GLOBAL RANKINGS 2001: AUSTRALIA - Taking stock of PR. The PR industry Down Under is feeling the pinch, although specialists are finding ways to thrive. Paul McIntyre reports

PR in post-Olympics Australia has taken a dive. Most of the major

network agencies have laid off staff, clients are less inclined to give

a green light to projects, and there are indications of discounting to

win new business.The technology meltdown hasn't hit the local market as

hard as it has in North America, but it is contributing to widespread

sobriety about growth for the next six months and into 2002. The first

half of 2000 was boom time in the lead-up to the Sydney Olympics, but by

December of last year, many PR practices were getting their first

indications of a slowdown. The past three months have confirmed it, but

that has not stopped several international acquisitions and mergers.



Burson-Marsteller's fortunes are fairly typical of the market as a

whole. B-M chief executive Varina Nissen says that although the agency's

overall income growth for the 12 months to December 2000 rose 20 per

cent, the first half of 2001 has brought a drop in growth of 'negative

single digits.' For the full calendar, she expects a rise of about six

per cent. 'In early July, I would have said it would improve in the

fourth quarter, but the past couple of weeks suggest it's going to be

flat for the rest of 2001,' Nissen says. 'My only concern is it

potentially could be flat for 2002.'



Turnbull Porter Novelli chairman Noel Turnbull agrees: 'The market is

tougher than it has been for a decade,' he says. 'The outlook is

entirely dependent on the global economic outlook. It's finely poised.

The difference is we've been through ten years in which the biggest

problem has been finding staff. Now companies are laying people

off.'



Outside of the tech downturn and the effect of a softening global

economy, other growth-limiting factors for Australian business include a

massive overhaul of the tax system (to a broad-based ten per cent

consumption tax) and a fall-off after the Olympic boom. Corporate

reputation work, technology, corporate finance, and overall mergers and

acquisitions activity have gone soft. B-M, Hill & Knowlton, Edelman, and

Weber Shandwick have all made layoffs, and Turnbull Porter Novelli is

not replacing staff.



B-M and H&K have closed their offices in capital city Canberra and are

using their Sydney and Melbourne offices for servicing federal

government business and lobbying.



'Our Sydney office experienced a bit of a downturn after the Olympics,

which is to be expected,' says H&K joint managing director Greg Ray.

'February to May has been pretty slow, but we have been picking up some

good business in the past six weeks or so.'



Another head of an international agency network (who did not want to be

named) says the decline in new business and existing budgets has forced

the big players to scramble: 'With all this shaking out, there is no

clear-cut positioning for market leaders. Everyone is chasing

everything, and no-one is establishing themselves with a dominant

position in any sector of themarket.'



There are still bright spots, however. Many point to healthcare, issues

management, government projects, internal communications, and marketing

communications as remaining strong, although the latter sector is

unsteady within some agencies. 'A lot of companies are starting to see

changes in the economy, and are asking us to help advise on issues such

as factory shutdowns and (layoffs),' says Edelman managing director Jill

Collins.



Like many of her rivals, Collins also says there is growing work

advising companies on the implications for possible changes in the

federal government after an election later this year.



B-M and Edelman say their corporate social responsibility and grassroots

campaigns work is growing strongly, but from a small base. However, H&K

says its newly-created rural and regional affairspractice is faring

well.



Gavin Anderson chief executive Ian Smith says he has noted a shift to

more project-related work, a move with which many concur. Gavin Anderson

is one of the few who has continued to benefit from mergers and

acquisition projects and government privatisation work.



Ogilvy caused a stir when it re-entered the Australian market in April

2001 after an eight-year absence with a model many local rivals don't

believe will work. After taking minority and majority interests in five

specialist PR firms under the leadership of managing partner and former

B-M chief Chris Savage, it can now lay claim to the top Australian

ranking based on fee income ($20m). In announcing the initiative,

Ogilvy PR Asia-Pacific head Matthew Armstrong said it was the 'biggest

bet on the power of specialisation that the Australian PR market has

ever seen.'



The Ogilvy investment covers PR firms in technology (Howorth

Communications), government affairs and lobbying (Parker & Partners),

multi-cultural marketing (Ethnic Communications), workplace

communications (Impact), and issues management and corporate finance

(Savage & Horrigan). Savage says that each of the independent but

interlinked operations are growing at 30 per cent this year, and that

profits will also rise: 'The PR market in Australia for the major,

traditional one-stop shop multinationals is tough. The reality is that

where your offer is genuinely specialised, the market is becoming more

sophisticated in recognising that that is the offer they want. This is

where the major one-stop shops are really hurting. They might have a

couple of practice areas that are okay, but where they are middle of the

road, they aren't getting the work. The good niche agencies are busier

than ever. There is a difference, though, in that we are all now having

to be more aggressive in seeking opportunities.'



Two other agencies - PPR, which was bought last year by the Cordiant

group, and one of the last remaining mid-size independents, Royce - talk

similar lines. Royce CEO Peter Mahon says his company will grow by 20

per cent this year, and is looking to hire staff. Mahon continues to

move the company into a broader corporate advisory role beyond its

traditional base in media relations.



PPR chief Richard Lazar is doing likewise. He says PPR will show 'double

digit' growth this year, although much of it is coming from a wider

offer of communications services. Lazar says much of PPR's growth is

coming from its integrated offer - the agency having recently acquired a

sales promotion agency to bolster its direct marketing, guerrilla

marketing, and online divisions - as well as its traditional PR

operation, which includes internal communications, issues management,

technology, and marketing communications.



Fleishman-Hillard's majority stake in Stratcom, finalised in April, is

the first direct equity investment the international agency has made in

Australia. Senior vice-president and director Tony Rasmond says the

agency has made no layoffs, and its two key areas of corporate finance

and consumer marketing are still doing well, but with 'more

pressure'.



He adds: 'Undoubtedly, the labour market has turned right around, but we

haven't been affected yet. We've just put some people on, but everyone

has projects that are not being checked off.'



INTERNATIONAL AGENCIES OPERATING IN AUSTRALIA

Rank Agency Name Australia Income (USdollars)

00 00 99 % chg

1 Porter Novelli International 9,497,700 7,378,000 29

2 Hill & Knowlton 7,132,000 6,735,000 6

3 Burson-Marsteller 7,061,000 6,083,000 16

4 Cordiant 6,774,000 5,229,000 30

5 Weber Shandwick Worldwide 4,958,000 5,580,000 -11

6 Edelman Public

Relations Worldwide 5,221,832 2,591,748 101

7 Rowland Communications

Worldwide 2,543,000 4,013,000 -37

8 Cohn & Wolfe 975,000 546,000 79

9 Text 100 836,591 1,027,949 -19

Source: Council of PR Firms Note: This is a list of global PR firms in

Australia. It does not include local independents



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