Next Fifteen Communications: Agency Business Report 2007

Next Fifteen's highlights were ironically linked to its challenges, says Tim Dyson, CEO. The three PR firms in question, Text 100, OutCast and Bite, are all firmly attached to the fortunes of the Bay Area - and the robust tech market on a wider scale.

Next Fifteen's highlights were ironically linked to its challenges, says Tim Dyson, CEO. The three PR firms in question, Text 100, OutCast and Bite, are all firmly attached to the fortunes of the Bay Area - and the robust tech market on a wider scale.

"We have seen the tech market really rebound," Dyson says. "This rebound has been different to that first real surge in tech. Tech jumped onto social media very fast. Now, mainstream companies are coming to grips with that. We're in a position to leverage the steep learning curve."

But Next Fifteen's component firms have had somewhat mixed fortunes. While Bite and OutCast showed good growth - and Text 100 fielded a good global performance - the latter took a hit to the tune of a 13% drop in US revenue. Not a precipitous decrease, but one somewhat anomalous to the market as a whole.

Yet, says Text 100 CEO Aedhmar Hynes via e-mail: "Overall, 2006 was a better year than the numbers reflect. Our largest client [IBM] reduced its marketing expenditure substantially at the start of the year." She says she strongly believes 2007 is looking better in terms of growth, owing to such wins as Cisco Systems.

Text 100 led in other areas, though. One of the most high-profile examples of a PR firm using social media was the agency's much-publicized move into Linden Lab's virtual world, Second Life. It opened an island on the site, and Hynes presented - or rather, her avatar did.

"[It] did some great things with Second Life," Dyson says. "It's been about how to push the boundaries in PR work. I don't think the future of us lies in a virtual agency, but it's an interesting innovation."

Bite Communications had a successful year with 18% growth in revenue.

"Bite's challenge was its first full year with Sun [Microsystems]," Dyson says.

Bite's key 2006 win was local innovator Dolby Laboratories. The shop also had a big push in late 2006 with the opening of its clean-tech practice, which employs George Basile, Ph.D., among others.

It opened an office in Austin, TX, late in the year. Dyson says Next Fifteen is looking at expanding Bite into Asia.

OutCast, for most of its existence, has been associated with great startups, says Dyson. In 2006, its client list expanded via growth with existing client Yahoo, as well as with Dell, EMC, and Salesforce.com. Revenue was up 13% year on year.

"The reality for [OutCast] is it was able to shake that reputation of only working with startups," Dyson adds.

He says the challenge will be to maintain strength in the three firms' core offerings, with major players in the tech arena.

Text 100

Principal: Aedhmar Hynes, CEO
Offices: Five wholly owned in US; 22 rest of the world. Three affiliated offices in Europe, Asia Pacific

Staff
Text 100 employs 506 people worldwide, a 5% increase, with 35% turnover. Major hires were Dan Mees, VP, North America; and Stephanie Sacks, EVP, North America. Departures included Tom Reno, regional director, North America; and Tarun Deo, regional sales director, APAC.

Regional performance
Text 100 opened an office in Malaysia, but closed one in China. Asia Pacific is the fastest-growing market; revenues indicate overseas growth is outpacing the US.

Practice areas
Text 100 has seven global practices, with
a peer media relations practice and clean-tech sector introduced in 2006. No one practice outperformed any other.

Accounts
Key wins included NXP, Macrovision, Oracle in Asia, Amdocs-Europe, Nuance, NTT Verio, and Mathworks. Losses included Motorola, Nextel, Visto, Zultys Technologies, and Ariba.

Financial performance
US revenue was $22 million, down 13% from 2005; global was $51 million, up 2%. Says the agency, "We did not meet our original expectations, as they were fairly aggressive and somewhat aspirational."

Bite Communications

Principals: Clive Armitage, global CEO; Burghardt Tenderich, GM, North America
Offices: Four in the US; three rest of the world

Staff
Bite employs 94 people in the US, up 36%, with a turnover rate of 19%. Hires included Virginia Jamieson, VP, as part of its purchase of Parachute Marketing.

Regional performance
Bite opened an office in Austin, TX, in October and one in Hong Kong in January 2007. Asia-Pacific operations are still in their infancy, but are showing promise.

Practice areas
The tech agency has divisions in consumer tech, startup tech, Web 2.0 tech, enterprise b-to-b and, in 2006, opened a clean- tech practice. Enterprise b-to-b showed the most growth, though the firm will also focus on what it calls the "consumerization" of tech, as well as sustainability.

Accounts
Wins included Dolby Laboratories, Diageo (thebar.com), Autonomy, and Brocade. The agency lost Juniper Networks.

Financial performance
Global revenue was $27,200,000, an 18% increase from 2005. US revenue was $15,870,000, also up 18%. Existing clients accounted for 77% of its growth.

OutCast Communications

Principals: Margit Wennmachers and Caryn Marooney, co-presidents
Offices: San Francisco and New York

Staff
OutCast employs 55 people, up by 15% since 2005, with 6.5% turnover. One SVP was hired in 2006, and one VP left.

Practice areas
OutCast does not split its services into practice areas, but its clients fall into three categories: technology services (5% of business), consumer services (26%), and b-to-b software (69%). In the technology services area, OutCast has a number of new clients in the healthcare technology and green technology categories. The largest growth area in 2006 was consumer services.

Accounts
Key wins were Yahoo's Communities, Communications, and Front Doors group; Omniture; ehealth; and IGA Worldwide. OutCast lost Oakley Networks.

Financial performance
Revenue was $9,442,488, up 13%year on year, with an 18% profit margin. New business was more of a growth driver than organic. The firm says: "We experienced top- and bottom-line growth in FY2006. Revenue grew significantly, staff costs were up, and we worked to keep other operating expenses as flat as possible."

Agency's full questionnaire follows below:

Text 100

Name of parent division/company (enter both where applicable)
Next Fifteen Communications Group, plc

Name of subsidiary companies
Text 100, Bite Communications, Inferno, Outcast, August.one, Lexis

Has your ownership status changed in the past year? If yes, please explain
No

Name of global CEO and US CEO (or most senior equivalent)
Aedhmar Hynes-CEO
Scott Friedman-US Regional Director

What is your current headcount?
As of December 2006 our global headcount is 506

How has your headcount changed since FY 2005?
5% increase in staff when comparing December 2005 to December 2006

What was the percentage of staff turnover in 2006?
35%

Did you make any senior hires in 2006 (VP and higher)? Please state name, title (and unique responsibilities, if applicable), and previous company
Mei Ling Yeow-
Managing Consultant, Malaysia
Dan Mees-Vice President-North America, leads key Boston-based client relationships
Stephanie Sacks-Executive Vice President, North America, appointed to further move forward our corporate communications capabilities

What senior staff have departed the firm? Please state name and previous title
Tom Reno-Regional Director, North America
Tarun Deo-Regional Sales Director, APAC

Please list any other senior management changes, including restructures and significant, senior-level promotions
Promotions:
Scott Friedman-President, North America (appointed in February 2007)
David McCulloch-Executive Vice President, North America (appointed in February 2007)
Zacharia James-President, India
Rishi Seth-Managing Consultant-India

Have you made any acquisitions in the past year, or merged with another agency?
No

How many wholly owned offices do you have globally? Please list with agency names and cities under the following headings. Add majority-owned offices in parentheses.
27 wholly owned offices
North America:
Boston
New York City
Rochester
San Francisco
Seattle

Europe:
Amsterdam, The Netherlands
Copenhagen, Denmark
Dublin, Ireland
London, UK
Madrid, Spain
Milan, Italy
Munich, Germany
Stockholm, Sweden
Paris, France
Oslo, Norway

Africa
Johannesburg, South Africa

Middle East:
Mumbai, India
New Delhi, India
Bangalore, India

Asia Pacific:
Beijing, China
Shanghai, China
Hong Kong, China
Tokyo, Japan
Kuala Lumpur, Malaysia
Auckland, New Zealand
Singapore
Sydney, Australia

How many partly owned offices or affiliates do you operate globally? Please list agency names and cities under the following headings.
We have 3 affiliated offices

  • Europe:
    Helsinki, Finland
  • Asia Pacific:
    Seoul, Korea
    Taipei, Taiwan

What offices opened in 2006 or early 2007? (State when)
Kuala Lumpur, Malaysia

What offices closed in 2006 or early 2007? (State when)
Guangzhou, China

Which regions, US and globally, are growing, and why?
All of our regions are experiencing growth at varying rates. Our APAC region is the fastest growing of the three as it is still in a formative stage and emerging.

How many practice areas do you have? Please list.
Text 100 has seven global communications practices (analyst relations, corporate communications, investor relations, peer media relations, product public relations, public affairs, research and measurement) and seven sector practices (digital lifestyle, software, wireless, security, semiconductor, IT services and clean technology).

Which ones are new?
In 2006, we introduced the peer media relations practice (all services related to peer-to-peer platforms such as blogs or social networks but also virtual worlds such as Second Life) and the clean technology sector.

Of those, which ones are part of the core strategy of the agency?
Our strategy is to address the whole ecosystem of influence our clients have to consider in an increasingly interdependent business environment. As a result, all our practices are feeding into our core strategy.

Which practice areas have been phased out in the past year?
None.

What practice areas showed the most growth? Please elucidate.
No particular practice area, but communications to support a business proposition cutting across different practice areas.

Which practice areas showed the least growth? Please elucidate.
Isolated offerings like analyst relations as a standalone.

What is the distribution of accounts across practice areas?
The phenomenon described in 24) and 25) applies to nearly all accounts.

What key account wins did you have in 2006? If based outside the US, or are global, please state regions.
NXP-Europe, US, Asia
Macrovision-US, Europe
Oracle-Asia
Amdocs-Europe
Nuance-Europe, Asia
NTT Verio-US
Mathworks-US
PCI Security Standards Council-US

Of your 2006 wins, how many were across three or more countries?
NXP-China, France, Germany, Hong Kong, Japan, Malaysia, Sweden, UK, US
Mathworks-Australia, France, Germany, Sweden, UK, US
Nuance-India, The Netherlands, Spain, Sweden, UK

What key accounts did you lose in 2006? If based outside the US, or are global, please state regions.
Intel-Asia, Europe
Motorola-US
Nextel-US
Discovery-Europe
Visto-US
Zulty's Technologies-US
Ariba-US

Did you expand any existing accounts into new domestic or international markets or sectors? Please elucidate.
N/A

What proportion of your clients are on a retainer? Has this changed over the past year?
Based on value, 82% of our clients are on retainer
In 2005, 86% of our clients were on retainer.

What was your 2006 global (including US) revenue?
$51,818,042

What was the % change over 2005 global revenue
2% increase

What was your global profit margin in 2006?
12%

What was your 2006 US revenue?
$22,084,907

What was the % change over 2005 US revenue
13% decrease

What was your US profit margin in 2006?
27%

Did you experience top-line or bottom-line growth in the past year, or both? Please elucidate.
Yes, our top line growth from a revenue perspective is $1.0M. Our bottom-line growth in the past calendar year was $1.6M

How much of your growth was organic, and how much was due to new business won?
Organic Growth-82%
New Business Growth-18%

How did your performance, in terms of revenue and growth, meet expectations you had for the year?
We did not meet our original expectations for the year as they were fairly aggressive and somewhat aspirational. However, we did achieve a fair level of revenue growth and entered our new fiscal year with a lot of positive momentum.

Bite Communications

Name of parent division/company
Bite Communications is part of the Next Fifteen Communications holding group, which also includes OutCast and Text100 in the United States.

Name of subsidiary companies
Bite Communications Corporation has no other subsidiaries in the United States.

Has your ownership status changed in the past year?
The ownership structure of the organization has not changed.

Name of global CEO and US CEO (or most senior equivalent)
Clive Armitage, Global CEO. Burghardt Tenderich, General Manager, North America.

What is your current headcount?
The current headcount in the United States is 94 consultants. Bite Communications has grown 36% since FY 2005.

How has your headcount changed since FY 2005?
In February 2005, the headcount in the United States was 60 consultants.

What was the percentage of staff turnover in 2006?
For 2006, Bite has a turnover rate of 19 percent.

Did you make any senior hires in 2006 (VP and higher)? Please state name, title (and unique responsibilities, if applicable), and previous company
Virginia Jamieson, VP (Parachute Marketing)

What senior staff have departed the firm? Please state name and previous title
Judy Wilks, Vice President. Jonathan Gandal, Senior Vice President.

Please list any other senior management changes, including restructures and significant, senior-level promotions
Jane Thompson and Shannon O'Neill were promoted to Senior Vice President. Sean Mills, Stacey Burbach and Bill Danon were all promoted from Account Director to Vice President. Marisa Ramans was promoted from HR Director to Vice President, Human Resources. Hamish MacPhail, CFO, and Jason Clarke, Business Development and Marketing Director, transferred to San Francisco from Bite's London office.

Have you made any acquisitions in the past year, or merged with another agency?
Bite Communications acquired the PR assets of Parachute Marketing. The deal was brokered towards the end of 2005 and finalized in February 2006.

How many wholly owned offices do you have globally? Please list with agency names and cities under the following headings. Add majority-owned offices in parentheses.
North America - San Francisco, CA, Palo Alto, CA, New York, NY, Austin, TX. Europe -London, United Kingdom, Stockholm, Sweden. Asia Pacific - Hong Kong, China.

How many partly owned offices or affiliates do you operate globally? Please list agency names and cities under the following headings.
All of Bite's offices are wholly-owned. Bite uses the Next Fifteen network to facilitate other markets.

What offices opened in 2006 or early 2007? (State when)
Palo Alto - January 2006. Austin - October 2006. Hong Kong - January 2007.

What offices closed in 2006 or early 2007? (State when)
None.

Which regions, US and globally, are growing, and why?
In the US, Bite continues to expand its core strength in the Enterprise B2B sector but has also experienced significant growth in the consumer tech sector with the addition of large brands such as Dolby and Diageo's thebar.com and several Web 2.0 start ups. Bite is also experiencing significant growth in the cleantech sector with several of its clients focusing on the importance of sustainability. In Europe, the UK and Swedish offices have experienced similar trends. Clients such as Cisco and Polycom have bolstered the Enterprise B2B roster, while new business wins with 3, Getty Images, Palm and Yamaha have been added to an already impressive list of consumer tech clients. Having recently opened in January 2007, Bite's Asia-Pac offering is still in its infancy but already supports existing clients from some of Bite's other more established markets.

How many practice areas do you have? Please list.
Enterprise/B-B Technology. Consumer Technology. Start-Up Technology. Web 2.0 Technology. Clean Technology.

Which ones are new?
Bite's Cleantech Practice is are recently created division of the agency.

Of those, which ones are part of the core strategy of the agency?
In the US, Bite will continue to focus on Enterprise Technology companies in the B2B sector. However, Bite believes consumer-facing products and services will be the main drivers in the information technology market. This continues to be reflected in the increasing number of consumer tech companies moving to Silicon Valley. With ongoing consolidation in the B2B tech industry and the increasing ‘consumerization of IT', Bite will stay focused in this growth area. In addition, Bite also believes that it's going to be critical for many companies to align their activities and messaging with strategic sustainability issues. The complexity of these challenges requires businesses competing in the "clean and green" marketplace to identify a public relations partner that can drive environmentally-friendly communications efforts while still representing the core strengths of each specific client.The success of Bite's Cleantech Practice will be a key component of the agency's growth strategy in 2007.

Which practice areas have been phased out in the past year?
None.

What practice areas showed the most growth? Please elucidate.
Financially, the Enterprise B2B Practice showed the most growth. This growth resulted from a combination of the expansion of existing accounts and four significant new business wins in this sector. However, Bite added slightly more new clients to its roster in the areas of consumer tech, Web 2.0 and start up.

Which practice areas showed the least growth? Please elucidate.
Having only recently launched the Cleantech Practice earlier in 2007, it has showed the least amount of growth by comparison.

What is the distribution of accounts across practice areas?
B2B/Enterprise - 30 percent. Consumer Technology - 20 percent. Startup - 23 percent. Web 2.0 - 17 percent. Green Technology - 10 percent.

What key account wins did you have in 2006? If based outside the US, or are global, please state regions.
Bite had several account wins in 2006. ‘Key' account wins in the US include: Autonomy, Brocade, Diageo (thebar.com), Dolby, Net-A-Porter and Wikia. ‘Key' account wins in the Europe include: 3, Cisco, Fujitsu, Getty Images, Palm, Polycom andYamaha.

Of your 2006 wins, how many were across three or more countries?
Of the 2006 wins, several were across two countries but only one new account spans three or more countries.

What key accounts did you lose in 2006? If based outside the US, or are global, please state regions.
In the US, Bite only lost one key account in 2006 - Juniper Networks. In Europe, Bite lost its position as a rostered agency for BT due to consolidation.

Did you expand any existing accounts into new domestic or international markets or sectors?
AMD expanded from San Francisco, CA and New York, NY to Austin, TX. Autonomy expanded from the UK to the US. Polycom expanded from the UK to Sweden.

What proportion of your clients are on a retainer? Has this changed over the past year?
Bite's US clients are 95% percent retainer-based. Yes.

What was your 2006 global (including US) revenue?
$27.28M.

What was the % change over 2005 global revenue
The percentage change over 2005 was 18 percent growth.

What was your global profit margin in 2006?
Bite does not wish to disclose this information for public consumption.

What was your 2006 US revenue?
$15.87M.

What was the % change over 2005 US revenue
The percentage change over 2005 was 18 percent growth.

What was your US profit margin in 2006?
Bite does not wish to disclose this information for public consumption.

Did you experience top-line or bottom-line growth in the past year, or both?
Bite experienced top line growth, which last largely due to organic growth.

How much of your growth was organic, and how much was due to new business won? Please elucidate.
77 percent organic growth, 23 percent new business.

How did your performance, in terms of revenue and growth, meet expectations you had for the year?
Bite exceeded its performance expectations for FY06 by 7 percent.

OutCast Communications

Name of parent division/company (enter both where applicable)
Next Fifteen Communications Corp.

Name of subsidiary companies
N/A

Has your ownership status changed in the past year? If yes, please explain
No

Name of global CEO and US CEO (or most senior equivalent)
Tim Dyson CEO
Margit Wennmachers and Caryn Marooney, Co-Presidents

What is your current headcount?
55 (this figure does not include interns who participate in our six-month paid internship, if included our headcount is 65).

How has your headcount changed since FY 2005?
Headcount has increased by 15% since FY 2005. (this figure does not include interns who participate in our six-month paid internship)

What was the percentage of staff turnover in 2006?
6.5 % (this figure does not include interns who participate in our six-month paid internship)

Did you make any senior hires in 2006 (VP and higher)? Please state name, title (and unique responsibilities, if applicable), and previous company
One SVP hired in 2006

What senior staff have departed the firm? Please state name and previous title
One VP left in 2006

Please list any other senior management changes, including restructures and significant, senior-level promotions
Two promotions from VP to SVP in 2006

Have you made any acquisitions in the past year, or merged with another agency?
No

How many wholly owned offices do you have globally?
North America: Offices in San Francisco (headquarters) and in New York City

How many partly owned offices or affiliates do you operate globally?
None.

What offices opened in 2006 or early 2007? (State when)
N/A

What offices closed in 2006 or early 2007? (State when)
N/A

Which regions, US and globally, are growing, and why?
We experienced growth in both SF and NY in 2006, both in number of clients, existing client budgets, and staff.

How many practice areas do you have? Please list.
OutCast does not organize internally around practice areas. We have a diversified portfolio of clients across multiple technology areas, but do not have discrete practice areas for each of these areas. Nor do we organize service offerings (writing, new media, etc.) around discrete practice areas.

That being said, our client mix is approximately as follows:

  • Technology Services
  • Consumer Services
  • B to B Software

Which ones are new?
In the area of technology services, we have new clients in healthcare technology and green technology categories.

Of those, which ones are part of the core strategy of the agency?
All of areas listed above are tied back to our core strategy of being a leading technology PR agency.

Which practice areas have been phased out in the past year?
None

What practice areas showed the most growth? Please elucidate.
In the past 12 months, the area of the greatest growth has been Consumer Services.

Which practice areas showed the least growth? Please elucidate.
N/A

What is the distribution of accounts across practice areas?

  • Technology Services -5%
  • Consumer Services -26%
  • B to B Software -69%

What key account wins did you have in 2006? If based outside the US, or are global, please state regions.
In 2006, we added seven new clients to our roster. Key wins were Yahoo! Communities, Communications and Front Doors groups, Omniture, ehealth, and IGA Worldwide.

Of your 2006 wins, how many were across three or more countries?
N/A

What key accounts did you lose in 2006? If based outside the US, or are global, please state regions.
Oakley Networks

Did you expand any existing accounts into new domestic or international markets or sectors? Please elucidate.
We won additional Yahoo! properties, including the Communities, Communications and Front Doors groups, and budgets in 2006.

What proportion of your clients are on a retainer? Has this changed over the past year?
We only have one client on a monthly retainer.
No

What was your 2006 global (including US) revenue?
Agency declined to give information.

What was the % change over 2005 global revenue
Agency declined to give information.

What was your global profit margin in 2006?
Agency declined to give information.

What was your 2006 US revenue?
Our FY2006 revenue was 9.8M
Our revenue is tracked by a fiscal year period (August 1-July 31)

What was the % change over 2005 US revenue
32%

What was your US profit margin in 2006?
18%

Did you experience top-line or bottom-line growth in the past year, or both? Please elucidate.
We experienced both top and bottom line growth in FY2006. Revenue grew significantly, staff costs were up, and we worked to keep other operating expenses as flat as possible.

How much of your growth was organic, and how much was due to new business won?
We experienced growth in both areas with new business being the area of greatest growth.

How did your performance, in terms of revenue and growth, meet expectations you had for the year?
FY2006 performance exceeded our expectations in terms of revenue and growth. We were also fortunate to be able to add great new staff, some of whom have expertise in new and emerging areas.

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