ANALYSIS: Small PR Shops - Smaller firms jump into the gaps left byindustry giants. As the PR industry's larger firms close theirloss-making local offices, independent shops left behind are discoveringa wealth of talent and business

Harris Diamond saw an office that didn't fit the practice area or

geographical coverage needs of Weber Shandwick Worldwide.



Christine Barney saw an opportunity.



Walk into her office, and Barney will show you yellowed newspaper clips

detailing the business dealings of Hank Meyer, the granddaddy of PR in

Miami. She's worked in the market since its infancy - 1989 - when she

left New York's Burson-Marsteller office for a smaller shop in the sunny

south. Larry Weber purchased the office in 1997. A little over a month

ago, she bought it back, returning to her old title of CEO of RBB Public

Relations.



"I'm excited about the future for us," Barney says. "You lose the safety

net of being part of a large global agency when you're on your own, but

if I decide tomorrow that I want to build a capability in

telecommunications, say, and I want to make an investment, sometimes I

can put resources against that based on a gut feel. In this day and age,

I think speed is of the utmost importance in terms of garnering market

share."



Diamond says he wishes Barney well. "Sometimes the business doesn't make

sense for us, but local management and local offices can make it make

sense for them," Diamond explains. "When it's a good operation, I've

always believed local management should have an opportunity to give it a

try on their own."



Large firms typically react to economic recession by closing local

offices.



Over the past few months, Cohn & Wolfe shuttered its Atlanta office,

folded its DC office into Burson's, and closed its Austin, TX and

Chicago offices; Edelman closed its Boston and Austin offices; Hill &

Knowlton closed the US offices of its Carl Byoir & Associates brand; The

Weber Group closed its San Francisco office; Citigate shuttered its

Miami outpost; and tech shop Niehaus Ryan Wong closed its New York and

Austin offices. Layoff statistics are similarly far-reaching.



Good news on the local front



But while the big guys prune their branch offices and personnel, local

agencies tell PRWeek they are benefiting from the changes in

competition, some excellent executives recently released into the job

market, and the chance to undercut large agency retainers.



Jack Bergen, president of the Council of PR Firms, confirms that

closures and layoffs are an opportunity for local agencies to hire top

talent and to angle for clients angry that their account executive has

been fired.



Because large firms in top markets often rely on two or three major

clients nearby who require national or international work, they are more

susceptible to budget cutbacks, Bergen says. Local offices have many

smaller accounts.



"There's a stability that is much more difficult for the larger agencies

to achieve," says Bergen of small and mid-size shops. "Often their

threshold of account size is higher. They're not going to pick up the

local bank or local car dealer as a client. The larger agencies, they're

going after the regional headquarters of the car company, not the car

dealer."



Ray Kotcher, CEO of Ketchum, says there is excess capacity in agency

networks. In the quest to be large, some agencies, Kotcher explains,

have over-invested, making brick and mortar decisions that he finds

questionable.



He says large networks are now considering alternatives to building out

geographical offices.



"You no longer need a presence in a market to service a client," says

Kotcher. "You see a lot of large agencies, ourselves included, working

with clients in a virtual manner."



Kotcher also thinks opening a service office within a client's company

can be a cheaper alternative to building out a separate office. He

characterizes the current environment for local offices as an ebb, which

he says will soon flow again.



Helene Solomon, president and CEO of Bishoff Solomon Communications in

Boston, says she's having no problem with the ebb. Multinational agency

networks that built up to service Boston's once-highflying dot-coms have

become so hungry for business, they are trying to poach local accounts

they wouldn't have gone near in economies past. Solomon says she isn't

overly concerned by the competition, and two months ago she even

expanded her agency beyond New England into PR's most competitive market

- New York - to continue earning the local and regional work she

enjoys.



"Our profit and loss objectives are our own, and are not dictated by a

holding company in another city in another country," says Solomon, who

performs regional work for McDonald's, Six Flags New England, and

Pfizer.



"Our interest is in developing community-based, almost grassroots

programs that keep our clients in public focus in New England. That's

not to say the global agencies couldn't develop that expertise, but that

hasn't typically been their focus."



Home for PR's wayward souls



Large agency CEOs say they are constantly approached by smaller agencies

who want to be bought out or partner with a network. Major consolidation

by large corporations, such as IBM, also point to the need for large

agencies with global reach.



But the siren song of entrepreneurship remains strong, even in this

worst economy in ten years, and Siobhan Olson, VP and director of PR for

Clarity Coverdale Fury in Minneapolis, says she knows why. In operation

for one year, her division has posted close to $1 million in

business, has nine clients, and increased its staff from one person to

six. Meanwhile, Weber Shandwick Worldwide recently had what sources say

was a 10% layoff at the original flagship Shandwick office nearby. Olson

said that both clients and employees tell her they feel "lost within the

system" of the larger agencies.



"The multinationals have gotten too big," says Olson. "If you're a large

PR client, yes you need an office that has multiple offices around this

country or around the world. But we have picked up clients who have

gotten lost within the system and want to go to one place."



Olson says a lack of defined career paths and a dearth of day-to-day

client contact at senior levels has also driven employees to her

agency.



That trend even trickles down to individual departures from smaller

agencies.



According to the Bureau of Labor Statistics, of the 122,000 PR

specialists in 1998, the most recent year for which figures are

available, 13,000, or roughly 10%, were self-employed. Last month,

Valerie Zucker left local agency The Apple Organization to launch her

own practice in North Miami Beach, FL. Zucker employs herself plus one

other person.



"It's really interesting," she tells of launching her small agency in a

recession. "I believe most companies whether they are small or midsize

businesses to big corporations, do not want to pay big retainers

anymore. What I have is actually in demand."



Some companies choose small agencies or sole practitioners, as Zucker

explains, because they are cheaper. Others believe as Barney does, that

smaller agencies can move faster and adapt quicker. But some just don't

want to throw business to the giants. As Allan Hirsh III, president of

Thurman House publishing company, told PRWeek a few months ago when

queried why he had hired an independent publicist for a major story: "We

believe - and always have - in the little guy."



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