Dentsu's CRM operation staves off Covid-19 ad slump

Dentsu Aegis’ CRM agencies – spearheaded by Merkle’s data-driven operation – are outperforming all other parts of the business, proving resilient to the Covid-19 downturn due to client demand and its long term contracts.

The move, revealed in Dentsu Group’s Q1 financial results, shows that US market, which is where Merkle is most established, turned in a relatively strong performance, up 2.2%. The company said this was driven by CRM businesses and continuing high demand for Merkle-related services, including precision marketing platform M1.

Meanwhile, its international division, Dentsu Aegis Network, was also reaping the benefits of the Merkle operation after splitting into the three core disciplines of CRM, media and creative as part of a restructure announced in December.

The CRM division, which includes Merkle, Gyro and B2B International, grew 3.9% in the first quarter, while media fell 5.9% and creative dropped 6.5%, leading to an overall decline of 3.3%.

The company cited the impact of coronavirus, with particular weakness in DAN’s Asia-Pacific region, which was down nearly 20%.

Overall, Dentsu Group reported a 0.8% drop in organic growth for the first quarter with reported net revenues of approximately $2.1bn, down 0.4%.

Like other holding companies, Dentsu has implemented a raft of cost cutting measures including a pause in M&A activity at least until Q3, travel cutbacks, reduced working hours and temporary salary cuts and some layoffs. The company said it is targeting a 7% cut from of its 2020 budget.

However, the update stated that “CRM remains the most defensive part of the business, driving transformation within our clients’ businesses”.

Dentsu Group president and CEO Toshihiro Yamamoto added: “The accelerated buyout of the remaining Merkle shares, announced in March, will ensure key talent retention and deliver EPS accretion for 2020. Merkle is a key pillar in the delivery of DAN’s differentiated data-driven and tech-enabled client offering.”