REGIONAL FOCUS - SAN DIEGO & ORANGE COUNTY: A brand-new ball game in SoCal

Clients control the field as agencies try to survive a down economy

Clients control the field as agencies try to survive a down economy

Boasting a combined population of nearly 5.5 million, the Orange County/San Diego region offers an ever-increasing pool of highly skilled professionals willing to endure some occasional nightmarish traffic in order to live a family-friendly lifestyle in a sunny climate. As a result, business is booming in the area - Orange County has 112 companies with revenues exceeding $100 million annually, while San Diego has an additional 45.

With its proximity to the major media market of LA, the region should be an ideal PR market. But despite some strong, long-term prospects, many of the PR firms in San Diego and Orange County spent 2001 locked in a Darwinian battle for survival. For many, flat growth - or only a single-digit decline - was considered good, as numerous agencies either dramatically scaled back their operations or, in some cases, went out of business.

"We have essentially been here for three years now, but we've done very well because we're one of the few agencies that hasn't lost business," says Michael Busselen, general manager of Fleishman-Hillard's San Diego office, which reported flat revenues of $3.1 million. "It has been very challenging. Anybody in town who was depending on the start-ups and churn of little companies in both the wireless and software space was affected. It used to be if one didn't go well, there was another one calling in two days. All of a sudden, that whole cycle ended."

David Paine, president of Costa Mesa-based Paine PR, echoes a similar theme for Orange County. "Part of it was that there were fewer clients out there, says Paine, whose Orange County office experienced a 10% drop in revenues to $3.7 million last year. "But it's also that clients are cutting back on their fees at a time when the economy is weak, and their sales are down. For a lot of local agencies, that one-two punch hit them hard."

Surprising sources of growth

Perhaps surprisingly, given the nationwide slump, several of the Orange County firms cited technology as the segment that kept them going last year, and it's now driving growth this year. While Orange County doesn't have the hi-tech depth of, say, San Francisco, Lisa Zwick, general manager of Weber Shandwick Worldwide subsidiary The Benjamin Group, says she's seeing renewed interest in several tech-related categories, including security, broadband, storage, and business-to-business software.

"There was some shakeout, and we heard about some firms closing or downsizing, notes Zwick, whose office saw a slight revenue rise to $5.9 million in 2001. "But the people who remained had to stay competitive, and I think it's good for the clients and good for the industry. We have to be nimble with our clients, and ride out the highs and lows with them."

Christine Bock, general manager of Costa Mesa-based Bock Communications, also emphasizes the need for a national/international client-base and approach. "We've been able to differentiate ourselves in that we can offer European support, she says of her firm, which specializes in telecommunications. "And Qualcomm hired us just to do support in Korea, Japan, and Hong Kong. The difference for us is we haven't focused on any particular geographic region. In fact, our two new Orange County clients, Starbase and Micro General, are our first (to be based here)."

The tech slowdown is compounded by the flattening of two other cornerstones of the county's economy: tourism and commercial real estate. But Orange County continues to flex its economic clout in the automotive industry. Bucking the overall trend toward downsizing, Karin Pellmann, senior manager with the Lake Forest-based Renaissance Creative Group, says she's presently adding staff in order to better serve clients like

Ford's Premier Auto Group, along with the automaker's environmental group.

Though business slowed last year, Pellman stresses it was more the case of clients spending less rather than dumping their outside PR firms. "Some companies are moving some aspects in-house and cutting back, but they have not necessarily given up on the partnership, she says.

Adds Jennifer Banovetz, Renaissance Project Manager for several of the Ford accounts, "They're looking for a lot more strategic thinking in terms of media relations. It's a lot more focused."

In San Diego, the continued strength of the local commercial and residential real estate market is helping to buffer the impact of the tech slump on the local PR market. Nonetheless, last year was a hard one for most players in San Diego's PR market, as well-established local firms like Stoorza Communications and Matthews/Mark closed their doors. Others, such as the Gable Group, shut their physical offices.

Changing relationships

This downturn had its effects on the once tight-knit San Diego PR community, including the relationship between in-house corporate communications pros and the increasing number of freelance or out-of-work PR people in the area. Courtney Simmons, director of media relations for the Legoland theme park, says she no longer attends PRSA meetings or other similar events. "I find that when I do go, I leave with more business cards of people looking for me to hire them, than resources to help me get the next hit, she says.

While it will never match LA or New York, San Diego continues to mature as a PR market, even during this slow period. "Because of the companies that have moved here, such as Gateway and Iomega, there is some cachet to both companies and agencies being here, says Formula PR founder Michael Olguin, who recently won the New Jersey-based Prince Tennis account, as well as local client SonarTec Golf. "I don't think it's as backwards as it once was, but I also don't think I could survive on strictly San Diego work. Locally, there are a lot of $3,000-$5,000 accounts, which will get you nowhere when you're trying to build your business."

Biotech has long been one of the area's strengths, and has continued to evolve. One of the benefits of the recent merger between Presence Euro RSCG and Bay Area-based Noonan Russo was to provide the local San Diego office with the ability to offer investor relations services to its biotech and medical technology clients. General manager Ed Stevens points out that many of the area's biotech firms now find themselves dealing with investors impatient with the traditionally slow product development and approval process. "In terms of the venture community, these companies have to answer the question of how are you going to make money more quickly than developing drugs, he says. "So I'm seeing a lot of growth in diagnostics."

Though the pace of commercial development in San Diego has slowed, Karen Hutchens, general manager of the San Diego office of NCG/Porter Novelli, says local development PR continues to provide a foundation for many agencies. "What carried us through the last year was a lot of land-use clients - major development, transportation, master plans, says Hutchens, whose office revenues rose nearly 18% in 2001 to $2.4 million. "During a recession, the development community tries to get things ready to go. People are coming to agencies a lot more for project work. I've seen a drop in long-term retainer-based relationships."

While San Diego and Orange County have evolved differently, and are supported by different core industries, there was some blending of the two markets during the PR boom. "Before, when the business was very strong and there was quite a bit of money, we talked quite a bit about Orange County, as well as LA and San Francisco, says Indra Gardiner, cofounder of Bailey-Gardiner, which late last year expanded its business by acquiring local boutique shop Cooper-Iverson. But now, Gardiner says, "We're sticking fairly close, and focusing on what's available here."

"When there was more business than agencies to service them, no one really cared where you came from, adds Busselen of Fleishman-Hillard, which recently beat out more than 20 other agencies to win the San Diego Padres baseball account. "But now that the ball's in the clients' court, they much prefer somebody who can get over to their office in 30 minutes if they need help right away."

Eye on the future

What's driving the area's long-term PR prospects is that the talent pool in San Diego continues to grow, as experienced pros moving to the area are augmented by a host of entry-level prospects coming out of local universities, most notably the PR program at San Diego State. "We usually fill our slots with people we pull out of the intern program at SDSU, explains David Tucker, of Nuffer Smith Tucker, which saw revenues rise nearly 13% to $2.1 million in 2001 in part due to the acquisition of local biotech boutique shop Stock/Alper. "In fact, our current president began as an intern 15 years ago."

For the Orange County and San Diego firms that have survived the past few difficult years, there appears to be some light at the end of the tunnel. "There's a lot more money out there than six months, or even three or four months ago, says Gardiner.

Adds Paine, "Whenever there's a shakeout in the PR business, that creates staff turnover and service issues. So in all of the chaos, there's always opportunity."

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Qualcomm maintains leadership role

For much of the past decade, Qualcomm has been a poster child for the vast economic growth that is transforming southern California. Despite falling from its stock market highs of a few years ago, the telecom giant still has a market capitalization of $21 billion, and maintains a position as one of the leaders in the global wireless communication revolution.

Christine Trimble, director of public relations, saying running a global corporate communications effort from a mid-market city does not present too many challenges. "We've been able to do a lot of media outreach through teleconferencing, webcasts, and videoconferencing, she explains. "The telecom trade, as well as the general business press, is distributed across the US so the reporters Qualcomm wants to reach are based all over. In addition, all the growth of the telecom industry here in San Diego has attracted more reporters to this area."

Qualcomm does outsource some of its PR, but, Trimble says, "For a lot of that, I'm looking for international capabilities, so it's not a concern that they have a local presence. I have staff PR managers in other countries as we continue to look at markets outside the US."

While it continues to build a global reputation, Qualcomm also strives to be a bedrock of the local community. The two major professional sports teams in the area, baseball's Padres and football's Chargers, play at Qualcomm Stadium, and company executives often speak at conferences and seminars throughout Southern California.

"So many of our employees are based in San Diego, says Trimble, "it's important that we're involved in the community, particularly in the technology and telecom industry, and the different groups and organizations here."

SAN DIEGO PR AGENCIES

Rank Firm Name Revenue (dlrs) Change Location

2001 2001 2000 %

1 Weber Shandwick 5,879,832 NA NA Irvine

2 Paine PR* 3,700,000 4,111,000 -10 Costa Mesa

3 Fleishman-Hillard* 3,110,000 3,110,000 0 San Diego

4 Porter Novelli 2,366,000 2,012,000 18 San Diego

5 Magnet Communications 2,159,000 1,747,000 24 Corona

6 Nuffer Smith Tucker 2,071,135 1,835,700 13 San Diego

7 PResence Euro RSCG 561,087 NA NA San Diego

8 Lewis 461,414 NA NA San Diego

*Paine and Fleishman figures originally combined with LA. Breakouts

supplied by the two agencies.

Source: Council of PR Firms Auditing: No audit was required for inclusion in the rankings. The CEO/CFO/principal was required to sign a statement verifying the accuracy of the data and agreeing to possible participation in a random audit Disclaimer: While every effort has been made to ensure the accuracy of these figures, PRWeek cannot accept liability for, nor make financial guarantees based upon the information in this chart.

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