MARKET FOCUS WASHINGTON, DC - Capital PR - Public affairs in DC is on the rise but as Steve Lilienthal reports, healthcare is huge and hi-tech sizzles

When Shandwick announced it was acquiring the huge government affairs firm, The Cassidy Companies, for a reported dollars 70 to dollars 80 million (see Jody Powell profile, p22) in October, it sent shockwaves through the industry.

When Shandwick announced it was acquiring the huge government affairs firm, The Cassidy Companies, for a reported dollars 70 to dollars 80 million (see Jody Powell profile, p22) in October, it sent shockwaves through the industry.

When Shandwick announced it was acquiring the huge government

affairs firm, The Cassidy Companies, for a reported dollars 70 to

dollars 80 million (see Jody Powell profile, p22) in October, it sent

shockwaves through the industry.



Was the price right? Shandwick obviously thinks it was - even though it

already had a burgeoning practice in DC, it’s putting a stake in its

future with a greater presence in this opportunity-laden

marketplace.



Washington is no longer a one-company town. Growth in the financial,

hi-tech and healthcare sectors especially means that there are an

increasing number of PR pros who work here who don’t work in government

relations.



And yet, there’s no question that the biggest field remains public

affairs and government relations. ’Smart firms recognize the need to

marry the two,’ says Bob Sommer, EVP and principal of The MWW Group,

whose DC office exceeded 50% growth last year. PRWeek’s rankings of the

top agencies in the DC area show a respectable growth in billings of 25%

(compared to a national average of 24%). Only three firms registered

losses from ’97 to ’98, and the managers of two of them, Edelman and

Ruder-Finn, confidently asserted to PRWeek that they are back on the

growth track.



Each of the top 10 firms, and most of the others on PRWeek’s list, have

a public affairs practice or perform that role for clients in areas such

as healthcare and technology.



Burson-Marsteller and Hill & Knowlton, with strong public affairs and

lobbying practices, had cornered the number one and two positions in the

marketplace. Then, suddenly, Shandwick reshuffled the order. All told,

Shandwick estimates its ramped-up DC operation will post dollars 75

million in revenue this year, creating a new powerhouse.



Shandwick has been making a name for itself in the DC marketplace but it

lacked a firm, established presence in the market. The Cassidy

Companies, aware of the importance of an overseas presence as the World

Trade Organization and European Union play important decision-making

roles regarding trade, also had an interest in expansion.



Fleishman-Hillard regional president Paul Johnson draws this lesson: ’If

you want to be a serious global contender, then you must have a strong

DC presence. You see that with the Shandwick acquisition.’



Other firms feel the need to consider expansion. Ketchum senior partner

and director Mark Schannon expresses interest in acquiring or developing

closer relationships with government affairs and public affairs

firms.



Manning, Selvage & Lee is intent on expanding its public affairs

capability and expresses interest in potential acquisitions. Other

firms, such as The Hawthorne Group, credit last year’s 88% growth to

’organic’ expansion of services beyond traditional public affairs to

areas such as crisis communications and strategic analysis.



Ups and downs



Public affairs, of course, has its ups and downs. For instance, as the

impeachment process gathered momentum, growth slowed at Powell Tate.



Conversely, BSMG received a big spike in income last year due to its

work involving the tobacco settlement. The agency’s growth in terms of

long-term clients is said to be good this year but income is unlikely to

match 1998’s exceptional performance of 146% growth.



Larger firms such as FH, Ogilvy and H&K are also showing greater

interest in performing PR on behalf of the government. It is not as

profitable as commercial work but can provide significant overhead on a

consistent basis. FH won a five-year, dollars 10 million annualized

contract last year from the Office of National Drug Control Policy. It

also has a multiyear, multimillion dollar account with the U.S. Mint.

Ogilvy has received an dollars 8.2 million contract from the Institute

for Neurological Disorders and Strokes of the National Institutes of

Health (NIH). Cohn & Wolfe received dollars 2 million to plan the

strategy for the Census PR.



In a connected field, Washington-area PR firms can find a lucrative

client base in the 3,600 non-profits and associations that Gale Research

says are based in the DC region. Charles Greener, GM for Porter Novelli

notes, ’Increasingly, companies are asking trade associations to take on

a broader assignment - to not only do public policy, but also provide

guidance and promotion of their products and industry.’



Full-service trend



The Shandwick acquisition also indicates a trend that big firms say is

becoming more pronounced in Washington - the need to offer clients full

services. ’It’s no longer advertising or press releases. You need

research, grassroots, new media, coalition building,’ asserts Cynthia

Hudson, MD of Burson.



That helps explain this year’s other deals. BM bought Direct Impact, the

grassroots-consulting firm after a one-year strategic alliance, deciding

that its expertise would be more capable than an in-house operation. PN

acquired Goddard-Claussen and while the firm was started in California,

it has a Washington office that has concentrated on areas such as the

environment and healthcare. Earle Palmer Brown in mid-’98 acquired the

PR firm Henry J. Kaufman & Associates, restoring a PR capability that it

had winnowed down earlier in the decade.



Healthcare and hi-tech are important practice areas, often but not

always intertwined with public affairs. The federal government has

helped spur the technology revolution in the area, diversifying the

region’s economy and giving rise to over 3,000 tech companies. The

Pentagon and the federal government have added sizzle to northern

Virginia’s hi-tech business; the NIH is spurring medical and bioscience

industries in suburban Maryland.



The NIH and Centers for Disease Control and Prevention are also

undertaking important public information campaigns. Ogilvy has done well

in this area as has PN, which has a huge ’social marketing’ contract

with the foundation overseeing the youth prevention campaign of the

foundation created by the tobacco settlement. BM, H&K, MS&L, Edelman and

Ketchum, among others, have found success in handling public affairs for

healthcare trade associations, medical and pharmaceutical companies and

other health-related institutions.



One fast-growth firm of late has been the Matthews Media Group

(Rockville, MD), which posted dollars 5.8 million in fee income last

year and is on track to do dollars 18 million this year, according to

president Molly Matthews. Most of the agency’s work is in staging health

communications campaigns along with PR campaigns to recruit patients for

research trials for pharmaceutical companies and the NIH.



Proximity is key



John Seng, president of Spectrum Science PR, which specializes in

pharmaceuticals, registered 81% growth last year compared to 1997. New

York has traditionally been the important center for health PR, but Seng

sees more prescription product work being done in DC. Marketing, he

notes, can be done in either city. The difference is the relationships

that can be forged between the regulators and the third-party groups on

whose word hinges the fate of a product. ’I’m just a cab ride away from

Capitol Hill, and I can take the Metro up to NIH,’ he notes. ’If you

can’t convince the legislators charged with oversight or regulators or

researchers that your product is best, then some other company will do

that.’



’The DC firms,’ insists Seng, ’are best positioned to do the

multifaceted public relations and public affairs campaigns that can best

promote prescription products.’



Nearly every big firm proudly promotes its tech practice, arguing that

it can provide better services to fledgling companies in areas such as

IR and, naturally, public affairs, as topics such as encryption and

e-commerce become important policy issues. Some of the more notable

practices in a still-fledgling market are located at Edelman, Ketchum,

Ogilvy and H&K. FH’s work on behalf of the Baby Bells in the telecom

debate in the mid-’90s proved a useful learning experience.



Fleishman DC now works on public affairs for SBC, one of the Baby Bells

involved in the suit.



But the big firms do not have this field to themselves. Gloria Dittus,

president and CEO of Dittus Communications (Washington), started her

tech PR company in the mid-’90s. Its client list now includes Network

Solutions, the world’s largest registrar of Web addresses, and Internet

advertising company DoubleClick.



H&K’s Blanc & Otus (San Francisco) recently set up an office in DC to

serve the burgeoning tech market, and Waggener Edstrom (Portland) is

also considering such a move. Northern Virginia has a host of companies

serving this market, such as The Weber Group (Alexandria), Promarc

Technology (Arlington) and O’Keeffe & Company (McLean).



Agency heads see other potential revenue sources on the horizon. FH

formed a financial services practice in the expectation that banking

deregulation and e-commerce will create a niche. Investor relations will

be more important here to serve dot-coms.



Craig Martin, EVP and MD of Ruder-Finn, sees potentially lucrative

clients in small and medium medical technology firms in the Maryland and

Virginia suburbs. H&K president and CEO/USA Tom Hoog says his agency has

been diversifying its portfolio to include a good-sized consumer

practice.



But will the public relations boom in Washington, DC last? Dittus is

optimistic. ’The future’s knocking on our back door,’ she says, pointing

out that the DC tech boom is Internet-driven, and that boom will not

disappear soon. Others, such as Ketchum senior partner and director Mark

Schannon, while pleased with the firm’s breakthrough this year in its

Internet business, sees an inevitable shakeout in dot-coms. But Hoog

argues that the total tech growth in DC, including telecom, cable,

hardware and software, may eventually equal spending in public

affairs.



Fresh, hip faces



New faces will add some firepower to the DC scene. Torie Clarke, who

used to work at Bozell/Eskew Advertising, will be running H&K’s DC

office. Clarke’s style, described by a co-worker as ’young’ and ’hip,’

will provide a counterpoint to a firm often stereotyped as a preserve

for

dark-suited lobbyists.



Burson expects its global health practice will be invigorated in DC as a

result of the group’s new head, Dr. Ken Rabin, moving to the

capital.



Also, Joe Martyak has taken over the Golin/Harris Washington office,

planning to boost its expertise in key areas. And Fenton Communications,

a specialist in environmental and human rights causes, is seeking a new

general manager.



KINGS OF THE HILL: TOP 33 WASHINGTON, DC PR AGENCIES

Rank       Company          Income      Change       US income

98    97                    1998        1997         %     1998

1     1    Burson-

           Marsteller       34,646,000  31,227,000   11    136,596,000

2     2    Hill & Knowlton  27,000,000  23,200,000   16    113,000,000

3     11   BSMG Worldwide   20,855,500  8,488,500    146   109,537,000

4     3    Fleishman-

           Hillard          19,648,000  16,959,000   16    136,272,000

5     5    Ketchum          18,946,000  14,664,000   29    101,485,000

6     N/A  Porter Novelli   17,517,025  N/A          N/A   88,235,570

7     8    Ogilvy

           PR Worldwide     16,229,000  11,959,000   36    54,457,700

8     4    Powell Tate*     15,656,880  15,556,820   1     15,656,880

9     6    GCI/APCO         14,295,000  13,540,000   6     44,539,245

10    10   Shandwick

           Public Affairs   12,899,000  8,625,000    50    91,485,000

11    7    Edelman PR       12,267,146  13,228,158   -7    101,868,218

12    9    The

           Kamber Group     11,962,300  10,785,000   11    11,962,300

13    13   Weber/McGinn     9,379,534   6,522,932    44    57,866,543

14    16   The

           Hawthorne

           Group            8,051,443   4,282,338    88    8,051,443

15    14   Greer,

           Margolis,

           Mitchell,

           Burns &

           Associates*      7,278,661   5,709,385    27    8,801,461

16    12   The Widmyer

           Baker Group      7,242,745   6,739,855    7     7,242,745

17    N/A  Manning

           Selvage & Lee    5,904,400   N/A          N/A   50,173,300

18    18   Matthews

           Media Group      5,800,000   3,300,000    76    5,800,000

19    15   Stackig

           Advertising

           & PR             4,570,721   4,291,270    7     4,570,721

20    17   Brotman

           Winter Fried     4,125,000   4,075,000    1     4,125,000

21    20   Smith & Haroff   3,100,000   2,700,000    15    3,100,000

22    21   Strat@comm       2,868,424   2,219,203    29    2,868,424

23    32   Earle

           Palmer Brown     2,600,000   100,000      2500  8,800,000

24    19   Ruder-Finn       2,467,000   2,735,000    -10   45,601,000

25    24   Creative

           Response

           Concepts*        2,371,100   1,498,600    58    2,371,100

26    25   The MWW Group    2,321,945   1,490,000    56    17,220,267

27    29   The

           Promarc

           Agency           1,939,257   909,541      113   1,939,257

28    26   Cohn & Wolfe     1,862,008   1,386,000    34    25,981,976

29    22   Hagar Sharp      1,803,454   2,041,031    -12   1,803,454

30    28   Spectrum

           Science PR       1,759,844   974,209      81    1,759,844

31    23   RMR &

           Associates       1,700,000   1,500,000    13    1,700,000

32    27   Geddings

           Phillips

           Communications   1,300,000   1,100,000    18    1,300,000

33    30   Golin/Harris     1,100,000   900,000      22    48,612,159

1998 Total Income           78,045,962  222,706,842  25    1,176,374,737


Rank       Company            SV %   US income    SV %   Location

98    97                      1998   1997         1997

1     1    Burson-

           Marsteller         25     119,330,000  26     Washington, DC

2     2    Hill & Knowlton    24     103,100,000  23     Washington, DC

3     11   BSMG Worldwide     19     58,136,000   15     Washington, DC

4     3    Fleishman-

           Hillard            14     115,193,000  15     Washington, DC

5     5    Ketchum            19     78,769,000   19     Washington, DC

6     N/A  Porter Novelli     20     66,594,342   N/A    Washington, DC

7     8    Ogilvy

           PR Worldwide       30     33,053,000   36     Washington, DC

8     4    Powell Tate*       100    15,556,820   100    Washington, DC

9     6    GCI/APCO           32     37,786,457   36     Washington, DC

10    10   Shandwick

           Public Affairs     14     80,292,000   11     Washington, DC

11    7    Edelman PR         12     86,833,594   15     Washington, DC

12    9    The

           Kamber Group       100    10,785,000   100    Washington, DC

13    13   Weber/McGinn       16     49,020,178   13     Arlington, VA

14    16   The

           Hawthorne

           Group              100    4,282,338    100    Alexandria, VA

15    14   Greer,

           Margolis,

           Mitchell,

           Burns &

           Associates*        83     6,788,327    84     Washington, DC

16    12   The Widmyer

           Baker Group        100    6,739,855    100    Washington, DC

17    N/A  Manning

           Selvage & Lee      12     37,767,050   N/A    Washington, DC

18    18   Matthews

           Media Group        100    3,300,000    100    Rockville, MD

19    15   Stackig

           Advertising

           & PR               100    4,291,270    100    McLean, VA

20    17   Brotman

           Winter Fried       100    4,075,000    100    Washington, DC

21    20   Smith & Haroff     100    2,700,000    100    Alexandria, VA

22    21   Strat@comm         100    2,219,203    100    Washington, DC

23    32   Earle

           Palmer Brown       30     6,500,000    2      Washington, DC

24    19   Ruder-Finn         5      42,650,000   6      Washington, DC

25    24   Creative

           Response

           Concepts*          100    1,498,600    100    Alexandria, VA

26    25   The MWW Group      13     14,367,000   10     Washington, DC

27    29   The

           Promarc

           Agency             100    909,541      100    Washington, DC

28    26   Cohn & Wolfe       7      21,533,360   6      Washington, DC

29    22   Hagar Sharp        100    2,041,031    100    Washington, DC

30    28   Spectrum

           Science PR         100    974,209      100    Washington, DC

31    23   RMR &

           Associates         100    1,500,000    100    Rockville, MD

32    27   Geddings

           Phillips

           Communications     100    1,100,000    100    Reston, VA

33    30   Golin/Harris       2      42,088,000   2      Washington, DC

1998 Total Income             24     957,412,783  23


Source: PRWeek Top 200 *Denotes that only the 1998 income has been

audited by the Council of Public Relations Firms

*Includes NY office

Includes Baltimore office

Includes NY, Atlanta and LA offices

Includes NY and LA offices



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