MARKET FOCUS: NORTHWEST - Northwest welcoming new visitors. PR is heating up around Seattle and Portland with new business and agency networks. But staff turnover isn't as drastic as in California

For the past two years, Silicon Valley and San Francisco have grabbed the lion's share of headlines about economic prosperity and dot-com riches.

For the past two years, Silicon Valley and San Francisco have grabbed the lion's share of headlines about economic prosperity and dot-com riches.

For the past two years, Silicon Valley and San Francisco have grabbed the lion's share of headlines about economic prosperity and dot-com riches.

However, an even bigger boom is just beginning to hit further north, in Portland, Seattle and the surrounding hamlets.

Like California, the so-called 'Silicon Forest' has been increasingly fueled by loads of venture capital and a huge influx of Internet and software entrepreneurs, many of them defectors from Microsoft's hallowed halls.

In addition, industries such as lumber, aerospace and retail have stayed steady or shown a healthy comeback in the past year. Even Microsoft seems to be on a major upswing; at press time its stock price was up 19% from the same time last year, and the company was reporting the return of 'several hundred' former employees who had previously fled to start-ups.



Stability to the north

In addition to maintaining a comparitively lower cost of living than the Bay Area, the Northwest has escaped the key threat to longevity of the PR boom farther south - i.e., high turnover and account churn. Clients from all over the country - even from blue chip companies Intel and Cisco - are starting to eschew Silicon Valley agencies in favor of what are perceived to be the more stable firms of the Northwest. While the area also saw its share of dot-com defections in 1999, the perception is that the agency-side talent pool is still full enough to serve the robust economy.

'The labor market is competitive here, but I can say that turnover in the Seattle office is half that of our Silicon Valley operations,' confirms Casey Sheldon, the Seattle-based managing director for Shandwick International's Western technology practice.

Howard Barokas, whose Seattle boutique Barokas PR includes client Cisco Systems, has noticed an increase in interest from NorCal companies in particular. 'We've probably gotten more new business calls in the past six months from the Bay Area than from Seattle all year,' he reports.

A quick glance at the PRWeek rankings shows that the Northwest is no longer the backwoods frontier of yesteryear. Even as recently as the early 1990s, Seattle and Portland were dominated by local, independent small- to mid-sized agencies with mainly regional accounts. Today, only four of the 10 largest Northwest firms are based here, and only about half of the top 20 are independently owned.

In fact, five of the top 20 agencies in this chart have been acquired since January 1999: Wham was bought in April 1999 by Edelman (until then Edleman in Seattle was a one-man operation); Rockey Company, which was scooped up by Hill & Knowlton in July; Portland's KVO Public Relations, acquired by Fleishman-Hillard last spring; integrated agency Imagio, which joined with J Walter Thompson around the same time; and, most recently, MWW/Savitt, which became part of the Golin-Harris family last month.

Interestingly, the rankings reveal a wider variety of PR firms and clients, and this could be another advantage the Northwest has over its more tech-obsessed neighbors to the south.

In a region that retail giants such as Eddie Bauer, Nike and Starbucks call home, it's not difficult to understand why there are plenty of diversified PR opportunities. Unlike the Bay Area, generalist PR firms, as well as those specializing in food, hospitality and public affairs, share the top-25 charts with hi-tech heavyweights such as Waggener-Edstrom, Weber and Porter Novelli Convergence.

In fact, only about half of the agencies in the region's top 20 are specifically hi-tech-focused. And even those with formidable tech practices and clients, such as Edelman/Seattle (Microsoft), DDB Public Relations (RealNetworks) and MWW/Savitt (Mercata), have at least a few non-tech clients on the roster. Also, two of the agencies showing the greatest year-to-year increases are actually firms specializing in public affairs, political campaign work and crisis communications: APCO/Seattle (dollars 5.34 million, 161% growth) and Gogerty Stark Marriott (dollars 3.8 million, 67% growth).

At the same time, most of the fastest-growing agencies are those specializing in emerging technology. For example, New Ventures Communications, a Portland-based agency launched in 1998, grew to dollars 1.33 million in just 18 months, a whopping 928% growth rate. Similarly, The Bernhardt Agency, a Portland firm started in 1994 by a former Intel exec, grew 333% to dollars 3.9 million in the past year - partly due to work with established companies, such as Compaq, expertise in speaker placement and a large base of start-up clients. Even Porter Novelli Convergence (Copithorne & Bellows until December 1999), which represents Hewlett-Packard's Pavillion line and S3's Rio division, posted a 182% increase from 1998-1999. None of this is all that surprising, of course. As in the Bay Area, it's the pre-IPO e-commerce, wireless and software upstarts that are spending the big bucks in PR here.

As in the Bay Area and Silicon Valley, a handful of major-league agencies took a hit in 1999. Specifically, Shandwick's loss of the dollars 5 million Microsoft MSN business last August was undoubtedly behind the firm's disappointing 13% decrease from 1998. However, Sheldon says the Seattle branch is back on track with the recent addition of Kodak's on-line photo-processing division and Microsoft's digital media and Web TV divisions, and is projecting dollars 5.9 million for 2000.

Publicis Dialog, the agency best known for its work with commodities such as the United Soybean Board and branded foods such as Gardenburger, posted a loss of 6% in 1999. According to Seattle president Jeff Hasen, the downturn reflects the agency's decision to resign several accounts that had not proven profitable. However, he added that the Seattle branch is projecting a gain in 2000, due to its work with VoiceStream and the addition of several new brands for Nestle.



Stormy weather

But could some rain be in the forecast for the Northwest PR scene? For one thing, salaries are inching up. According to Salary.com, a Seattle-area PR manager with about seven years of experience can expect to command a salary of about dollars 73,000; PR directors can expect up to dollars 150,000. On the agency side, account supervisors make about dollars 65,000, and account managers around dollars 80,000 - just slightly below Bay Area figures.

Second, more consolidation on the agency scene is inevitable; the area is far from picked-over in terms of acquisitions. According to PRWeek's Agency Rankings, of the top 25 US agencies, only 11 have a presence here now. Those who do not include Burson-Marsteller, Ketchum, BSMG Worldwide, Ogilvy, Brodeur, Ruder-Finn, Manning Selvage & Lee, and Citigate-Cunningham.

Who will be next to heed the siren song of dollar signs? Waggener-Edstrom seems determined to maintain its independence, though it's still the crown jewel of hi-tech holdouts. Relative newcomers Rolling Thunder, New Venture Communications and Wave Rock have burst on the scene, racking up relationships with the key VCs and, as a result, becoming prime takeover prospects.

The number of California- and Boston-based agencies planting flags here shows few signs of waning. In the past year, San Jose-based Sterling Associates, San Francisco's The Horn Group, Silicon Valley's Strategy Associates and Connect PR from Provo, Utah, have all come to Seattle.

On the other hand, there is more than enough business to go around. Nearly every firm contacted for this article is predicting growth for next year.

And even the newest start-ups look to be more than fly-by-night dot-coms, promising long-term prosperity on both the agency and client sides.

'This is a place people bring their families. They set up their companies to grow here, not to just get to an IPO and move on. Nobody talks about exit strategies,' says KMC Group's Ayares.

That seems doubly likely for those planting seeds now in fertile PR fields of the Silicon Forest.



THE RISE AND RISE OF THE ''SILICON FOREST'': TOP NORTHWEST PR AGENCIES

Ranking   Agency Name                     Audit      NW income (dollars)

99   98                                                1999         1998

1    1    Waggener Edstrom                Y      44,082,000   37,865,000

2    4    MWW Group                       Y       6,367,998    4,704,107

3    2    KVO                             Y       5,853,000    5,900,000

4    9    GCI/APCO                        N       5,342,010    2,045,000

5    3    Shandwick                       N       4,948,000    5,711,000

6    6    The Rockey Company              N       4,084,000    3,996,000

7    13   The Bernhardt Agency            N       3,900,000      900,000

8    8    Gogerty Stark Marriott          N       3,824,240    2,286,090





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