, among others. Through the end of the decade and into the mid-2000s, Asatsu continued to develop its international network, adding subsidiaries in Thailand, Malaysia, Hong Kong, Taiwan, Malaysia, the Philippines, Singapore, Vietnam, and Korea.

KEY DATES

1951:: Dai-Ichi Kikaku Senden Co. is founded as part of Mitsubishi in order to provide advertising services for the radio market.
1956:: Masao Inagaki leads the creation of the Asatsu advertising company as part of Asahi Tsushin, focusing on the magazine advertising market.
1976:: Dai-Ichi forms an international partnership with DDB.
1984:: Asatsu forms an international partnership with BBDO.
1987:: Asatsu becomes the first Japanese advertising agency to list shares on Tokyo Stock Exchange.
1993:: Asatsu forms its first joint venture subsidiary in China.
1996:: Dai-Ichi goes public with a listing on the Tokyo exchange.
1999:: Asatsu and Dai-Ichi merge, forming Asatsu-DK, then forming a partnership with WPP Worldwide, which takes a 20 percent stake in Asatsu-DK.
2002:: Asatsu-DK acquires animation company Eiken Co. Ltd.
2004:: Asatsu-DK forms Drill, a joint venture partnership with Dentsu.
2006:: Asatsu-DK adds a new subsidiary in Fujian, China.

MERGING FOR THE NEW CENTURY

The late 1990s represented a new era for the Japanese advertising industry. While Dentsu remained the market's dominant player, the major international groups had increasingly begun to make an effort to establish direct operations in the country. At the same time, the domestic industry was on the verge of a consolidation phase, which culminated in the creation of Hakuhodo DY in a merger among Daiko, Hakuhodo, and Yomiko. In order to solidify its number three ranking, Asatsu turned to Dai-Ichi in 1999. The two companies agreed to merge that year, becoming Asatsu-DK. Both companies shared a common client, in the form of Mitsubishi. Yet, Mitsubishi, rocked by scandal at the beginning of the 2000s, surprised the advertising industry, and especially Asatsu-DK, by announcing it was moving its account to Dentsu. Asatsu put a brave face on the sudden loss of its major client, pointing out that the move would enable it to begin building a relationship with other automotive companies.

The period was also marked by the end of Asatsu's relationship with BBDO. Instead, Asatsu turned to the U.K.'s WPP Group, forming an initial partnership in 1998. Following the creation of Asatsu-DK, the two companies moved to strengthen their partnership. In a stock swap, WPP acquired a 20 percent stake in Asatsu-DK, while the Japanese company received an equivalent stake—of approximately five percent—in the larger British company.

The deal encouraged Asatsu-DK to explore expansion beyond its Southeast Asian stronghold in the 2000s. In 1999, the company established a subsidiary in France, then strengthened its European presence with the creation of Knots Europe BV in the Netherlands in 2001. Asatsu-DK also added a liaison office in New Delhi, in a first move into the vast Indian market, in 2000. By then, the company had also added a subsidiary in Vietnam as well. In 2004, the company moved to boost its operations in China, in the face of stiffening competition from Dentsu and Hakuhodo, creating a new in-house unit to coordinate the advertising operations of its various Chinese subsidiaries.

Back in Japan, the company strengthened its programming production operations through the acquisition of the Eiken Co. Ltd. animation studio in 2002. The purchase brought Asatsu-DK Eiken's library of more than 6,000 cartoon titles, including its popular Eightman and Sazaesan series. Asatsu-DK, which saw new success with its Yu Gi Oh! cartoon series in the 2000s, also led the formation of Sesame Street Partners, which acquired the license to produce a localized version of the popular children's television program, in 2004.

Asatsu-DK continued to form new relationships into the mid-2000s. In 2004, the company launched a joint venture with Dentsu. Called Drill, the new company was meant to provide Western-styled communications planning services for the Japanese market. Asatsu-DK's part of the joint venture stood at 40 percent. At the same time, the company deepened its relationship with WPP, forming a partnership with that group's J. Walter Thompson Japan subsidiary to explore cooperation agreements not only in Japan, but elsewhere in Asia and into the United States as well. On its own, meanwhile, Asatsu-DK broadened its presence in the mainland China market, launching a new subsidiary in Fujian in 2006. Asatsu-DK not only claimed a clear position as Japan's third-largest advertising agency, it had also grown into one of the new century's top 10 global advertising groups.

PRINCIPAL SUBSIDIARIES

ADK America Inc.; ADK Arts Inc. ADK International Inc.; ADK Asia Regional Center (Malaysia); ADK BOYS Inc.; ADK Deutschland GmbH; ADK Europe (Netherlands); ADK France S.A.S; Asatsu (Thailand) Co., Ltd.; Asatsu Advertising Co., Ltd. (China); Asatsu-DK Hong Kong Ltd.; Asatsu-DK Inc. Seoul LG (South Korea); Asatsu-DK Malaysia Sdn. Bhd.; Asatsu-DK Singapore Pte. Ltd.; Asatsu-DK Vietnam Inc.; ASDIK Ltd. (Thailand); Dai-Ichi Kikaku (Thailand) Co., Ltd.; Dai-Ichi Kikaku Advertising Co., Ltd. (China); Dai-Ichi Kikaku Fortune Advertising Co., Ltd. (China); Digital Advertising Consortium Inc.; Drill Inc.; DS Public Relations Consulting Co., Ltd. (China); Eiken Co., Ltd.; KNOTs Europe B.V. (Netherlands); Kyowa Kikaku Ltd.; Motivation Marketing Inc.; Neo Shobo Inc.; Nihon Ad Systems Inc.; Nihon Bungeisha Co., Ltd.; Nippon Information Industry Corp.; PT. Asta Atria Surya (Indonesia); Right Song Music Publishing Co., Ltd.; Scoop Ad World Pte. Ltd. (Singapore); Super Vision, Inc.; Tiexu Advertising Co., Ltd. (China); TRI Communication Inc.; United-Asatsu International Ltd. (Taiwan).

PRINCIPAL COMPETITORS

Dentsu Inc.; Hakuhodo DY Holdings; Gendai Agency Inc.; Shinken-AD Company Ltd.; Tokyo Electron Agency Ltd.; Catalina Marketing Japan K.K.; Nippon Oil Trading Corp.