GLOBAL RANKINGS: Europe - As PR's stature increases across Europe,indigenous independents are stronger than ever - and they're drawing theattention of purchase-hungry powerhouses

As in so many areas of business and culture, Europe took a lead

from the US in the early part of 2001, as the stock of dot-coms declined

rapidly following the hi-tech feeding frenzy of 1999/2000 (described by

one Italian PR staffer as "technology drunkenness.") As investors drew

their purse strings tighter, IPO activity across the board has slowed

from river to trickle, thus denying many agencies of the work that

served them so well.



Global agencies did particularly well last year, with both Weber

Shandwick and Hill & Knowlton breaking the $75 million fee income

mark. Euro RSCG remained on top with $87.7 million, pushed by

Chime Communications less than $2 million behind. On the back of

its strong growth, Chime - a WPP PR agency - has now set about expanding

its business beyond a traditionally UK base, with a notable entry into

the US market earlier this year.



Networks had a reasonable year but appear convinced the gap between

themselves and global agencies is closing. Although Worldcom network's

fee income was virtually static in 2000 at $56 million, and

Entente International dipped 13% to $30 million, Brodeur climbed

into second place in the PRWeek UK Europe 2000 networks table with a

rise of 27% to $30.2 million.



PR's growing popularity



But despite the recent downturn, most agencies are upbeat about the

stature of PR as a communications tool, and of its place in the

marketing mix.



In the UK, the PR market is as sophisticated and lucrative as it is in

the US. Elsewhere in Europe, it is a work in progress. However, while

traditional advertising strongholds such as France remain tough to break

for aspiring foreign PR agencies, there are signs that attitudes toward

PR on the part of big business right across Europe are shifting. The

demand for strategic advice is on the upswing in almost every European

country, according to native PR staffers. In Sweden, for example, parts

of the PR industry rose to a par with management consultants, advising

CEOs and enjoying closer links to the boardroom than ever before.



Another driver for increasing interest in PR is companies' realization

of the need to maintain and enhance their corporate reputation across

the board. Legislation - or the promise of legislation - in many

European countries on enforced transparency in corporate governance

issues will increase this trend.



Depending on geography, agencies remain split between increased

specialization and the need for broader offerings. In Germany, upcoming

legislation on pensions and company taxation will push financial work to

the fore during the rest of the year and 2002. In Italy, Nicoletta

Cerana, MD of Ketchum Italia, says the country's crowded PR market

"generates confusion in the client's perception of PR service quality,"

so agencies are keen to differentiate their offering.



But in Belgium the reverse appears true. The bigger agencies, such as

GCI/APCO Brussels (which increased fee income by 36% to $6

million in 2000), have tended to focus on just two areas: the promotion

of domestic goods and services as well as public affairs. However, H&K

director Paul Baeyaert confirms that less familiar approaches, such as

guerrilla marketing, are on the rise. In the Netherlands, agencies are

looking to develop one-stop shops, bringing in advertising skills to

give them a more rounded appeal.



The resurgence of PR for bricks-and-mortar businesses is a given over

the coming year, as the relative demise of technology companies will

mean that agencies must court more traditional clients. The dot-com

explosion has also shown those same clients what can be achieved. The

marriage of offline comms with online will be of particular relevance to

Dutch agencies, given that nine percent of the Netherlands' GDP is

predicted to be generated online by 2005.



The downturn in dot-coms and telecoms has not affected European

economies equally across the board. Despite huge cutbacks by players

such as Ericsson, for example, technology remains big business in

Sweden, which is good news for relative newcomers like Havanna PR, which

jumped 300% last year through specializing in IT and dot-com clients.

Other stellar performances in 2000 came from financial specialist

Haubrok, which leapt into sixth place in the German rankings with a 119%

rise in fee income on the back of IPO work, much of which were dot-coms

coming to market. In the French market, Brodeur SRRP turned in a

sterling performance, increasing fee income by nearly half again to

$3.8 million, largely through dot-com accounts. Finally, few

Swiss agencies reported a significant downturn, and the second half of

2001 is predicted to be strong, with 2002 even better.



Takeover targets



Europe remains appealing to a number of global agency groups. The main

attraction is still London, where last year's incursions were led by

BSMG (with Square Mile, GJW and Lyons Waddell) leading the charge.

Germany was also a popular destination for BSMG (with two acquisitions)

and Edelman (with one). Edelman also bought an agency in Sweden, while

two others bought in Italy: H&K purchased Gaia, and Weber Shandwick

snapped up Massmedia and Bridge Editore in Milan. Despite these

incursions from global agency groups, indigenous independent players

remain strong in a number of markets.



Barabino & Partners (with a fee income of $10 million) stayed at

the top of the tree in Italy. In the Netherlands, No. 2 agency Winkelman

& Van Hessen ($6.5 million in fee income) remains attractive to

international networks in a country where most of the leading agencies

have formal tie-ups with majors. And firms such as Vienna-based

Hochegger Com must also be seen as potential targets for takeover.

Austria's No. 2 agency has a fee income of $5.4 million, and the

country's PR industry is rightly seen as the gateway to central and

eastern Europe. This goes some way to explaining why Kohtes Klewes, the

dominant agency in Germany, took a 40% stake in Austria's Publico, which

boasted a fee income of $8 million.



In fact, London has been almost the exclusive hunting ground for

acquisitions in 2001, with its investor relations businesses

particularly attractive to the likes of Euro RSCG (Maitland) and WPP

(Finsbury). Other "hot" agencies that fell under the hammer included The

Red Consultancy, which was bought by Incepta. Porter Novelli,

Fleishman-Hillard, MS&L, BSMG and Golin/Harris all continued to round

out their UK offerings.



Many PR pros point to the relative lack of maturity in the German,

French and Italian PR markets when compared to the US and UK. If this is

the case, then it follows that even greater opportunities are on the

horizon as executives turn their gaze further eastward. The mass

privatization programs in energy and telecoms that followed political

and economic liberalization in central Europe from 1990 onward are

largely completed and western brands - attracted to the region by the

appearance of potentially voracious consumer markets from behind the

iron curtain - are strongly in evidence.



Eastern Europe



Hungary's economy has grown at more than four percent for the last five

years - ahead of the other big players in the region, Poland and the

Czech Republic - and is set to grow five percent this year. Hungary will

soon see a shake-up of its banking system, reducing 40 or so

institutions down to half a dozen.



Julianna Gulden is MD of Gulden Communications in Budapest. Despite a

name change earlier this month from Gulden B-M to align themselves more

closely with the Young & Rubicam ad brand, she believes clients are

increasingly seeing the value of PR over advertising: "As more companies

have started to use PR, it is being seen as a communications tool that

can deliver business results, and it will become more widely used."



Agencies in the Czech Republic have seen an increase in consumer and IT

work and the healthcare sector is thought likely to grow. AMI

Communications partner Marek Stransky also believes the importance of PR

has increased over the last couple of years. The agency, an Edelman

affiliate in both the Czech Republic and Slovakia, grew by 24% in Prague

last year, returning a fee income of $1.2 million. It used to

have 80 percent of its work in media relations.



"I have seen an important change in clients' perception of PR

consultants. Very often they are used as strategic counselors for top

management, especially for the restructuring of industrial companies,

reputation management and crisis communications," says Stransky.



Revenue at the Czech Republic's top agency, Donath-Burson-Marsteller,

dipped 16% in 2000 to $1.4 million. Meanwhile, the Republic's

economic performance remains a mixed bag, with growth offset by a huge

national debt. "The trend is upward but is it robust?" asks Vladimir

Feldman, MD of GJW/BSMG's Prague office. In a country of only ten

million people, a PR agency with a turnover of $1-2 million is

considered sizeable. But he is encouraged by the prospect of

cross-border work evolving from potential inclusion in the European

Union.



The Action PR network runs throughout the region, as a Golin/Harris

affiliate in Croatia, Slovenia and Macedonia, and a Weber Shandwick

affiliate in Romania. Ruxandra Mateescu, director of the Action office

in Bucharest, says advertising, via locals such as Black Pencil

Advertising, remains better known as a communication tool: "There are

not many international chains. It tends to be branches of advertising

companies, but (in PR) there is still room to grow."



Poland is home to a well-developed PR scene. As well as international

groups like Burson, there are locals such as Sigma International and

Ciszewski PR. Another of these, 180 deg PR, was established in Warsaw

two years ago as part of Leo Burnett and became an MS&L affiliate in

January. MD Danuta Raczkiewicz-Chenczke says annual growth in the PR

market has been growing at 10% a year, although there was a decrease

last year. There are some essential cuts in marketing budgets where

money and efforts have shifted from strategy and brand-building programs

into direct consumer targeted activities such as promotion and consumer

PR programs. The economy as a whole is growing by 4% although that, too,

has slowed. An autumn election seems likely to see a change of

government from conservative to social democrat, in line with much of

the rest of Europe.



Although the scramble for dot-com business was never so frantic in

central Europe as in the west of the continent, there has certainly been

no immunity from the downturn, which is leading telecoms clients in

particular to cut PR budgets.



Gulden argues that the region cannot be taken as a homogenous mass, but

there is one issue from which the whole area should benefit. Membership

of the EU, which could be a reality for many of these countries as early

as 2004, is sure to bring both increased foreign investment and greater

opportunities for PR.



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