As in so many areas of business and culture, Europe took a lead
from the US in the early part of 2001, as the stock of dot-coms declined
rapidly following the hi-tech feeding frenzy of 1999/2000 (described by
one Italian PR staffer as "technology drunkenness.") As investors drew
their purse strings tighter, IPO activity across the board has slowed
from river to trickle, thus denying many agencies of the work that
served them so well.
Global agencies did particularly well last year, with both Weber
Shandwick and Hill & Knowlton breaking the $75 million fee income
mark. Euro RSCG remained on top with $87.7 million, pushed by
Chime Communications less than $2 million behind. On the back of
its strong growth, Chime - a WPP PR agency - has now set about expanding
its business beyond a traditionally UK base, with a notable entry into
the US market earlier this year.
Networks had a reasonable year but appear convinced the gap between
themselves and global agencies is closing. Although Worldcom network's
fee income was virtually static in 2000 at $56 million, and
Entente International dipped 13% to $30 million, Brodeur climbed
into second place in the PRWeek UK Europe 2000 networks table with a
rise of 27% to $30.2 million.
PR's growing popularity
But despite the recent downturn, most agencies are upbeat about the
stature of PR as a communications tool, and of its place in the
In the UK, the PR market is as sophisticated and lucrative as it is in
the US. Elsewhere in Europe, it is a work in progress. However, while
traditional advertising strongholds such as France remain tough to break
for aspiring foreign PR agencies, there are signs that attitudes toward
PR on the part of big business right across Europe are shifting. The
demand for strategic advice is on the upswing in almost every European
country, according to native PR staffers. In Sweden, for example, parts
of the PR industry rose to a par with management consultants, advising
CEOs and enjoying closer links to the boardroom than ever before.
Another driver for increasing interest in PR is companies' realization
of the need to maintain and enhance their corporate reputation across
the board. Legislation - or the promise of legislation - in many
European countries on enforced transparency in corporate governance
issues will increase this trend.
Depending on geography, agencies remain split between increased
specialization and the need for broader offerings. In Germany, upcoming
legislation on pensions and company taxation will push financial work to
the fore during the rest of the year and 2002. In Italy, Nicoletta
Cerana, MD of Ketchum Italia, says the country's crowded PR market
"generates confusion in the client's perception of PR service quality,"
so agencies are keen to differentiate their offering.
But in Belgium the reverse appears true. The bigger agencies, such as
GCI/APCO Brussels (which increased fee income by 36% to $6
million in 2000), have tended to focus on just two areas: the promotion
of domestic goods and services as well as public affairs. However, H&K
director Paul Baeyaert confirms that less familiar approaches, such as
guerrilla marketing, are on the rise. In the Netherlands, agencies are
looking to develop one-stop shops, bringing in advertising skills to
give them a more rounded appeal.
The resurgence of PR for bricks-and-mortar businesses is a given over
the coming year, as the relative demise of technology companies will
mean that agencies must court more traditional clients. The dot-com
explosion has also shown those same clients what can be achieved. The
marriage of offline comms with online will be of particular relevance to
Dutch agencies, given that nine percent of the Netherlands' GDP is
predicted to be generated online by 2005.
The downturn in dot-coms and telecoms has not affected European
economies equally across the board. Despite huge cutbacks by players
such as Ericsson, for example, technology remains big business in
Sweden, which is good news for relative newcomers like Havanna PR, which
jumped 300% last year through specializing in IT and dot-com clients.
Other stellar performances in 2000 came from financial specialist
Haubrok, which leapt into sixth place in the German rankings with a 119%
rise in fee income on the back of IPO work, much of which were dot-coms
coming to market. In the French market, Brodeur SRRP turned in a
sterling performance, increasing fee income by nearly half again to
$3.8 million, largely through dot-com accounts. Finally, few
Swiss agencies reported a significant downturn, and the second half of
2001 is predicted to be strong, with 2002 even better.
Europe remains appealing to a number of global agency groups. The main
attraction is still London, where last year's incursions were led by
BSMG (with Square Mile, GJW and Lyons Waddell) leading the charge.
Germany was also a popular destination for BSMG (with two acquisitions)
and Edelman (with one). Edelman also bought an agency in Sweden, while
two others bought in Italy: H&K purchased Gaia, and Weber Shandwick
snapped up Massmedia and Bridge Editore in Milan. Despite these
incursions from global agency groups, indigenous independent players
remain strong in a number of markets.
Barabino & Partners (with a fee income of $10 million) stayed at
the top of the tree in Italy. In the Netherlands, No. 2 agency Winkelman
& Van Hessen ($6.5 million in fee income) remains attractive to
international networks in a country where most of the leading agencies
have formal tie-ups with majors. And firms such as Vienna-based
Hochegger Com must also be seen as potential targets for takeover.
Austria's No. 2 agency has a fee income of $5.4 million, and the
country's PR industry is rightly seen as the gateway to central and
eastern Europe. This goes some way to explaining why Kohtes Klewes, the
dominant agency in Germany, took a 40% stake in Austria's Publico, which
boasted a fee income of $8 million.
In fact, London has been almost the exclusive hunting ground for
acquisitions in 2001, with its investor relations businesses
particularly attractive to the likes of Euro RSCG (Maitland) and WPP
(Finsbury). Other "hot" agencies that fell under the hammer included The
Red Consultancy, which was bought by Incepta. Porter Novelli,
Fleishman-Hillard, MS&L, BSMG and Golin/Harris all continued to round
out their UK offerings.
Many PR pros point to the relative lack of maturity in the German,
French and Italian PR markets when compared to the US and UK. If this is
the case, then it follows that even greater opportunities are on the
horizon as executives turn their gaze further eastward. The mass
privatization programs in energy and telecoms that followed political
and economic liberalization in central Europe from 1990 onward are
largely completed and western brands - attracted to the region by the
appearance of potentially voracious consumer markets from behind the
iron curtain - are strongly in evidence.
Hungary's economy has grown at more than four percent for the last five
years - ahead of the other big players in the region, Poland and the
Czech Republic - and is set to grow five percent this year. Hungary will
soon see a shake-up of its banking system, reducing 40 or so
institutions down to half a dozen.
Julianna Gulden is MD of Gulden Communications in Budapest. Despite a
name change earlier this month from Gulden B-M to align themselves more
closely with the Young & Rubicam ad brand, she believes clients are
increasingly seeing the value of PR over advertising: "As more companies
have started to use PR, it is being seen as a communications tool that
can deliver business results, and it will become more widely used."
Agencies in the Czech Republic have seen an increase in consumer and IT
work and the healthcare sector is thought likely to grow. AMI
Communications partner Marek Stransky also believes the importance of PR
has increased over the last couple of years. The agency, an Edelman
affiliate in both the Czech Republic and Slovakia, grew by 24% in Prague
last year, returning a fee income of $1.2 million. It used to
have 80 percent of its work in media relations.
"I have seen an important change in clients' perception of PR
consultants. Very often they are used as strategic counselors for top
management, especially for the restructuring of industrial companies,
reputation management and crisis communications," says Stransky.
Revenue at the Czech Republic's top agency, Donath-Burson-Marsteller,
dipped 16% in 2000 to $1.4 million. Meanwhile, the Republic's
economic performance remains a mixed bag, with growth offset by a huge
national debt. "The trend is upward but is it robust?" asks Vladimir
Feldman, MD of GJW/BSMG's Prague office. In a country of only ten
million people, a PR agency with a turnover of $1-2 million is
considered sizeable. But he is encouraged by the prospect of
cross-border work evolving from potential inclusion in the European
The Action PR network runs throughout the region, as a Golin/Harris
affiliate in Croatia, Slovenia and Macedonia, and a Weber Shandwick
affiliate in Romania. Ruxandra Mateescu, director of the Action office
in Bucharest, says advertising, via locals such as Black Pencil
Advertising, remains better known as a communication tool: "There are
not many international chains. It tends to be branches of advertising
companies, but (in PR) there is still room to grow."
Poland is home to a well-developed PR scene. As well as international
groups like Burson, there are locals such as Sigma International and
Ciszewski PR. Another of these, 180 deg PR, was established in Warsaw
two years ago as part of Leo Burnett and became an MS&L affiliate in
January. MD Danuta Raczkiewicz-Chenczke says annual growth in the PR
market has been growing at 10% a year, although there was a decrease
last year. There are some essential cuts in marketing budgets where
money and efforts have shifted from strategy and brand-building programs
into direct consumer targeted activities such as promotion and consumer
PR programs. The economy as a whole is growing by 4% although that, too,
has slowed. An autumn election seems likely to see a change of
government from conservative to social democrat, in line with much of
the rest of Europe.
Although the scramble for dot-com business was never so frantic in
central Europe as in the west of the continent, there has certainly been
no immunity from the downturn, which is leading telecoms clients in
particular to cut PR budgets.
Gulden argues that the region cannot be taken as a homogenous mass, but
there is one issue from which the whole area should benefit. Membership
of the EU, which could be a reality for many of these countries as early
as 2004, is sure to bring both increased foreign investment and greater
opportunities for PR.