In the late 80s Japan had seen one of its worst economic events in its postwar history: the burst of the asset price bubble which threw the country into a recession which latest over 10 years. And now a new bubble is ready to burst: the classic media advertising bubble

Now in 2009 Japan is facing again a time of turmoil. Everybody talks about the global recession hitting Japan, the strong Yen killing exports, bank and loan crisis forcing a down-sizing in Japanese companies. All this results in less money available to spent on purchases and less money available for companies to invest in marketing and advertising. Companies have to spent their budgets more efficient. In reality this means a move away from classic media (print, TV, radio) towards new media (web, mobile) offering a better ROI for the money spent. While this is also true for many other countries in the world, this development in Japan is like a ticking time bomb which will explode real soon

Three agencies to bind them all
Dentsu, Hakuhodo and ADK are regarded as Japans biggest ad agencies with an estimated combined market share of over 70% (rough estimate). Print and TV ads and media connections are what turned these agencies into media giants and personal connections with the clients helped to feed these giants over the years. In fact a big part of the success can be attributed to these “personal connection” approach: wining and dining its clients, entertaining them at nightclubs or even offering their offspring a job at their agency. Working together with the same agency for years including sweet bonuses like free golf trips, nice presents and pretty girls can be tempting. And it seems to work, as many of Japans biggest companies still rely on these agencies for most of their advertising needs. These “needs” are channeled by the way the big agencies do their business: buy ad space on TV and in Magazines/Newspapers and sell this space including the ads to the client. Miraculously this system has been working now for over 30 years. This gives the impression that Japanese consumers still live in a world of classic mass media consumption and that the internet just plays a minor role. At least this is what the agencies want to believe and maybe also their clients. But reality is quite different:

Japan already is a digital society
In 2006 the average Japanese consumer for the first time spent more time online than reading magazines or newspapers. Japanese are the most active bloggers on this planet, turning Japanese into one of the most frequently used language for blog entries worldwide. Japan also has one of th e highest　mobile broadband saturation as well as the cheapest high speed broadband connections globally. In fact Japan is one of the top 5 leading digital societies in the world today. Mobile SNS platforms like Mobage have over 10 million users and access to popular websites can reach billions of pageviews.

Big agencies seem to live in a different century
It looks like most agencies turn a blind eye on reality and keep pushing most of their clients money into TV and magazine ads while Japanese consumers already moved on to the new media world. The idea of the family gathering around the TV set to watch their favorite show or a Saturday main event together is a blast from the past. Today very often the TV is nothing more than a white noise in a Japanese household which gets turned on in the morning and gets turned off after midnight. But TV commercials are still big business in Japan. The reason why the agencies and clients are still pushing for the same old thing? Because it worked so well in the past and as long as nobody outside finds out about the truth its all right. And who makes sure nobody finds out about it? The company who provides the measurement data of the campaigns:

Media control is no longer “king”
One of Japans biggest institution for measuring the reach of TV and print ads (and in the end the overall success of a media campaign) is far from being a neutral institution. In fact it is “owned” by one of the three big agencies! Unlike ad agencies in other countries the strong skill of the big Japanese agencies is control and not creativity. Now with Japanese companies facing an overall economic crisis, clients need to rethink how to spend their advertising money. The trend clearly goes towards online advertisement/promotion, offering one of the best cost/performance ratios. So instead of pushing through another expensive TV commercial Japanese marketers have to move their budgets to online. This even goes beyond classic display advertisement: Car makers launch their own SNS services, food manufacturers let internet users create their next cup ramen soup product for them and beverage makers start to offer mobile multiplayer game portals. Marketers are more and more looking for digital creativity combined with measurability. This is one reason why the big ad agencies in Japan are so afraid. No more fiddling around with the numbers or some wild guessing. The internet was born out of numbers and it can offer numbers better than any other media. It provides a detailed performance record of media activities ranging from simple eyeballs to detailed purchase conversion ratios.

Real data is the new king
For example IPTV makes it possible to track and trace the viewing behavior of every single user. This provides much more valuable and valid data than a -perhaps biased- research panel of a few hundred viewers. Now with services like KDDI Hikari TV, JoostTV, Yahoo BB TV or even YouTube this is possible. What users are watching for how long and when can be measured without any problems. The performance/value of actors, shows and ads could even be measured in real-time when users start to “opt-out” by switching channels or turning off the system/application. (Intra-broadcast performance, chapter performance) Providing personalized ads/special offers or recommendations based on individual viewing patterns is already being tested by several companies. All in all (real) data is the new king and the new currency. There is no way to “pretend” or “assume” anymore. What counts are just facts and these facts have the power to disrupt a whole industry.

The big players are left in the cold
The internet is -in a way- the antithesis of “media control”. You cannot “own” the internet, unlike classic media. And this sends shivers down the spine of the big ad agencies in Japan who were used to “own” the media (or at least the space in the media), make a fortune out of their “possessions” and worst case spin-doctor data about viewer/reader consumption.

Lights are on “red alert”
Of course it needs to be mentioned that the big agencies are aware of this shift and in the last years some departments tried to acquire small and mid sized online agencies, online portals, create spin-off or weave partnerships with other global partners. But still there seems to be a big majority living in a state of denial. Only a very little percentage of the big agencies business and overall revenues are generated through online communication activities (roughly less than 10%).

A revolution is knocking at the door
Given the economic downturn Japan is facing right now, the classic advertising bubble burst will happen much sooner than expected: In April the new fiscal year starts and companies report their annual profit. Around the same time also advertising strategies and media budgets get fixed. And classic mass media might not be a top priority anymore!
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