GLOBAL RANKINGS 2001: CANADA - Courting interest. The US economy may be frozen solid, but PR agencies north of the border are keeping their cool, and continue to attract attention from international agency groups. Chris Daniels reports

Because of Canada's heavy reliance on the US, its biggest trading

partner, you would think that the loud bang of the American technology

bubble bursting would have shaken PR foundations north of the

border.



Not so. 'Last year, we were lamenting that US firms had far more of the

dot. com business than we did,' says Linda Smith, SV-P and general

manager of Fleishman-Hillard Canada in Toronto. 'Now this year, we

don't mind so much.'



Not that the technology downturn hasn't been felt by the country's PR

agencies. In June, five-year-old Pydea, a hi-tech firm in Toronto whose

clients included Media Metrix and travel web site Exit.ca, laid off its

entire staff. However, that casualty is not indicative of the current

market, especially when you consider Pydea was a boutique with only

four full-time employees. Most hi-tech firms in Canada - and the

technology divisions of multinationals - are experiencing growth, but

not at the rates that forecasts projected last autumn.



Take, for example, Maverick Public Relations in Toronto, something of a

tech darling in the Canadian PR landscape, that has rapidly grown to 25

clients and more than $1m in revenues in just two years. 'In the

first quarter of 2001, we were 40 per cent above 2000 revenues,' says

president Julie Rusciolelli, who adds that she has only had to lay off

one employee this year. Maverick currently has 13 staff, 'but that

growth is way, way lower than projected.'



What is continuing to drive the Canadian market is globalisation, or at

least North Americanisation, as companies look for agencies that can

service both Canadian and American markets, especially in the tech and

healthcare sectors.



Other factors which have boosted the industry include Toronto's

unsuccessful bid to host the 2008 Olympic Games, with marketers like

Bell Canada running local ad campaigns.



And while some tech businesses collapsed or scaled back their budgets,

major new accounts outside of the technology sector were placed up for

grabs in competitive pitches. Electronic retailer Best Buy of

Minneapolis hired the Toronto office of Edelman as part of its drive to

enter Canada with 65 stores during the next three years, while Levi

Strauss Canada hired its first-ever PR agency of record in Apex Public

Relations, a Toronto shop with about $2m in revenues.



But the biggest trend steering the industry is the blurring of the

border, with many firms both big and small reporting at least 25 per

cent of their work being done south of the border, either for

Canadian-based clients or, to a lesser but still significant extent,

for US-based clients. That has resulted in multinationals continuing to

buy up independents, and Canadian-owned PR firms fighting back by

expanding outside of their native land. This trend is expected to

continue during the next few years.



Although accurate figures for the Canadian PR industry are difficult to

come by because many firms are privately owned, industry estimates

value it at between $200m and $300m. While the branch

offices of US giants such as Hill & Knowlton, Cohn & Wolfe, and Edelman

have long competed neck-and-neck in the Canadian market, last year

Fleishman-Hillard broke away as a dominant force, thanks to its

aggressive acquisition strategy.



F-H's 2000 billings skyrocketed to $27.9m, up from $4.1m

in 1999. That massive growth is a result of F-H Canada reporting

revenues that for the first time include recent acquisitions GPC

International of Toronto (which has offices in 16 countries, with eight

of those in Canada), and High Road Communications (the largest hi-tech

PR firm in Canada, with offices in Ottawa, Toronto, and San

Francisco).



In recent years, High Road has enjoyed annual growth rates between 70

and 75 per cent, although this year it expects those numbers to drop to

a modest five to ten per cent. For High Road, the blurring of the

US/Canadian border was never more apparent until this year.



With revenues exceeding $4m, High Road has grown by

concentrating on the US market, which accounts for 85 per cent of its

work. Its Canadian clients - for which it does mostly US work - include

Northwood Technologies (a wireless telecom software solutions

provider), and Synamics (a developer of voice and data applications for

telecommunications carriers).



Citing the reaction to a shrinking US tech market and the higher

profile of Canadian companies such as Nortel Networks and Research in

Motion (the maker of the handheld e-mail gadget BlackBerry), High Road

managing partner and co-founder Rick Doyon says American PR firms are

now pursuing Canadian clients looking for US exposure.



'In the heyday of 1999 and 2000, they would never have looked twice at

any of these companies because the Canadian budgets were too small.

They wouldn't talk to you unless the account was at least $30,000 a month,' says Doyon. 'Now they're saying to clients, "We can do

that work for $15,000 a month." They're promising the moon and

stars to some Canadian clients, but what happens when those

expectations aren't met? Something will have to give.' He says High

Road has pitched against such US firms as Fitzgerald Communications of

Boston.



F-H Canada's acquisition strategy is to keep itself, GPC, and High Road

operating separately, so clients are not lost due to conflict, and work

can be referred to one another. But F-H Canada's main barrier to

dominating the market comes from two Canadian-owned firms, both of

which are gunning to become global players - or at least a force in the

North American market.



Canada's largest PR firm is National Public Relations in Toronto (49

per cent owned by Burson-Marsteller), whose billings this year total an

impressive $46m, up from $27m in 1999. That growth

includes the June acquisition of Labrador Communications of Vancouver,

which takes the number of National offices in Canada to five. National

also has a New Jersey office.



But partner Colin Buchanan says National's main push is to become an

international player. 'It's our dream to open in London, and we hope to

be there next year,' he says. Its healthcare business is helping to

stimulate that expansion dream, with European clients such as

Swiss-based drug company Sarona.



Toronto-based Environics Communications is the other leading Canadian

independent, with total (domestic) revenues of $3.2m. In June,

it opened its second US office in Washington, DC. Its first office in

Stamford, CT, opened in 1995, and now has 19 employees.



The Washington office is headed by senior V-P and general manager Dave

Groobert, most recently a senior managing director at Hill & Knowlton

in Washington and formerly director of PR at global satellite

communications company COMSAT in Bethesda, MD. Bruce MacLellan, founder

and president of Environics, says the Washington office will service

clients like the Association of Hispanic Advertising Agencies and the

National Safe Kids Campaign.



But the Canadian independents are aware that the market will likely

face further consolidation. Echoing a statement expressed by the heads

of Apex Public Relations and Maverick, MacLellan says he receives calls

from 'two or three players who are constantly prowling for

acquisitions.'



Maverick's Rusciolelli compares it to being at a ball, with many

suitors looking to fill your dance card. 'It feels good to be wanted,'

she says.



'But we tell them we're not interested. Not yet, anyway.' No doubt

those suitors will take a rain check.



INTERNATIONAL AGENCIES OPERATING IN CANADA

Rank Agency Name Canada Income (USdollars)

00 99 00 99 % chg

1 5 Fleishman-Hillard 27,928,000 4,121,000 578

2 1 Hill & Knowlton 15,146,000 11,830,000 28

3 3 Weber Shandwick Worldwide 8,696,000 5,823,000 49

4 2 Edelman Public

Relations Worldwide 6,817,645 8,038,593 15

5 4 Optimum Public Relations 6,620,000 5,420,000 22

6 6 Porter Novelli Intl 4,001,000 3,042,000 32

7 8 GCI Group/APCO Associates 3,112,296 2,428,226 28

8 - Manning Selvage & Lee 2,926,000 - -

9 9 Waggener Edstrom 444,259 237,884 87

Source: PRWeek US Agency Rankings Company notes: Fleishman-Hillard's

revenues include income from GPC in an Omnicom merger



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