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It sounded so exciting when, in January 1999, Yutaka Narita,

Dentsu's president and the eminence grise of Japan's advertising

industry, spoke about how market forces, globalisation and

digitalisation were creating the big bang for media industries and

advertising. Could this really happen in Japan? As the only country ever

devastated by nuclear weaponry, the Japanese surely know what a big bang

can achieve.

Yet, more than two years later, there is no mushroom cloud on the

horizon.

Japan's media landscape continues to be dominated by five privately

owned major newspaper publishers and their affiliated, publicly quoted

TV stations.

These, plus the four networks operated by NHK, Japan's public

broadcaster, form the backbone and most of the flesh for Japan's media

consumption.

Foreign involvement in these giants has been kept at bay since Rupert

Murdoch was forced to retreat from a raid on TV Asahi in 1997. And there

are no battles between Japan's gentlemanly media owners.

In a similar pattern, giants, notably Dentsu and Hakuhodo, trailed by

Asatsu, Tokyu Agency, and Daiko, dominate Japan's advertising

industry.

Here foreign players have found more entry: WPP owns 20 per cent of

Asatsu; IPG has 20 per cent of Daiko, and the unattached Tokyu Agency

has been in on/off talks with a spectrum of international agencies for

about four years. WPP is also in partnership with Dentsu via the Dentsu

Young & Rubicam joint venture, which, contrary to some reports, looks

like having a long and healthy future.

One consequence of the size and tenure of these industry leaders is that

Japan's advertising and media markets play by Japanese rules. "Compared

with the UK, media owners are in a much stronger position relative to

advertisers," says Mark Patterson, president of MindShare in Japan. Rate

increases run ahead of inflation, industry media research lags behind

the UK's norms, and there is next to no transparency in media invoicing

- net costs are as difficult to find as the Holy Grail.

But there are pressures for change that did not exist a few years

ago.

One consequence of Japan's economic woes and increasing understanding of

Western models for managing advertising monies is that there are calls

for change. Research by Nikkei Advertising Research Institute, shows

that advertisers reckon the top priority for agencies is "effective

media planning" (cited by 82.5 per cent), a new discipline in Japan.

Neither Dentsu nor Hakuhodo owes its size to laziness. While many

Japanese agencies lag, these leaders are both investing large sums in

proprietary research and planning technologies. The surprise is how few

Western agencies are doing likewise. McCann-Erickson has been doing just

this for the past five years and now MindShare is paying the admission

fees to that select club by introducing WPP's proprietary research tools

to Japan. Why the focus on proprietary data? Simply because the industry

as a whole has failed to get its act together and provide the necessary

tools and data.

Consequently the quality gap in media services between the biggest and

most of the rest yawns ever wider.

You can sense the pressure for change by the growth in spending.

According to Dentsu, total ad expenditures for 2000 grew 7.2 per cent to

Y6,110.2 billion, the first increase since 1997 and a record high.

Meanwhile, consumer spending fell slightly as unemployment,

bankruptcies, and deflation took their toll on spending power and

confidence. Of course, there were some special factors at work. Spending

on IT and telecoms rose and many companies decided to bolster brand

images. Corporate restructuring created some new advertising needs. The

Sydney Olympics and the Lower House election campaign also contributed

to the advertising upturn, as did a long-term care insurance plan and a

digital broadcasting service.

But from street gossip, advertisers know they must make their budgets

work harder and are asking new questions about what they are getting

from their agencies, driving commission rates down.

While it may take keen eyes and insider knowledge to spot change in the

traditional mass media market, it is easy to spot them in Japan's hot

zone - the internet. Internet-related spending surged 145 per cent in

2000 to Y59 billion. Though a mere 1 per cent drop in the ocean, this,

and particularly the mobile internet of NTT DoCoMo's i-mode, KDDI's

EZ-Web, and J-Phone's J-Sky Web is where marketers are finding new ways

to build relations between brands and consumers.

A few examples: through MindShare, Warner Lambert's Hall's throat

lozenge sponsors a pollen alarm & information service on i-mode. The

brand has highest demand in the early part of the year when air is

driest and hayfever is most prevalent. The service delivers pollen info

at a time chosen by the user each day and is tailored to their location.

Then there's a sub-menu of Shiseido's i-mode site, Shiseido.mode, which

offers beauty advice based on the changing hormone balance during a

woman's menstrual cycle.

Those who have registered for the service get personalised advisory

e-mails about food and cosmetics during the critical days each month,

based on the data they give Shiseido. Meanwhile, i-cooking, a popular

Nestle i-mode site devised by m.Ogilvy, helps working homemakers plan

the evening meal while they commute home on the train.

In a strange contrast, Japan is at the cutting edge in developing mobile

marketing solutions and customer relationship management tools, but it's

only emerging from the dark ages in the use and evaluation of

traditional mass media. Satellite and cable have failed to find stable

orbits in the marketing firmament and are outshined by the internet.

The business practices of TV and print are entrenched in a consensus

culture that stomachs endless negotiation but little decision. "It is

not that the Japanese are averse to change," says Professor Toshio

Yamaki, of Tokyo Keizai University. "It is just that they prefer it to

be very slow."

TOP TEN JAPANESE AGENCIES BILLINGS IN 2000

Rank Agency Billings Compared with

(Yen million) 1999 (%)

1 Dentsu 1,475,780 112.8

2 Hakuhodo 740,214 109.8

3 Asatsu DK 340,889 106.5

4 Toyko Agency 196,842 108.1

5 Daiko 158,196 103.4

6 Yomiko 117,244 106.1

7 I&S/BBDO 100,246 104.9

8 JR Higashi Nihon 91,753 104.9

9 McCann-Erickson 79,213 105.1

10 Asako 60,424 111.3

Total 3,360,801 1,072.9

Source: McCann-Erickson Japan. Basis: Non-consolidated domestic

billings for the calendar year 2000.

TOP TEN ADVERTISERS RANKING BY MEDIA AD EXPENDITURES

Rank Advertiser Ad expenditures Change

(Yen million) (%)

1 Kao 75,007 18.3

2 Toyota Motor 68,900 11.7

3 Suntory 55,263 -4.4

4 Nissan Motor 34,478 -5.2

5 Proctor & Gamble/Far East 33,322 9.8

6 Lion 33,220 5.3

7 NTT DoCoMo 32,223 16.0

8 Shiseido 32,055 12.6

9 Kirin Brewery 30,992 14.1

10 Nippon Lever 30.864 43.2

Source: McCann-Erickson Japan. Based on TV, newspaper, magazine and

radio adex.