REGIONAL FOCUS: WASHINGTON, DC - DC embraces public affairs boostThe new administration and Jeffords' switch have spelled good news forDC's PR scene, reports Douglas Quenqua.

Widespread layoffs, greater competition for fewer contracts,

incredible shrinking budgets and once-promising tech clients shutting

their doors for good. Add temperatures in the high 90s and humidity

levels on par with Costa Rica, and it's a wonder anybody stays in

Washington, DC for very long.



Luckily, that's not the whole story. There are plenty of things to be

optimistic about on the DC PR scene. Sure, the northern Virginia

hi-tech corridor - which two years ago was going to transform DC from a

one-company town into the next Silicon Valley - isn't quite meeting

expectations, but the healthcare business is booming.



DC isn't "recession-proof," as the emerging cliche would have it. But it

does react differently to a down market than any other city. The lion's

share of PR work still flows between K street and either end of

Pennsylvania Avenue - and regardless of what you may have thought during

the 2000 election fiasco, the government isn't going out of business

anytime soon.



Right now, nothing makes DC agency heads happier than healthcare. "It's

the booming business," says APCO CEO Margery Kraus. A convergence of

several factors are making this so: rising drug costs, a host of new

medications coming on the market, privacy issues affecting HMOs,

hospitals and drug companies, and controversial "patients rights"

legislation on the Hill.



All these are driving concerned healthcare interests to DC agency

doorsteps.



Public affairs, still the bread and butter of every major DC firm, is

also coming through. This is a pleasant surprise for many, as the

all-Republican government emerging from the election didn't promise the

sort of high-volume fights that bring in public affairs business.



"We came out of the election with a very homogenous government," says

Steve Dahllof, managing director of Ogilvy PR. "That does not lend

itself to a lot of public affairs work." But in May, when

then-Republican Senator Jim Jeffords of Vermont decided to become an

independent, thereby giving Democrats the upper hand in the upper

chamber, things began to change.



"Jeffords' switch changed the dynamic in the senate. PR has now become

an issue," says Hill & Knowlton CEO Tom Hoog. The former chief of staff

to Sen. Gary Hart returned to Washington when general manager Torie

Clarke defected to the Department of Defense in the spring. He will be

watching over the office until the end of the year. "Now there's a

general feeling that there will be contentious issues, so we're seeing

spending on public affairs go up."



Tech: disappointing DC



And then there's the big letdown.



"Tech is at the top of the disappointment list," says Dahllof, who

should know. In what he terms a reaction to the down market, his firm

merged its tech arm, Alexander Ogilvy, into its general operations in

February, resulting in nationwide layoffs and the closure of Alexander

Ogilvy's 21-person northern Virginia office.



Luckily for most, Washington agencies largely avoided the dot-com world

to begin with. "We were never so dot-com focused," says APCO's

Kraus.



"We have a couple of clients we've done tech work for that aren't

necessarily tech companies. That work has expanded dramatically into

seven-figure accounts. We're working for some dot-coms, but that work

has shrunk."



At least two agencies openly bucked the trend. According to Jim Fabiani,

CEO of Weber Shandwick World-wide's DC operation - which does its tech

business in DC under the moniker of The Weber Group - made considerable

gains in the sector over the last year. "We built our practice on very

established tech businesses. So even though we had about 30% of our tech

revenue from new start-ups, when the tech market went to hell we've

continued to make between 18% and 19% profit in the area."



Fabiani also claims to see the light at the end of the long and winding

tunnel that was the 1999 merger between Cassidy Companies and WSW. Most

notable in 2001 was the return of the brand name Powell Tate on January

1, which had been taken away when the merger first occurred. "It was

ridiculous," he says, "It was simply failing to recognize brand

value."



H&K went even further, acquiring five-year-old hi-tech shop ProMarc in

April, doubling its staff in the sector to nearly 30 people while other

agencies were making layoffs.



Government work galore



One of the primary perks of agency life in the nation's capital is the

opportunity to go after federal contracts. Of course, many firms -

particularly smaller ones - don't take the opportunity, citing the tiny

margins, red tape, and difficulty in turning profits. But those who have

often find that those contracts provide steady work in lean times.



Ogilvy and Porter Novelli have both built reputations on their agility

at making such work pay, though many believe PN has begun to remove

itself from the game. These beliefs were fortified when the agency

decided not to pursue renewal of a massive National Institute of Mental

Health contract in June.



Fleishman-Hillard has entered the fray, picking up work with the Library

of Congress in April, and continuing work with the Department of

Education, the Environmental Protection Agency, and the Office of

National Drug Control Policy.



Ketchum partner Mark Schannon also claims to be making "major inroads"

in government work. "We finally figured out government contracts," he

effuses. "It's very complicated, very difficult stuff, but the work is

terrific. Once you get the folks working on the account, they just love

it." Among the government work Ketchum has won are the Centers for

Medicare and Medicaid Services (formerly known as the Healthcare

Financing Administration).



Ketchum is also moving into lobbying, buying The Washington Group in

January for a reported $15 million. "We've been doing a lot of

joint pitches," says Schannon, "but the goal is to move very slowly at

integration because lobbyists don't understand what PR people do, and PR

people don't understand what lobbyists do."



Washington also offers the unique opportunity to represent foreign

governments, especially when a new administration comes into town and

foreign leaders look for ways to introduce themselves. Mexico, a major

player already on the foreign affairs scene this year, signed with APCO

last month, which also represents Singapore and Turkey. Ogilvy recently

won Switzerland work and signed on Puerto Rico earlier in the year.

Chile tapped Fleishman, and Haiti recruited Qorvis.



Special interest groups need PR help



And then there are all those associations and interest groups. If

anything in Washington outnumbers politicians and law students, it's

these. From the National Association of Secondary School Principals to

the National Association for the Advancement for Colored People to The

Salt Association, every conceivable interest has an outpost here, and

each is fighting to be heard above the collective din.



Fortune magazine's annual Washington Power 25 list ranks these

associations by influence. This year, the National Rifle Association

(NRA) took the top spot from the AARP (formerly the American Association

of Retired Persons), which had been there three years running.



Largely responsible for that was NRA director of communications Bill

Powers, who last month left behind his $100 million budget to go

to work for NRA agency of record The Mercury Group in northern Virginia.

His replacement is still being sought.



Ironically, some say the down economy has actually helped boost the

spending power of these groups. "When people are facing cutbacks,

they're going to rely more on their associations," says Public Affairs

Council president Doug Pinkham. "Some corporations may find they don't

have as many lobbyists as they once did. If they're in tune with their

association's legislative priorities, they'll lean more heavily on

them."



Corporate in the capital



A flurry of newcomers opened their doors in DC this year, the most

notable of which was Bridgestone/Firestone. The embattled tire maker

installed former Clinton Transportation Department aide and Edelman VP

Steve Akey as head of government relations.



Others opening their doors included Conoco, PacifiCare Health Systems,

and Mirant. Notable closings not due to mergers included 3Com and

ITT.



Most agency heads agree that these corporations are realizing more and

more that they don't need to go to New York for their straight corporate

work. Public affairs is what brings them in the door, they say, but they

soon realize that many of their other PR needs can be fulfilled in

Washington.



"You have more companies that are coming to DC because they realize that

their interests can be affected by what's happening in Washington,"

observes MS&L COO Don Hannaford, "but by the same token you have a

bigger business sector in DC than you did 10 years or even five years

ago. The corporate reputation side of our business exploded with the

tech side. For a lot of agencies who had business in Washington with

tech clients, a lot of it was branding and positioning; making them look

good to VCs and making a name for themselves."



DC agencies emerging



Two major competitors on the agency front emerged in the past year:

Quinn Gillespie, formed when high-level operatives Ed Gillespie

(Republican), and Jack Quinn (Democrat) decided to join forces, and

Qorvis, brainchild of Mike Petruzello, who brought together The Poretz

Group, The Weber Merritt Company, and JAS Communications with financial

backing from lobbying shop Patton Boggs. Qorvis has had a particularly

active year, leading the fight for one of President Bush's pet issues -

drilling for oil in the Alaska National Wildlife Refuge - and bringing

aboard several top people from Petruzello's old agency, WSW.



As for the year to come, expect acquisitions of healthcare firms and

lobbying shops. One agency often cited as ripe for acquisition is GYMR,

formed by several ex-Fleishman healthcare specialists. Asked about a

possible sale, partners Peter Garret and Patty Yu Hussein will say only

that they are "concentrating on the future."



A good plan, according to Ketchum's Schannon: "There's a lot of fear out

there right now, but one thing you can't afford to do in the middle of

an economic downturn is ignore the future."



WASHINGTON, DC PR AGENCIES

Rank Firm Name Income Income Staff

2000 1999 (dollars) 2000 Growth

(%)

1 N/A Weber Shandwick Worldwide* 60,535,807 6 275

2 2 Burson-Marsteller 46,391,000a 9 179

3 4 Fleishman-Hillard 34,693,000 35 184

4 3 Hill & Knowlton 32,300,000 18 163

5 6 Ogilvy PR 29,320,100 33 219

6 5 Porter Novelli 27,490,000 23 169

7 7 Ketchum 26,549,000 32 137

8 11 BSMG Worldwide 21,804,747 62 84

9 36 Golin/Harris** 21,420,000 1,365 83

10 9 Edelman 20,551,852 25 104

11 10 GCI Group/APCO Associates 19,186,655 31 105

12 15 The MWW Group 8,644,619 22 12

13 16 Widmeyer Communications 8,500,000 20 66

14 NEW Triad Communication 7,189,856 5 17

15 NEW Gibbons & Company 5,600,000 17 6

16 22 Cohn & Wolfe 5,595,000 62 25

17 17 Manning Selvage & Lee 5,337,397 7 4

18 18 Equals Three Communications 5,000,000 12 60

(Bethesda, MD)

19 20 RMR & Associates (Rockville, MD) 4,607,000 8 30

20 21 Brotman Winter Fried 4,200,000 0 12

21 23 Strat@comm 3,918,672 15 22

22 26 The Bivings Group 3,704,000 28

23 34 Fitzgerald Communications 3,684,811 145

24 25 Earle Palmer Brown/PR 3,590,727 16 25

25 24 Creative Response Concepts 3,440,172 10 19

(Alexandria, VA)

26 28 Ruder Finn 3,074,000 25 27

27 NEW Spectrum Science Public Relations 3,056,980 30 25

28 31 DCS Group 2,392,930 15 15

29 38 Brodeur Worldwide 2,300,000 109 14

30 32 Hager Sharp 2,098,978 19 21

31 35 GYMR*** 2,051,031 13

32 30 Barksdale Ballard (Vienna, VA) 1,539,588 -29 18

33 39 Optimum Public Relations 921,000 21 8

(Falls Church, VA)

34 NEW Jasculca/Terman & Associates 586,180 N/A 5

35 NEW The Nixon Group 320,287 N/A 4

NOTES: 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 on the information in

this chart.

* Weber and Shandwick merged in September 2000. The agencies were ranked

at 8 and 1 respectively in last year's listing. ** Golin/Harris' 2000

income includes revenue from Barbour Griffith & Rogers and Weber McGinn,

acquired during that year. Its third acquisition, MWW, is still ranked

separately. *** Formerly Garrett Yu Hussein.



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