Sony, Dentsu Form Broadband Media, Advertising Firm

Like Godzilla and Rodan teaming up to tackle MechaGodzilla, Japanese consumer electronics titan Sony Corp. and ad agency giant Dentsu plan to jointly take on the largely untapped and untried broadband advertising market.

Under an agreement between the two, Dentsu, the world’s largest advertising agency, will pay about $13 million for a 40 percent stake in Intervision, a traditional ad agency purchased by Sony in 1997 and rebranded as a digital shop.

Since 1997, Intervision has focused chiefly on site design, digital advertising strategy, and, through a co-branded practice with New York-based i-shop Razorfish, back-end integration and technology services. Currently, about half of Intravision’s billings come from work for its Sony siblings.

Once the Sony-Dentsu joint venture deal is concluded in April, however, the Tokyo-based agency will take on a new name and a new purpose: to oversee broadband advertising in Japan and Asia for companies owned by Sony, and to provide similar services for outside clients.

Much of the new company’s advertising goals will be met, it said, by developing its own media channels. Sources said the firm would develop subscription-based, personalized content for delivery via high-speed Internet connections and related media, like interactive TV. Additionally, the firm could distribute content from studios and other developers across its broadband network.

As a marketing services provider, the new company plans to offer broadband advertising strategies and inventory within that content, using products that combine brand-focused creatives with audience segmentation, targeting and remarketing. To that end, Intervision already has internally developed technology, dubbed “PaSaTa,” which allows for rich media ads to be targeted via profile and inserted into streaming content.

“The company will develop a new marketing model for the broadband era that fuses the highly effective Customer Relations Management made possible by Internet interactive media, with corporate and product advertising approaches equaling the creative strength employed in ‘traditional’ mass media,” said a spokesperson.

The new company also will provide typical agency services including broadband account planning and media planning and buying. (It’s unclear whether those duties will extend to broadband media other than its own content channels.)

“The new company will take Sony’s broadband business and rich content and combine it with Dentsu’s marketing strength and communication skills to create and develop new businesses,” said Ikuya Tanaka, who will become the new firm’s president. Tanaka is currently head of Dentsu’s sports marketing division and a board member of mainland Asian portal-turned-online marketing play chinadotcom.

Sony chairman and chief executive Nobuyuki Idei, along with other Sony and Dentsu executives, said during a press conference in Tokyo that said the partners had “high hopes” for the firm, anticipating it would bring in about $414.6 million in 2002 billings.

Those are lofty goals indeed, considering that broadband is only in its infancy in Asia. Exactly how many of the region’s roughly 84 million Internet subscribers use broadband is unclear. Several experts figure that the region has about 11 million broadband subscribers, with South Korea contributing close to half of that figure.

By the end of the year, that figure could swell to about 16 million to 20 million. (Comparatively, the U.S., where the broadband and iTV ad markets are considered by many to be too small to be effective ad vehicles, currently has about 15 million high-speed residential subscribers.)

Nevertheless, Sony and Dentsu aren’t alone in betting that the region’s fledgling Internet population will prove lucrative for advertising firms. Last month, a consortium of Japanese Internet and advertising firms said it expects the country’s broadband rich media advertising market will exceed $1.25 billion by 2006.

Similarly to Intervision, the consortium — whose members include technology players Trans Cosmos and J-Stream, and regional subsidiaries of U.S.-based DoubleClick and NetRatings — has said it intends to launch a service for distributing rich media ads via broadband as early as third quarter.

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