Analysis: Few PR survivors in the doomed dotcom fallout

Three years on from the height of the dotcom boom, Gnash Communications - the darling of the new economy - has gone out of business. Adam Hill looks at what happened to its peers

Firefly Communications MD Claire Walker can pinpoint the time she realised the dotcom boom was coming to an end: it was in 1999 when her agency promoted a book called The Internet Bubble. Author Tony Perkins, the editor-in-chief of Red Herring, the San Francisco-based tech magazine, talked of internet stocks being massively over-valued and an impending crash.

At that time, the noise of a few doom-mongers was drowned out by the loud knocking at PR agency doors by internet start-ups. And when faced with cash or offers of equity, questions about the nature of new clients' business plans were sometimes not as penetrative as they might have been.

Last week's demise of dotcom specialist Gnash Communications will be an uncomfortable reminder to many agency heads of the sleepless nights they suffered during 2001, and are perhaps still enduring now.

Two years ago, the top ten dotcom agencies by fee income included Band & Brown Communications, MacLaurin, Shandwick International, Beattie Media, Firefly Communications, Fodor Wylie, Nelson Bostock, Weber and Midnight Communications. In 2003, just Nelson Bostock, Midnight and Firefly remain on the list. Walker says: 'It wasn't going to last. Ten people a day were asking us for PR. It seemed a bit too easy.'

In 2001, 15 per cent of Firefly's fee income - £847,000 - came from dotcom activity. This year the figures have barely changed (12 per cent, £875,000) which gives a strong clue to the agency's approach. 'We used to dissect our client base,' says Walker. 'This was to see we had equal proportions of dotcoms and digital leaders, such as big tech companies, plus young, ambitious tech start-ups. Underlying that is all the telecoms firms we worked with on B2B or consumer work.'

So while Firefly has been hit on all sides by the bursting of the dotcom bubble plus the tech and telecoms downturn, it has not been mauled as badly as might have been feared.

There is a similar story at Beattie Media, which appeared in the 2001 table but not this year. 'We had a dedicated tech team. But IT practitioners are part of our consumer and B2B offering: if you are marketing M&S or a tech company to consumers the techniques and target media are often the same,' says CEO Gordon Beattie.

Band & Brown, which derived 60 per cent of its fee income in the 2001 table from dotcom clients, looks to be one of the biggest losers in what has been called the 'dotbomb'.

But CEO Nick Band insists this is not the case: 'We never created a dotcom division. That 60 per cent also included a lot of our big companies who were spending money on the internet, so many of our "dotcom' clients were retailers, spread throughout the agency. A lot of our clients in dotcoms left and joined mainstream tech companies and took us with them. And we had some good ones: beanz.com, for example, went on forever.'

In any discussion of dotcom insanity, 'forever' is relative, but Band adds: 'The dotcoms took a long time to collapse around us. There were a few bad debts but it also brought us a lot of money.'

And Band & Brown's potential exposure pales next to that of Midnight Communications. Two years ago, a staggering 99 per cent of its income came from dotcom clients. This has now been slashed to less than a quarter.

Founder and CEO Caraline Brown puts part of the agency's continued existence down to the fact that it is primarily Brighton-based, with lower overheads than London. She outlines her survival strategy: 'We didn't take shares in exchange for fees and we started to make cuts - not redundancies - 18 months ago.' At one point, the management team took a reduction in wages.

'We suffered bad debts no end last year and the year before, and this has been one of the worst years of my life.' But Midnight is still here, says Brown. 'We've been a lot more careful in what we take on, for example we would never touch anyone without second round funding.' The agency merged with the struggling Flapjack Communications 18 months ago and Midnight MD Antony Mayfield, adds: 'We have repositioned as a generalist agency.

We had a lot of IT people who went back to their core competency and we branched into B2B, lifestyle and consumer.'

Martin Bostock, MD of the third survivor of both top tens, Nelson Bostock, admits: 'We made mistakes, got our fingers burned a couple of times and were left with bad debts. But although a good chunk of our income was from internet and e-commerce-related clients, it doesn't mean they were small fluffy companies with no business plan.' And the agency always maintained a 40 per cent base of consumer and lifestyle accounts, he claims.

There is sympathy for Gnash from competitors who envied its dynamism and success. But the agency's slide from fastest-growing agency in 2001's PRWeek Top 150 to oblivion last week is seen as a stark warning of the peril in following too narrow a path.

Walker concludes: 'We tend not to use the words "dotcom" and "new economy" now, they are rather passe.' Mayfield puts it more bluntly: '"Dotcom" is a dirty word.'

TOP 10 DOTCOM PR SHOPS

Rnk/01 Company Sector PR income % overall

(pounds) income

1 The Red Consultancy 1,304,950 20

2 Firefly Communications 875,000 12

3 GCI/APCO UK 518,000 3

4 Midnight Communications 360,000 24

5 Grant Butler Coomber Group 309,974 11

6 Joe Public Relations 307,469 18

7 Nelson Bostock Communications 233,347 6

8 Bite Communications 168,700 4

9 Brands2Life 159,000 17

10 Ogilvy PR Worldwide 153,000 2

Source: Contact directory, most recent figures

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