• by Gavin O'Malley  @mp_gavin, January 17, 2007

Extending its global reach to Japan, Avenue A/Razorfish, a unit of aQuantive, has secured a 19.4% stake in Dentsu's digital agency Digital Palette. Dentsu, easily the largest ad agency in Japan, has also agreed to change Digital Palette's name to Dentsu Avenue A/Razorfish.

Part of a larger global push, the deal extends Avenue A's footprint in Asia, having recently acquired Hong Kong-based interactive agency e-Crusade for $2.95 million.

"We think our international presence is very attractive to clients," said Keith Metzger, general manager, international for aQuantive's Avenue A/Razorfish. "Our existing clients are interested in digital campaigns around the world, and Japan is particularly attractive because of its size and how far advanced they are in mobile."

In the last year, Avenue A/Razorfish has acquired NDA in the U.K., Amnesia in Australia, and most recently, Neue Digital in Germany. The Digital Palette deal adds offices in Tokyo and Kobe to Avenue A's stable of shops in London, Frankfurt, Sydney, Hong Kong and Shanghai.

Digital Palette has a current market capitalization of $3.32 million--meaning that Avenue A/Razorfish is securing a stake worth less than $650,000. But while small, analysts saw the deal as representative of a favorable strategy for Avenue A and parent company aQuantive.

"International internet advertising is growing even faster than the US, so [aQuantive's] increased emphasis on overseas deals, especially as efficient as this one, are a positive in our view," wrote Merrill Lynch analyst Lauren Rich Fine in a research note released on Tuesday. "The alliance will allow for a sharing of expertise and joint training as well as cross marketing."

Digital Palette presently has 148 employees--up from 111 just over a year ago--which suggests rapid growth, added Fine. The agency, which specializes in Web site design and interactive strategy, did not disclose its revenues.

Across the ad industry, executives seem well aware of clients' increasing demand for international reach.

"It's critical to have a regional presence in key markets around the world," said Harvey Goldhersz, chief operating officer for MediaCom Worldwide, a media buying firm owned by aQuantive rival WPP Group. "It's a growing part of the business, but agencies have to be prepared to meet demand."

Furthermore, agencies can benefit indirectly from their work in markets like Japan, according to Goldhersz. "Japan is clearly out in front in areas like mobile. We see returns in the form of insights about integrating mobile with the Internet."