When Shandwick announced it was acquiring the huge government affairs firm, The Cassidy Companies, for a reported dollars 70 to dollars 80 million (see Jody Powell profile, p22) in October, it sent shockwaves through the industry.
When Shandwick announced it was acquiring the huge government
affairs firm, The Cassidy Companies, for a reported dollars 70 to
dollars 80 million (see Jody Powell profile, p22) in October, it sent
shockwaves through the industry.
Was the price right? Shandwick obviously thinks it was - even though it
already had a burgeoning practice in DC, it’s putting a stake in its
future with a greater presence in this opportunity-laden
marketplace.
Washington is no longer a one-company town. Growth in the financial,
hi-tech and healthcare sectors especially means that there are an
increasing number of PR pros who work here who don’t work in government
relations.
And yet, there’s no question that the biggest field remains public
affairs and government relations. ’Smart firms recognize the need to
marry the two,’ says Bob Sommer, EVP and principal of The MWW Group,
whose DC office exceeded 50% growth last year. PRWeek’s rankings of the
top agencies in the DC area show a respectable growth in billings of 25%
(compared to a national average of 24%). Only three firms registered
losses from ’97 to ’98, and the managers of two of them, Edelman and
Ruder-Finn, confidently asserted to PRWeek that they are back on the
growth track.
Each of the top 10 firms, and most of the others on PRWeek’s list, have
a public affairs practice or perform that role for clients in areas such
as healthcare and technology.
Burson-Marsteller and Hill & Knowlton, with strong public affairs and
lobbying practices, had cornered the number one and two positions in the
marketplace. Then, suddenly, Shandwick reshuffled the order. All told,
Shandwick estimates its ramped-up DC operation will post dollars 75
million in revenue this year, creating a new powerhouse.
Shandwick has been making a name for itself in the DC marketplace but it
lacked a firm, established presence in the market. The Cassidy
Companies, aware of the importance of an overseas presence as the World
Trade Organization and European Union play important decision-making
roles regarding trade, also had an interest in expansion.
Fleishman-Hillard regional president Paul Johnson draws this lesson: ’If
you want to be a serious global contender, then you must have a strong
DC presence. You see that with the Shandwick acquisition.’
Other firms feel the need to consider expansion. Ketchum senior partner
and director Mark Schannon expresses interest in acquiring or developing
closer relationships with government affairs and public affairs
firms.
Manning, Selvage & Lee is intent on expanding its public affairs
capability and expresses interest in potential acquisitions. Other
firms, such as The Hawthorne Group, credit last year’s 88% growth to
’organic’ expansion of services beyond traditional public affairs to
areas such as crisis communications and strategic analysis.
Ups and downs
Public affairs, of course, has its ups and downs. For instance, as the
impeachment process gathered momentum, growth slowed at Powell Tate.
Conversely, BSMG received a big spike in income last year due to its
work involving the tobacco settlement. The agency’s growth in terms of
long-term clients is said to be good this year but income is unlikely to
match 1998’s exceptional performance of 146% growth.
Larger firms such as FH, Ogilvy and H&K are also showing greater
interest in performing PR on behalf of the government. It is not as
profitable as commercial work but can provide significant overhead on a
consistent basis. FH won a five-year, dollars 10 million annualized
contract last year from the Office of National Drug Control Policy. It
also has a multiyear, multimillion dollar account with the U.S. Mint.
Ogilvy has received an dollars 8.2 million contract from the Institute
for Neurological Disorders and Strokes of the National Institutes of
Health (NIH). Cohn & Wolfe received dollars 2 million to plan the
strategy for the Census PR.
In a connected field, Washington-area PR firms can find a lucrative
client base in the 3,600 non-profits and associations that Gale Research
says are based in the DC region. Charles Greener, GM for Porter Novelli
notes, ’Increasingly, companies are asking trade associations to take on
a broader assignment - to not only do public policy, but also provide
guidance and promotion of their products and industry.’
Full-service trend
The Shandwick acquisition also indicates a trend that big firms say is
becoming more pronounced in Washington - the need to offer clients full
services. ’It’s no longer advertising or press releases. You need
research, grassroots, new media, coalition building,’ asserts Cynthia
Hudson, MD of Burson.
That helps explain this year’s other deals. BM bought Direct Impact, the
grassroots-consulting firm after a one-year strategic alliance, deciding
that its expertise would be more capable than an in-house operation. PN
acquired Goddard-Claussen and while the firm was started in California,
it has a Washington office that has concentrated on areas such as the
environment and healthcare. Earle Palmer Brown in mid-’98 acquired the
PR firm Henry J. Kaufman & Associates, restoring a PR capability that it
had winnowed down earlier in the decade.
Healthcare and hi-tech are important practice areas, often but not
always intertwined with public affairs. The federal government has
helped spur the technology revolution in the area, diversifying the
region’s economy and giving rise to over 3,000 tech companies. The
Pentagon and the federal government have added sizzle to northern
Virginia’s hi-tech business; the NIH is spurring medical and bioscience
industries in suburban Maryland.
The NIH and Centers for Disease Control and Prevention are also
undertaking important public information campaigns. Ogilvy has done well
in this area as has PN, which has a huge ’social marketing’ contract
with the foundation overseeing the youth prevention campaign of the
foundation created by the tobacco settlement. BM, H&K, MS&L, Edelman and
Ketchum, among others, have found success in handling public affairs for
healthcare trade associations, medical and pharmaceutical companies and
other health-related institutions.
One fast-growth firm of late has been the Matthews Media Group
(Rockville, MD), which posted dollars 5.8 million in fee income last
year and is on track to do dollars 18 million this year, according to
president Molly Matthews. Most of the agency’s work is in staging health
communications campaigns along with PR campaigns to recruit patients for
research trials for pharmaceutical companies and the NIH.
Proximity is key
John Seng, president of Spectrum Science PR, which specializes in
pharmaceuticals, registered 81% growth last year compared to 1997. New
York has traditionally been the important center for health PR, but Seng
sees more prescription product work being done in DC. Marketing, he
notes, can be done in either city. The difference is the relationships
that can be forged between the regulators and the third-party groups on
whose word hinges the fate of a product. ’I’m just a cab ride away from
Capitol Hill, and I can take the Metro up to NIH,’ he notes. ’If you
can’t convince the legislators charged with oversight or regulators or
researchers that your product is best, then some other company will do
that.’
’The DC firms,’ insists Seng, ’are best positioned to do the
multifaceted public relations and public affairs campaigns that can best
promote prescription products.’
Nearly every big firm proudly promotes its tech practice, arguing that
it can provide better services to fledgling companies in areas such as
IR and, naturally, public affairs, as topics such as encryption and
e-commerce become important policy issues. Some of the more notable
practices in a still-fledgling market are located at Edelman, Ketchum,
Ogilvy and H&K. FH’s work on behalf of the Baby Bells in the telecom
debate in the mid-’90s proved a useful learning experience.
Fleishman DC now works on public affairs for SBC, one of the Baby Bells
involved in the suit.
But the big firms do not have this field to themselves. Gloria Dittus,
president and CEO of Dittus Communications (Washington), started her
tech PR company in the mid-’90s. Its client list now includes Network
Solutions, the world’s largest registrar of Web addresses, and Internet
advertising company DoubleClick.
H&K’s Blanc & Otus (San Francisco) recently set up an office in DC to
serve the burgeoning tech market, and Waggener Edstrom (Portland) is
also considering such a move. Northern Virginia has a host of companies
serving this market, such as The Weber Group (Alexandria), Promarc
Technology (Arlington) and O’Keeffe & Company (McLean).
Agency heads see other potential revenue sources on the horizon. FH
formed a financial services practice in the expectation that banking
deregulation and e-commerce will create a niche. Investor relations will
be more important here to serve dot-coms.
Craig Martin, EVP and MD of Ruder-Finn, sees potentially lucrative
clients in small and medium medical technology firms in the Maryland and
Virginia suburbs. H&K president and CEO/USA Tom Hoog says his agency has
been diversifying its portfolio to include a good-sized consumer
practice.
But will the public relations boom in Washington, DC last? Dittus is
optimistic. ’The future’s knocking on our back door,’ she says, pointing
out that the DC tech boom is Internet-driven, and that boom will not
disappear soon. Others, such as Ketchum senior partner and director Mark
Schannon, while pleased with the firm’s breakthrough this year in its
Internet business, sees an inevitable shakeout in dot-coms. But Hoog
argues that the total tech growth in DC, including telecom, cable,
hardware and software, may eventually equal spending in public
affairs.
Fresh, hip faces
New faces will add some firepower to the DC scene. Torie Clarke, who
used to work at Bozell/Eskew Advertising, will be running H&K’s DC
office. Clarke’s style, described by a co-worker as ’young’ and ’hip,’
will provide a counterpoint to a firm often stereotyped as a preserve
for
dark-suited lobbyists.
Burson expects its global health practice will be invigorated in DC as a
result of the group’s new head, Dr. Ken Rabin, moving to the
capital.
Also, Joe Martyak has taken over the Golin/Harris Washington office,
planning to boost its expertise in key areas. And Fenton Communications,
a specialist in environmental and human rights causes, is seeking a new
general manager.
KINGS OF THE HILL: TOP 33 WASHINGTON, DC PR AGENCIES
Rank Company Income Change US income
98 97 1998 1997 % 1998
1 1 Burson-
Marsteller 34,646,000 31,227,000 11 136,596,000
2 2 Hill & Knowlton 27,000,000 23,200,000 16 113,000,000
3 11 BSMG Worldwide 20,855,500 8,488,500 146 109,537,000
4 3 Fleishman-
Hillard 19,648,000 16,959,000 16 136,272,000
5 5 Ketchum 18,946,000 14,664,000 29 101,485,000
6 N/A Porter Novelli 17,517,025 N/A N/A 88,235,570
7 8 Ogilvy
PR Worldwide 16,229,000 11,959,000 36 54,457,700
8 4 Powell Tate* 15,656,880 15,556,820 1 15,656,880
9 6 GCI/APCO 14,295,000 13,540,000 6 44,539,245
10 10 Shandwick
Public Affairs 12,899,000 8,625,000 50 91,485,000
11 7 Edelman PR 12,267,146 13,228,158 -7 101,868,218
12 9 The
Kamber Group 11,962,300 10,785,000 11 11,962,300
13 13 Weber/McGinn 9,379,534 6,522,932 44 57,866,543
14 16 The
Hawthorne
Group 8,051,443 4,282,338 88 8,051,443
15 14 Greer,
Margolis,
Mitchell,
Burns &
Associates* 7,278,661 5,709,385 27 8,801,461
16 12 The Widmyer
Baker Group 7,242,745 6,739,855 7 7,242,745
17 N/A Manning
Selvage & Lee 5,904,400 N/A N/A 50,173,300
18 18 Matthews
Media Group 5,800,000 3,300,000 76 5,800,000
19 15 Stackig
Advertising
& PR 4,570,721 4,291,270 7 4,570,721
20 17 Brotman
Winter Fried 4,125,000 4,075,000 1 4,125,000
21 20 Smith & Haroff 3,100,000 2,700,000 15 3,100,000
22 21 Strat@comm 2,868,424 2,219,203 29 2,868,424
23 32 Earle
Palmer Brown 2,600,000 100,000 2500 8,800,000
24 19 Ruder-Finn 2,467,000 2,735,000 -10 45,601,000
25 24 Creative
Response
Concepts* 2,371,100 1,498,600 58 2,371,100
26 25 The MWW Group 2,321,945 1,490,000 56 17,220,267
27 29 The
Promarc
Agency 1,939,257 909,541 113 1,939,257
28 26 Cohn & Wolfe 1,862,008 1,386,000 34 25,981,976
29 22 Hagar Sharp 1,803,454 2,041,031 -12 1,803,454
30 28 Spectrum
Science PR 1,759,844 974,209 81 1,759,844
31 23 RMR &
Associates 1,700,000 1,500,000 13 1,700,000
32 27 Geddings
Phillips
Communications 1,300,000 1,100,000 18 1,300,000
33 30 Golin/Harris 1,100,000 900,000 22 48,612,159
1998 Total Income 78,045,962 222,706,842 25 1,176,374,737
Rank Company SV % US income SV % Location
98 97 1998 1997 1997
1 1 Burson-
Marsteller 25 119,330,000 26 Washington, DC
2 2 Hill & Knowlton 24 103,100,000 23 Washington, DC
3 11 BSMG Worldwide 19 58,136,000 15 Washington, DC
4 3 Fleishman-
Hillard 14 115,193,000 15 Washington, DC
5 5 Ketchum 19 78,769,000 19 Washington, DC
6 N/A Porter Novelli 20 66,594,342 N/A Washington, DC
7 8 Ogilvy
PR Worldwide 30 33,053,000 36 Washington, DC
8 4 Powell Tate* 100 15,556,820 100 Washington, DC
9 6 GCI/APCO 32 37,786,457 36 Washington, DC
10 10 Shandwick
Public Affairs 14 80,292,000 11 Washington, DC
11 7 Edelman PR 12 86,833,594 15 Washington, DC
12 9 The
Kamber Group 100 10,785,000 100 Washington, DC
13 13 Weber/McGinn 16 49,020,178 13 Arlington, VA
14 16 The
Hawthorne
Group 100 4,282,338 100 Alexandria, VA
15 14 Greer,
Margolis,
Mitchell,
Burns &
Associates* 83 6,788,327 84 Washington, DC
16 12 The Widmyer
Baker Group 100 6,739,855 100 Washington, DC
17 N/A Manning
Selvage & Lee 12 37,767,050 N/A Washington, DC
18 18 Matthews
Media Group 100 3,300,000 100 Rockville, MD
19 15 Stackig
Advertising
& PR 100 4,291,270 100 McLean, VA
20 17 Brotman
Winter Fried 100 4,075,000 100 Washington, DC
21 20 Smith & Haroff 100 2,700,000 100 Alexandria, VA
22 21 Strat@comm 100 2,219,203 100 Washington, DC
23 32 Earle
Palmer Brown 30 6,500,000 2 Washington, DC
24 19 Ruder-Finn 5 42,650,000 6 Washington, DC
25 24 Creative
Response
Concepts* 100 1,498,600 100 Alexandria, VA
26 25 The MWW Group 13 14,367,000 10 Washington, DC
27 29 The
Promarc
Agency 100 909,541 100 Washington, DC
28 26 Cohn & Wolfe 7 21,533,360 6 Washington, DC
29 22 Hagar Sharp 100 2,041,031 100 Washington, DC
30 28 Spectrum
Science PR 100 974,209 100 Washington, DC
31 23 RMR &
Associates 100 1,500,000 100 Rockville, MD
32 27 Geddings
Phillips
Communications 100 1,100,000 100 Reston, VA
33 30 Golin/Harris 2 42,088,000 2 Washington, DC
1998 Total Income 24 957,412,783 23
Source: PRWeek Top 200 *Denotes that only the 1998 income has been
audited by the Council of Public Relations Firms
*Includes NY office
Includes Baltimore office
Includes NY, Atlanta and LA offices
Includes NY and LA offices
