How the Edelman juggernaut powered on in 2013

Edelman's financials are always a fascinating read. Not just because it is the largest PR agency in the world and therefore a de facto bellwether.

Edelman's financials are always a fascinating read. Not just because it is the largest PR agency in the world and therefore a de facto bellwether.

But also because most of the rest of the top agencies are in holding company networks that don't release their figures - so we can't talk about them.

Believe me, we would write about them if we could. But the iron grip of Mr Sarbanes and Mr Oxley has WPP, Omnicom, Publicis, and IPG firmly in their grasp. At least, that's what the folks at the holding companies say. The idea of Sarbanes-Oxley was to make financial reporting more transparent, not less so. How releasing less information achieves this aim is a mystery to me. But anyway, I digress.

Edelman posted calendar year organic global growth of 11.4% in 2013 compared to the 12 months previous (its financial year actually runs from July to June). And this calendar year has also started well in terms of new business, with wins of Crayola and Tupperware complementing those such as Pitney Bowes from last year and organic growth from big global clients such as GE, Johnson & Johnson, AstraZeneca, and Unilever.

As an independent business Edelman has the ability to work on lower profit margins (approximately 14% in 2013) than its holding company competitors, which have to meet centrally imposed profits targets nearer to 20-25%.

When I spoke to senior management at the agency this week, global COO Matt Harrington noted that the New York office employed 365 people four years ago but had now more than doubled to 800. The DC office also performed surprisingly strongly, despite the deadlock that has caused much of corporate US to leave the Beltway in frustration.

One of the rare sectors where the agency lacks a really big global account is automotive, and maybe that is one area where not being part of a holding company is a weakness, given the integrated way in which these accounts work across advertising, marketing, digital, and communications. Think Team Ford and WPP, and Nissan United at Omnicom.

But Edelman's increase in revenue of $76 million in 2013 is impressive in anyone's language. And while ASIAPACMEA (Asia-Pac, Middle East and Africa) unsurprisingly grew 14.3% and Latin America grew 23.8%, the traditional stalwart markets of the US and UK stood up strongly.

In some of the more troubled regions in Europe the agency has refocused locally as many multinational clients have pulled back on communications and marketing in places such as Spain and Italy.

Another trend that is driving organic growth and is welcome for all agencies is the increasing amount of work coming through the CMO's office, or a more joined-up CCO and CMO function, and the integration of customer service functions under the CMO.

That latter trend makes sense given the influence of social media and the need for quick response and proactive real-time marketing and crisis plans. But it is good to hear that marketing and communications is getting more involved in customer service rather than the other way round.

Harrington isn't worried by the merging of the marketing and communications functions, pointing out that the smart, progressive CCOs who are digital natives are prospering in this environment because of more opportunity, not less.

Staff turnover and talent retention is still an issue at Edelman, especially at senior levels, just as it was at all the large agencies when we conducted our Agency Business Report analysis last May. For example, on the West Coast in 2013 the firm said goodbye to its global head of technology practice Pete Pedersen, president US western region Curt Kundred, and San Francisco GM Mike Kuczkowski.

The agency has instigated a full talent mapping and succession planning initiative that identifies where staffers can go next, and admits it hasn't been as deliberate about that in the past as it should have been. In addition, three out of four staffers have gone through a 30-hour top-up training program delivered internally across topics such as social media, search, and analytics.

But Richard Edelman was quick to point out that his agency's independence also makes it an attractive place to work, due to its low-control environment and the fact that the firm pays 35% of its pretax income into bonuses and compensation. “People want to be with a winner, with a company that has high ambitions,” he adds.

One thing's for sure, if Edelman keeps growing at this pace it is going to hit that magic $1 billion revenue mark within two to three years.

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