The 2000 PR Week Top 150 reveals an industry poised for change.
Over the last couple of years, the dot.coms growth has had substantial
impact on PR practices, but for the first time in 1999, the influence of
the e-conomy really made itself felt on agency business.
While the number of new clients serviced by the Top 150 companies
continued to rise, fee income growth was three per cent below the 1998
rise of 17 per cent, and fell slightly below the 15 per cent growth
years of the mid-1990s. This is, in part at least, the result of the
increasing willingness of companies to take on loss leaders in their bid
to establish their stake in the e-conomy. This trend is reinforced by
those agencies which have been willing to take share options in dot.com
start ups in lieu of fees.
This week also sees the publication of a report by Willott Kingston
Smith which claims that while marketing services companies are currently
experiencing a boom in business from internet-related marketing, this
expansion is not necessarily boosting profitability. WKS attributes the
nine per cent drop in operating profits among PR firms to the increased
employment costs of bringing requisite skills in-house. This would
certainly seem to be supported by PR Week’s own survey which identified
a willingness for PR agencies to recruit ahead of their needs to ensure
that they were fit for the future.
A large number of agencies also undermined their profits this year by
reinvesting in restructuring and the creation of specialist new media
divisions. In fact, a significant number of companies were willing to
rationalise their own client lists, on the premise that by taking a cut
in their immediate profits and fee income they would be better poised to
take on a new breed of new business.
There is no doubt whatsoever that of all the marketing services, public
relations is best poised to benefit from the development of the dot.com
e-conomy - it is the only marketing discipline that can handhold a
company from design to IPO, and can advise on the crucial management of
reputation via the internet.
Only time will tell however, whether the turbulence of the dot.com
e-conomy will settle and enable these companies to build on the
foundations they have now established. The wisdom or otherwise of this
strategy will be illustrated by next year’s Top 150. If the dot.com
bubble fails to burst, then we will hopefully see a significant rise in
income on the existing base of clients, as fledgling start-ups operating
on a wing and prayer, begin to deliver the goods in terms of real PR
spend with their agencies.