Edelman: Agency Business Report 2007

"PR can be the lead element for communications," says Richard Edelman, president and CEO of Edelman.

"PR can be the lead element for communications," says Richard Edelman, president and CEO of Edelman.

In 2006, the firm proved that mantra to both clients and industry peers, Edelman says, via its advancements in social-media initiatives, opinion-leader work, issues management, research, and classic media relations - "everything with PR at the center."

"So many strands have come together for us, and for clients," agrees Talbot.

From the A&R acquisition, to its work with MySpace, to its NGO/social marketing partnerships, Edelman's forward-thinking efforts within the past year have changed the communications environment, Talbot says, and "really helped us differentiate who we are and how we think."

Of course, Edelman's march into social media also had its negative impact in 2006, as the firm came under fire for its work on a blogging project that was not properly disclosed as sponsored by Wal-Mart. In the wake of this very public scandal, the firm made much of its efforts to bring social-media training to all its staff and to conduct a thorough internal review of disclosure practices in these areas.

Internally, Edelman's focus on developing more unified, cross-practice methodologies and efforts to create holistic, global account teams allowed it to expand its work with clients including Johnson & Johnson, Wal-Mart, and Wrigley; work which began in the marketing realm naturally extended to include corporate and public affairs efforts, Edelman says. "That was not the case two or three years ago," he adds.

The agency also last year embarked on a "huge drive" to educate employees, "to prepare them to [be] even better practitioners," Talbot says. While the Edelman University training program has long been a part of the firm's employee offerings, in 2006, the agency boosted its curriculum intensity, Talbot says, to provide programs "more meaningful to upper-mid-level and upper-level" staffers. In addition, Edelman added its "Living in Color" program, an initiative aimed at inspiring employees to expand their personal interests beyond the office environment.

As for the year ahead, Edelman says, the firm appears poised for innovation and growth, both on the domestic front and in emerging markets including India, Indonesia, and even Russia.

KEY FACTS

Principals: Richard Edelman, president and CEO, Pam Talbot, president and CEO, Edelman US

Ownership: Independent

Subsidiary companies: BioScience; Blue; First&42nd; Matter; StrategyOne

Offices: 12 wholly owned US, 33 rest of the world

US revenue: $216,145,972, a 26.5% increase over 2005

Staff
Edelman has 1,446 employees in the US, and 2,073 worldwide; global staff was up 26% from 2005. Key hires in the past year included Steve Rubel, SVP, me2revolution; Susan Stillings, global MD, financial practice (replacing Andrew Merrill); Shellie Winkler, EVP, corporate health, US Eastern region; Gary Grates, president, employee engagement practice; Laurence Evans, president, StrategyOne (replacing Jennifer Scott); and Andrew Marks and David Freeman, MDs, Matter entertainment practice. Also added were new GMs/directors in San Francisco, Washington, DC, Shanghai, Paris, and Beijing.

Promotions include A&R Partners founder Bob Angus being named global director, technology. Richard Murray, former EVP, interactive practice, Chicago, being named president, me2revolution, Chicago; and Peter Segall, formerly leader of the firm's health practice in DC, was appointed US director of health public affairs.

Departing were vice chairman Leslie Dach to client Wal-Mart; president of the technology practice Pam Pollace; GM, consumer marketing Lisa Sepulveda, New York; and MD, Matter Ferris Thompson.

Structural changes
In May 2006, Edelman acquired Silicon Valley-based tech PR firm A&R Partners. The agency also acquired branded entertainment and content firm Matter, and partnered with LA-based TAG Strategic to form the digital entertainment, rights, and technology practice.

Regional performance
With the A&R acquisition, Edelman's growth in Silicon Valley rose more than 171%, from $4,584,106 in 2005 to $12,427,141 in 2006. The firm reports significant organic growth in New York, Chicago, Atlanta, and Sacramento, among other areas. In DC, revenue grew 51% from $24,954,944 in 2005 to $37,638,670 in 2006; in Portland, it rose 55% from $2,811,721 in 2005 to $4,364,283. Edelman also saw a 19% revenue increase in Europe, 33% increase in Canada, and 32% increase in Asia; in the latter, key growth markets were China and India.

Practice areas
Edelman operates 16 core practice areas, most of which showed consistent global growth in 2006, according to the firm. Growth leaders included public affairs (48.3% of growth); tech (33.2%); interactive (26.6%); corporate affairs (22.2%); healthcare (20%); and consumer marketing (14.7%). The agency also reports heightened client interest in its 2006 launch, the new media-focused me2revolution group. Among other social-media initiatives, the division last year introduced a social-media release, conversational advertising, and blog communications. BioScience (medical education and publishing), however, was flat.

Accounts
Key wins in the US included SC Johnson, Wal-Mart, Kaiser Permanente, American Heart Association, Merck, Curves, Novartis, PriceWaterhouseCoopers, Charles Schwab, Burger King, Autodesk, Danone, American Petroleum Institute, California Energy Commission, Cephalon, International AIDS Vaccine Institute, Fox Interactive, and Hanesbrands. The firm reported that about two-thirds of its growth was organic, including the expansion of existing accounts Diageo, Nissan, Pfizer, Shell, and Microsoft.

Financial performance
Edelman exceeded expectations for 2006, both in the US and globally, the firm says. It reports domestic revenue of $216,145,972, a 26.5% increase over 2005. Even when accounting for the revenue gained through the A&R acquisition, that's still a heady climb. Globally, revenue grew 25.2%, from $271 million in 2005 to $337 million in 2006.

Agency's full questionnaire follows below:

Name of parent division/company (enter both where applicable)
Daniel J. Edelman, Inc.

Name of subsidiary companies
Edelman wholly owns and operates the following branded companies:
BioScience
Blue
First&42nd
MATTER
StrategyOne

Has your ownership status changed in the past year?
No

Name of global CEO and US CEO (or most senior equivalent)
Richard Edelman
, President & CEO, Edelman
Pam Talbot, President & CEO, Edelman U.S.

What is your current headcount? How has your headcount changed since FY 2005?
As of December 2006: Total global headcount: 2,533; Total US headcount: 1,446
In December 2005, total global headcount: 2,003
Increase: 26%
In December 2005, total U.S. headcount: 1,214
Increase: 16%

What was the percentage of staff turnover in 2006?
N/A

Did you make any senior hires in 2006 (VP and higher)? Please state name, title (and unique responsibilities, if applicable), and previous company
David Chamberlin, general manager, Shanghai
Marion Darrieutort, general manager, Paris
Laurence Evans, president, strategyone, New York
David Freeman, MD, MATTER, Los Angeles
Gary Grates, president, employee engagement practice, Chicago
Frank Kauffman, general manager, Washington, DC
John Kerr, director, Southeast Asia, Shanghai
Andrew Marks, MD MATTER, New York
Catherine Ogilvie, general manager, San Francisco
Steve Rubel, SVP, me2revolution, New York
Jeffrey Schultz, MD, Beijing
Susan Stillings, global MD, financial practice, NY
Silvia Rowe, strategic consultant, food & beverage, Chicago
Shellie Winkler, EVP, corporate health, U.S. Eastern Region

What senior staff have departed the firm? Please state name and previous title
Philippe Cherel
, DGM, Paris
Leslie Dach, Vice Chairman
Warren Egnal, GM, San Francisco
Christopher Hannegan, U.S. Director, Employee Engagement
Andrew Merrill, Global Managing Director, Finance & IR
Pamela Pollace, President, Technology practice
Jennifer Scott, President, StrategyOne (Research)
Lisa Sepulveda, GM, Consumer Marketing, NY

Please list any other senior management changes, including restructures and significant, senior-level promotions
Bob Angus
(Founder, A&R Partners)
Currently: Global Director, Technology

Justin Blake
Formerly: SVP, Corporate practice, NY
Currently: DGM, Corporate practice, NY

Daniel Cornell
Formerly: SVP, Interactive practice, Chicago
Currently: DGM, Interactive practice, Chicago

Christopher Hayes
Formerly: SVP, Public Affairs practice, Washington DC
Currently: EVP, Public Affairs practice, Washington DC

Todd Irwin
Formerly: SVP, Technology practice, Silicon Valley
Currently: DGM, Technology practice, Silicon Valley

Vic Malanga
Formerly: CFO, U.S. Operations
Currently: Worldwide CFO, Daniel J. Edelman, Inc.

Richard Murray
Formerly: EVP, Interactive practice, Chicago
Currently: President, me2revolution, Chicago

William Norris
Formerly: SVP, Sports & Sponsorship, Chicago
Currently: DGM, Sports & Sponsorship, Chicago

Mark Shadle
Formerly: MD, Corporate Affairs
Currently: Deputy President, Midwestern Region

Gerald Tschopp
Formerly: SVP, Consumer Brands, Los Angeles
Currently: EVP, Consumer Brands, Los Angeles


Have you made any acquisitions in the past year, or merged with another agency?
We acquired A&R Partners, Silicon's Valley largest independent technology PR firm, in May 2006. The acquisition of A&R included its offices in San Mateo, San Diego, Los Angeles, New York, Washington D.C., Denver, Portland and Louisville.

How many wholly owned offices do you have globally?
North America

Edelman US
Atlanta, GA
Austin, TX
Chicago, IL
Dallas, TX
Los Angeles, CA
New York, NY
Portland, OR
Sacramento, CA
San Francisco, CA
Silicon Valley
Seattle, WA
Washington DC

Edelman Canada
Montreal
Toronto

Latin America
Buenos Aires, Argentina
Mexico City, Mexico
Miami
Panama
Sao Paulo, Brazil

Europe
Amsterdam, Netherlands
Barcelona, Spain
Brussels, Belgium
Dublin, Ireland
Edinburgh, Scotland
Frankfurt, Germany
Hamburg, Germany
London, England
Madrid, Spain
Milan, Italy
Munich, Germany
Paris, France
Stockholm, Sweden
Warsaw, Poland

Asia-Pacific
Beijing, China
Guangzhou, China
Hong Kong, PRC
Kuala Lumpur, Malaysia
Melbourne, Australia
Mumbai, India
Seoul, Korea
Shanghai, China
Singapore, Singapore
Sydney, Australia
Taipei, Taiwan
Tokyo, Japan

How many partly owned offices or affiliates do you operate globally?
We have over 50 affiliates globally.

What offices opened in 2006 or early 2007? (State when)
None (Only A&R Partners acquisition in May 2006)

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

Which regions, US and globally, are growing, and why?
In the US

Office

CY 2005

CY 2006

% change

Portland

$2,811,721

$4,364,283

55%

Washington

$24,954,944

$37,638,670

51%

Sacramento

$1,028,548

$1,353,033

32%

Atlanta

$6,329,429

$8,259,742

31%

Chicago

$49,715,636

$61,740,910

24%

New York

$51,205,305

$59,199,477

16%

Silicon Valley

$4,584,106

$12,427,141

171.1%*

Our goal is to be first in quality reputation in the communications industry. Edelman has developed a formal quality program that is fueled by two principles: accountability and the exchange of best practice knowledge throughout our global network. Not only is staff held accountable for their client's expectations, but we invite clients to review our performance on a regular basis. Because of this very real commitment to quality, Edelman has experienced very little client turn-over. This, along with new business is reasons for our growth.

In Asia

Revenue increase of 32%
Key growth markets are China and India
Strong regional client list: AIG, J&J, Astra Zeneca, Microsoft, Goldman Sachs
Significant new business: Microsoft X-Box; AMO, Sun Hung Kai, SICPA

In Europe

A 19% increase over 2006
Significant new business: Diageo, GlaxoSmithKline, Mars Incorporated , Royal Dutch Shell plc; Sanofi-Aventis; Schering AG

In Canada

A 33% growth in revenue in 2006.

How many practice areas do you have? Please list.
Consumer
Corporate Reputation
Crisis & Issues Management
CSR
Employee Engagement
Entertainment (MATTER)
Financial & IR
Healthcare
Interactive
Multicultural
Public Affairs
Sports & Sponsorship
Technology
Travel & Tourism
Research (StrategyOne)
Advertising (Blue)

Which ones are new?
Me2 Revolution, our media lab-type group, which helps us navigate PR 2.0 by focusing on advancing our new media capabilities. Among other social media initiatives, they've created a social media release, conversational advertising and blog communications.

Of those, which ones are part of the core strategy of the agency?
All aforementioned practices are part of Edelman's core strategy; our largest global practices are Consumer (22%), Healthcare (20%), Corporate (15%), Technology (14%), and Public Affairs (11%).

Which practice areas have been phased out in the past year?
N/A

What practice areas showed the most growth? Please elucidate.
All of our practice areas grew globally in 2006, led by Public Affairs (48.3%); Technology (33.2%); Interactive (26.6%); Corporate Affairs (22.2%); Healthcare (20%) and Consumer (14.7%)

Which practice areas showed the least growth? Please elucidate.
BioScience (medical education and publishing) is flat.

What is the distribution of accounts across practice areas?
N/A

What key account wins did you have in 2006? If based outside the US, or are global, please state regions.

American Egg Board

Computer Sciences Corporation

Kaiser Permanente

Roche

American Heart Association

Curves

MedImmune Inc

SC Johnson

American Petroleum Institute (API)

Danone

Merck

Schering Plough

Autodesk Inc

Diebold, Inc.

Microsoft Vista

Scotts

Burger King

Duke University

Mushroom Council

Sepracor, Inc.

California Energy Commission

Fox Interactive

Nestle Beverage

Teva Pharmaceutical Industries, LTD.

Cephalon, Inc.

Hanesbrands Inc.

Novartis

USAA

Charles Schwab & Co, Inc.

International AIDS Vaccine Initiative

Ocean Tomo

Wal-Mart Stores, Inc.

Church & Dwight

Johnson & Johnson

PriceWaterhouseCoopers

 


In Asia-Pacific
AMO
Microsoft: X-Box in China
Sun Hung Kai
SICPA

In Europe
Diageo
GlaxoSmithKline
Mars Incorporated
Royal Dutch Shell plc
Sanofi-Aventis
Schering AG

Of your 2006 wins, how many were across three or more countries?
Edelman represents thousands of clients, so it is difficult to provide precise details. We estimate that at least 25% of our new clients are in 3 or more countries.

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

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

Abbott

Church & Dwight

Microsoft

Pfizer

Akamai

Diageo

Nissan

Shell

What proportion of your clients are on a retainer? Has this changed over the past year?
29% of worldwide fees are from retainer projects.
No.

What was your 2006 global (including US) revenue?
$327,972,819

What was the % change over 2005 global revenue
25.2%

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

What was your 2006 US revenue?
$216,145,972

What was the % change over 2005 US revenue
26.5%

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

Did you experience top-line or bottom-line growth in the past year, or both? Please elucidate.
Yes, globally, revenue grew 25.2%.

How much of your growth was organic, and how much was due to new business won?
Approximately 2/3 of our growth is organic.

How did your performance, in terms of revenue and growth, meet expectations you had for the year?
We exceeded our own expectations in 2006:

  • Global growth from $271 million in 2005 to $337 million in 2006
  • Consistency of growth across offices and practices - a reflection of increased capabilities in many areas and disciplines
  • Significant growth in Public affairs, Technology, Consumer, Corporate, Interactive and Healthcare.
  • A 26% increase in employees globally in the last fiscal year

2007 Agency Business Report

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