One of Madison Avenue’s legendary names has shifted its sights to China.
DDB Worldwide, the agency born as Doyle Dane Bernbach in New York more than 60 years ago and now owned by Omnicom Group Inc., is moving its global creative headquarters to Shanghai. While DDB will continue to have offices in New York and elsewhere, it will base its chief creative officer in China.
Many U.S. and Europe-based ad agencies have opened offices in the Asia-Pacific region – including others within the “big four” ad-agency holding companies that includes Omnicom – but DDB is the first major agency to move its headquarters for the global creative team to China.
The move signals a major bet by DDB about the sizable market that China represents, and the growing advertising budgets devoted to that region. Advertising spending in China is expected to increase nearly 17 per cent in 2012, to ¥406-billion (nearly $64-billion), according to a recent report by GroupM – a subsidiary of another “big four” company, WPP Group PLC.
The advertising industry’s focus on China is being driven by the growth of Chinese companies and the expansion of their spending on marketing, as well as multinationals looking to expand to the Chinese market. That includes two of DDB’s largest clients, McDonald’s Corp. and Volkswagen AG.
Although both companies have been marketing to Chinese consumers for years, the growing consumer base has spurred aggressive expansion plans. McDonald’s wants to open 700 new stores in the country by next year, up from its current base of about 1,300, as it races to catch up to competitor Yum Brands Inc., which operates KFC and Pizza Hut.
Even as the Chinese economic growth has slowed in recent months, consumer spending has remained strong as salaries continued to rise and more young people move into the middle class. This week, Chinese Premier Wen Jiabao said “expanding consumer demand” will be a major priority for the country this year.
“If you look at how the markets are going and how the world is changing, Asia will be the place where you have to be in terms of really developing the business,” said Amir Kassaei, who as DDB's chief creative officer oversees the agency’s creative vision for its advertising clients. “So we decided we have to make a key move with not only having an agency there, but with having a global creative centre there.”
DDB is setting up its creative headquarters in Shanghai and planning how to recruit talented staff. Depending on the amount of work it attracts, Mr. Kassaei envisions a hub with about 20 employees.
The move follows about nine months of discussions at the agency about its focus for the future. The decision to move the creative headquarters was made by DDB Worldwide chief executive officer Chuck Brymer.
“The world as we know it is changing and our industry's growth market is now without doubt the Asian region,” Mr. Brymer said in a statement.
Ad-agency holding company WPP is one Omnicom competitor that has made a number of moves in the Asia Pacific region, both by opening offices there for its agencies, including JWT and Ogilvy & Mather, as well as buying market share by acquiring digital marketing agencies, said Forrester Research analyst Chris Stutzman, who covers the industry.
The region has higher rates of early adoption of technologies such as mobile commerce, making it an incubator for new ideas in marketing and for understanding “the leading edge of consumer behaviour,” Mr. Stutzman said.
“Asian hubs such as Singapore and Shanghai are very, very digitally driven. So we can learn a lot from these regions,” Mr. Kassaei said. “We’re doing this to give a sign to all the organization in terms of where our future is.”