Dentsu, an Empire — The Singularity of Japanese-Style Advertising

In the previous episode, we saw the Creative Revolution of Madison Avenue. American advertising, together with the brilliance of its expression, built one golden age.

But across the Pacific in Japan, the history of advertising advanced by wholly different principles. Before any revolution in expression, it was the ‘mechanism’ for bundling the media themselves that grew vast. At its center stood a company called Dentsu.

What this episode depicts is not the merits or faults of any particular company. It is to look as neutrally as possible, within the bounds of publicly known fact, at what the ‘Japanese-style advertising agency model’ — structurally different from that of the West — actually was. Because many of the points are matters on which evaluations differ, we will proceed while avoiding firm verdicts.

A Giant That Began as a Broker

Dentsu’s origins go back to 1901. It is said to have begun when Hoshiro Mitsunaga founded ‘Japan Advertising,’ which handled newspaper advertising, and ‘Telegraphic Service Company,’ which distributed news. In time the two were merged into a company with two faces: advertising and news distribution.

Here, one feature of the Japanese-style agency already appears. In the West, too, advertising agencies arose from the brokering of newspaper ads, but in Japan, holding news distribution as a ‘news agency’ produced a strong bond with newspaper companies. The power to handle advertising space was supported by the depth of the relationship with the media.

In 1936, under wartime conditions, Dentsu is said to have transferred its news distribution division to the Domei News Agency and come to concentrate on the advertising agency business. From a company that carried information to a company that bundled advertising. That shift became the foundation of its later expansion into a giant.

The Empire That Television and Rapid Growth Raised

What truly made Dentsu vast was postwar reconstruction, the era of rapid economic growth, and the arrival of new media.

The figure regarded as the company’s reviver was Hideo Yoshida, who became president in 1947. He is said to have sought to turn advertising into a modern, rational business. He is also known for having presented to his employees, in 1951, the ‘Ten Demon Rules,’ which set out an attitude toward work. In fairness, however, it should be added that these ‘Ten Demon Rules’ later became an object of reexamination, their spirit questioned amid debates over long working hours.

In 1953, commercial television broadcasting began in Japan. This new medium, following radio, transformed the very nature of advertising. Through securing broadcast slots and linking sponsors with programs, Dentsu rapidly increased its billings. According to various company histories and materials, in Yoshida’s time Dentsu’s billings are said to have expanded several-fold within a few years. Who would bundle the living-room window of television, and how — at that pivotal point, Dentsu was positioned.

In this way Dentsu grew into a vast handler of media space, broadly managing the advertising slots of the principal media — newspapers, radio, and television. In reporting and industry materials, Dentsu is said to be counted, by scale of revenue, among the leading advertising companies in the world. It was not the revolution of expression but the power to bundle media that was set at the center of Japan’s advertising industry.

Multiple Firms in One Industry — A Japanese-Style Practice

Here we must touch on a point indispensable to discussing the Japanese-style model: the practice known as ‘handling multiple firms in one industry.’

At many Western agencies, the ‘one firm per industry’ principle (the conflict policy) is said to have been traditionally respected. If a single agency took on, say, automaker A, it would not accept the advertising of its competitor B. Advertising is, in a sense, an endeavor that pushes forward a client’s sales, and to support two competing firms at once would be a conflict of interest — so it was thought.

Yet at Japan’s major agencies, it is said not to be unusual for a single company to handle multiple competing firms in the same industry at the same time. A giant agency like Dentsu would handle, all together, several firms from each of the automobile, beverage, and home-appliance industries. Internal arrangements such as separating the responsible departments do exist, but it is a structure that departs greatly from the Western principle.

Why did such a practice take hold in Japan? Behind it, it is said, lay Japan’s media structure itself: media concentrated in a limited number of national newspapers and key broadcast stations, and the major agencies able to handle those slots were likewise narrowed to a few. When media are concentrated, the agencies that bundle them also grow vast and more readily gain the power to handle work across competitors. Structure bred the practice, and the practice in turn supported the structure — so it can be seen.

The Two-Giant Structure and the Outline of the Japanese-Style Model

When speaking of Japan’s advertising industry, the name raised alongside Dentsu is Hakuhodo.

Hakuhodo’s origins are said to lie in its beginning in 1895 as an advertising brokerage for educational magazines. Over a long history it grew into a full-service advertising agency, and in 2003 it merged management with a firm in the same business to establish the holding company Hakuhodo DY Holdings. Together with Dentsu, the two are collectively called ‘Dempaku’ and are regarded as representative of Japan’s advertising market.

Whereas the West, as we will see in a later episode, advanced toward a configuration of several vast holding companies competing with one another, Japan long continued with a structure centered on one preeminent firm and the two giants it heads. A vertically integrated full-service agency that, starting from sales, broadly takes in media, production, and even events within a single company — this, it is often explained, is the outline of the Japanese-style model. From its very starting point, its conception differed from the Western type that separates creative from media.

To the question of which model is superior, there is no easy answer. The Japanese type produced formidable media power and comprehensive capability, while it has also carried debate over market concentration and the nature of its practices. Light and shadow are, here too, inseparably bound together. What is certain is that the same endeavor called advertising grows into wholly different forms depending on the structure of a country and a society.

And while this Japanese-style giant walked its own path, another upheaval was occurring in the world of advertising. The agencies themselves were being acquired across borders, bundled together, and transformed into vast holding companies — the next episode is the story of that consolidation and globalization.