As WPP announced its results recently, we were again reminded that the conglomerate's PR firms had failed to live up to chairman Sir Martin Sorrell's exacting financial expectations. "PR, I'm disappointed in you,principal Sorrell seemed to say.
Perhaps buoyed by reassurances from one or two of his PR agency reports, Sorrell had hoped that PR would prove recession-proof - or at least better sheltered from the economic storm than advertising. But, as predicted by some old souls who'd seen it all before, the recession hit PR agencies just as hard as it hit their advertising brethren. In fact, according to WPP and Omnicom, their PR arms suffered more than their ad agencies last year.
Why would the incredibly astute Sorrell have expected the reverse? For one, strategic corporate communications and employee relations are arguably more important in tough economic climates than in sunnier times. Crisis and issues management workloads might be expected to increase in a recession also. And there has long been a belief that public affairs work must go on during a downturn - as do material announcements, which constitute the bread and butter for IR pros.
But we know in reality only a limited percentage of most agencies' revenues come from high-end strategic consulting, employee relations or crisis and issues management (most still rely more heavily on short-term promotional work). We also know that some CEOs - though they seem to be slipping slowly into the minority - still regard spending in these areas as discretionary.
What's more, public affairs took a major and completely unpredictable hit following September 11, while IR revenues fell as M&A activity dwindled.
All this added up in 2001 to disprove the theory that PR is recession-proof.
OK, so that is disappointing - who wouldn't like to work in a recession-proof industry after a year like 2001? But more disappointing is the PR industry missing another opportunity to prove that it has more effective tools for brand-building than the ad industry. As ad budgets were cut back, so was PR spending, despite the fact that the recession could have given PR a chance to show marketers that it is a more cost-effective way of building a new brand or taking a new product to market.
A handful of healthcare and tech corporations, which often seem to have less conservative, more dynamic marketing departments, took advantage of PR's cost-effective brand-building potential last year. Just look at the successful launch of the iPod, Orbitz, the Xbox or Dean Kamen's Segway, all of which depended on PR building the brand before the ad guys wheeled out their big guns.
But most marketers in the food and beverage and auto sectors continued to plow the old ad furrow, despite the fact that budgets were pared back so that brand managers are getting an ever smaller, less receptive audience in return for their dollars.
As PR stands, it cannot thrive - or go unscathed through a recession - on only high-end corporate communication and crisis work. In fact, the bigger chunk of agency revenues still comes from the part PR plays in the marketing mix. Which is why a recession is an opportunity for PR to thrive, at the expense of the increasingly inefficient ad industry.
But would Mr. Sorrell have wanted PR to steal share from advertising in order to maintain or improve its own revenues? One cannot help thinking he would not.