GLOBAL RANKINGS: Canada - The US economy may be a bit wobbly, butagencies north of the border are keeping their cool while independentscontinue to attract acquisitive international firms

Because of Canada's heavy reliance on the US, its biggest trading

partner, you'd think that the loud bang of the American technology

bubble bursting would have shaken the PR foundations north of the

border. Not so. "Last year, we were lamenting that US firms had far more

of the dot-com business than we did," says Linda Smith, SVP and GM of

Fleishman-Hillard Canada in Toronto. "Now this year, we don't mind so


Not that the technology downturn hasn't been felt by the country's PR

agencies. In June, five-year-old Pydea, a hi-tech firm in Toronto whose

clients included Media Metrix and travel Web site, laid off its

entire staff. However, that casualty is not indicative of the current

market, especially when you consider Pydea was a boutique with only four

full-time employees. Most hi-tech firms in Canada - and the technology

divisions of multinationals - are experiencing growth, but not at the

rates that forecasts projected last fall.

Take, for example, Maverick Public Relations in Toronto, something of a

tech darling in the Canadian PR landscape, that has rapidly grown to 25

clients and over $1 million in revenues in just two years. "In

the first quarter of 2001, we were 40% over 2000 revenues," says

president Julie Rusciolelli, who adds that she's only had to lay off one

employee this year. Maverick currently has 13 staff members. "But that

growth is way, way lower than projected."

What is continuing to drive the Canadian market is globalization, or at

least North Americanization, as companies look for agencies that can

service both Canadian and American markets, especially in the tech and

healthcare sectors.

While some tech businesses went belly-up or scaled back their budgets,

several major new accounts outside the tech sector have been put up for

grabs in competitive pitches this year. Electronic retailer Best Buy of

Minneapolis hired the Toronto office of Edelman as part of its drive to

enter Canada with 65 stores over the next three years, while Levi

Strauss Canada hired its first ever PR agency of record in Apex Public

Relations, a Toronto shop with about $2 million in revenues.

But the biggest trend steering the industry is the blurring of the

border, with many firms both big and small reporting at least 25% of

their work being done south of the border, either for Canadian-based

clients or, to a lesser but still significant extent, for US-based

clients. That has resulted in multinationals continuing to buy up

independents, and Canadian-owned PR firms fighting back by expanding

outside their native land. This trend is expected to continue over the

next few years.

New force

Although accurate figures for the Canadian PR industry are difficult to

come by because many firms are privately owned, industry estimates value

it at between $200 million and $300 million (C$290

million to C$435 million). While the branch offices of US giants

such as Hill & Knowlton, Cohn & Wolfe, and Edelman have long competed

neck-and-neck in the Canadian market, last year Fleishman-Hillard broke

away as a dominant force, thanks to its aggressive acquisition


Fleishman's 2000 billings skyrocketed to $27.9 million, up from

$4.1 million in 1999. That massive growth is a result of

Fleishman Canada reporting revenues that for the first time include a

merger with GPC International of Toronto (which has offices in 16

countries, eight of those in Canada), and the acquisition of High Road

Communications (the largest hi-tech PR firm in Canada, with offices in

Ottawa, Toronto, and San Francisco). In recent years, High Road has

enjoyed annual growth rates between 70% and 75% (although this year it

expects those numbers to drop to a modest 5% to 10%). For High Road, the

blurring of the US-Canadian border was never more apparent until this

year. With revenues exceeding $4 million, High Road has grown by

concentrating on the US market, which accounts for 85% of its work. Its

Canadian clients - for which it does mostly US work - include Northwood

Technologies (a wireless telecom software solutions provider) and

Synamics (a developer of voice and data applications for

telecommunications carriers).

Citing the reaction to a shrinking US tech market and the higher profile

of Canadian companies such as Nortel Networks and Research in Motion

(the maker of the hand-held e-mail gadget BlackBerry), High Road's

managing partner and cofounder Rick Doyon says American PR firms are now

pursuing Canadian clients looking for US exposure. "In the heyday of

1999 and 2000, they would never have looked twice at any of these

companies because the Canadian budgets were too small," says Doyon.

"They wouldn't talk to you unless the account was at least $30,000 a month. Now they're saying to clients, 'We can do that work for

$15,000 a month.' They're promising the moon and stars to some

Canadian clients, but what happens when those expectations aren't met?

Something will have to give." He says High Road has pitched against such

US firms as Fitzgerald Communications of Boston.

National pride

Fleishman Canada's acquisition strategy is to keep itself, GPC and High

Road operating separately, so clients are not lost due to conflict, and

work can be referred to one another. But Fleishman Canada's main barrier

to dominating the market comes from two Canadian-owned firms, both of

which are gunning to become global players - or at least a force in the

North American market.

Canada's largest PR firm is National Public Relations in Toronto (49%

owned by Burson-Marsteller), whose billings this year total an

impressive $46 million, up from $27 million in 1999. That

growth includes the June acquisition of Labrador Communications of

Vancouver, which takes the number of national offices in Canada to five.

National also has a New Jersey office.

Partner Colin Buchanan says National's main push is to become an

international player. "It's our dream to open in London, and we hope to

be there next year," he says. The healthcare business is helping to

stimulate that expansion dream, with European clients such as

Swiss-based drug company Sarona.

Toronto-based Environics Communications is the other leading Canadian

independent, with total revenues of C$7.2 million. In June, it

opened its second US office in Washington, DC. Its first office in

Stamford, CT opened in 1995, and now has 19 employees. The Washington

office is being headed by senior VP and general manager Dave Groobert,

most recently a senior managing director at H&K in Washington and

formerly director of PR at global satellite communications company

COMSAT in Bethesda, MD.

Bruce MacLellan, founder and president of Environics, says the

Washington office will service clients like the Association of Hispanic

Advertising Agencies and the National Safe Kids Campaign.

But the Canadian independents are aware that the market will likely face

further consolidation. Echoing a statement expressed by the heads of

Apex Public Relations and Maverick, MacLellan says he receives calls

from "two or three players who are constantly prowling for


Maverick's Rusciolelli compares it to being at a ball, with many suitors

looking to fill your dance card. "It feels good to be wanted," she says.

"But we tell them we're not interested. Not yet, anyway." No doubt those

suitors will take a rain check.



2000 1999 2000 1999 CHANGE

1 5 Fleishman-Hillard 27,928,000 4,121,000 578

2 1 Hill & Knowlton 15,146,000 11,830,000 28

3 3 Weber Shandwick Worldwide 8,696,000 5,823,000 49

4 2 Edelman Public Relations

Worldwide 6,817,645 8,038,593 -15

5 4 Optimum Public Relations 6,620,000 5,420,000 22

6 6 Porter Novelli International 4,001,000 3,042,000 32

7 7 Environics Communications 3,203,879 2,761,635 16

8 8 GCI Group/APCO Associates 3,112,296 2,428,226 28

9 N/A Manning Selvage & Lee 2,926,000 - N/A

10 9 Waggener Edstrom 444,259 237,884 87

SOURCE: PRWeek US Agency Rankings

NOTE: This is a list of global PR firms in Canada. It does not include

Canadian independents Company notes: Fleishman's revenues include income

from GPC in an Omnicom merger, as well as High Road Communications;

Burson-Marsteller owns 49% of National Public Relations.

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