MARKET FOCUS NEW YORK: Doing PR in the PR capital - New York, the PR headquarters of the world, is beginning to be encroached by other markets. Craig McGuire looks at how New York firms have been faring

Dot-coms everywhere you turn, deep-pocketed corporate clients and a host of other businesses helped to pad many a bottom line in New York’s PR industry last year. The boom, which has stretched out over several years now, has coincided with the prosperity of the city’s overall economy.

Dot-coms everywhere you turn, deep-pocketed corporate clients and a host of other businesses helped to pad many a bottom line in New York’s PR industry last year. The boom, which has stretched out over several years now, has coincided with the prosperity of the city’s overall economy.

Dot-coms everywhere you turn, deep-pocketed corporate clients and a

host of other businesses helped to pad many a bottom line in New York’s

PR industry last year. The boom, which has stretched out over several

years now, has coincided with the prosperity of the city’s overall

economy.



While analysts in other industries are calling for belt-tightening in

light of the market’s sluggish behavior as of late, including the

occasional ’market correction,’ PR pros are the ideal of optimism.



The wave of prosperity everyone hopes will never end dominated the

industry last year as almost all of the 70 agencies in New York that

provided numbers to PRWeek reported revenue growth. Yet, the industry

average for the city’s fee-income increase topped out at only 17% -

lower than the national average of 28%. Perhaps this reflects the fact

that the highest growth has come from sectors not traditionally

associated with New york, like hi-tech, public affairs, or perhaps it’s

the fact that in the capital of PR, the market is already remarkably

well served.



PRWeek’s 1999 New York industry rankings show some musical chairs in the

ordering of the numbers from last year. Not surprisingly,

Burson-Marsteller, although with only a 5% increase reporting dollars

65.7 million in New York revenues, continued its reign as undisputed

revenue kingpin of Gotham. Ruder Finn (a 14% increase to dollars 46

million) overtook Edelman (a 10% increase to dollars 45.2 million) this

year to trail a distant, certainly respectable, second.



Rounding out the top five, Ketchum (a 12% increase to dollars 32

million) overtook BSMG (which stayed flat at dollars 31 million).





Animosity decrease



Some say that this bounty caused many of the hardened combatants to

retract their claws. ’The best thing to happen last year was the

decrease in animosity between agencies over accounts,’ says Chris Clark,

managing director of Alexander Ogilvy/New York. ’We all have plenty of

business, so we don’t have to go for those nasty client grabs like we

used to. Of course, we still fight over people, but it seems to be a

much less war-like business than it was five years ago.’



Indeed, many agencies found themselves with too much on their

plates.



’A major change in the past year has been the willingness, even

necessity, of firms turning away potential clients, primarily in the

technology area,’ says Fleishman- Hillard’s Jan Van Meter. ’In

self-defense, firms have been turning away clients largely because of

lack of staff. Increasingly, firms are unwilling to sacrifice staffs to

’burn-out’ clients.’



This deluge of business has many PR heads in the enviable position of

picking and choosing accounts - but also forcing them to redefine the

way they handle prospects.



’Along with the rapid growth has come unexpected rethinking of business

strategies on the part of clients, and abrupt shut downs of client

businesses despite due diligence efforts to ensure that we take only the

clients with the best funding and the brightest future,’ says Ruder

Finn’s Peter Finn. ’For us this has meant a higher level of bad debt and

slow collections than we have experienced in the past.’



Staffing and spacing has also become somewhat of a problem. Ketchum and

Shandwick are one of a growing number of agencies forced to either

expand existing office space or relocate to new digs to house larger

staffs.



Many firms, in fact, are reporting multiple renovation projects and

relocations.





Talent drought



The PR industry in New York faces some of the same serious issues that

colleagues in other locales wake up to every day. For example, while

they may be in the most attractive market in the country, employee

recruitment and retention is still a problem for most New York

agencies.



’All metropolitan regions, and New York is no exception, face a dearth

of employee candidates,’ says Marijean Lauzier, president and CEO of the

Weber Group. ’Agencies must be more focused and innovative than ever in

order to create the right type of corporate environment that attracts

and retains talent.’



H&K chairman Tom Hoog says New York is representing less and less of the

industry’s business and partly because of the tight labor market.



’At the top of the list is the fact that I am finding the labor pool in

New York to be absolutely minimal,’ he says. ’Basically, you rob Peter

to pay Paul, with everybody poaching and circulating the same people,

without asking are they bringing greater value. The Washington

marketplace has a wealth of talent and one doesn’t have to poach other

agencies. Chicago has a wealth of talent, as does LA. The San Francisco

market is a bit tighter because the bulk of the work is in the tech

area. Many of us are saying if we can move it because workforce is

available, let’s do it.’



The talent drought in New York has many agencies considering drastic

measures. ’I’m more worried about people leaving than clients

(leaving),’ says Aaron Kwittken, EVP and GM of GCI’s New York

office.



The Alley met the Valley in 1999, as New York’s Silicon-set looked to

the PR industry to follow the earlier lead of its West Coast

counterpart.



With investors salivating over anything Internet, old and new economy

companies alike threw their dot-com dollars and dreams at PR pros,

desperate to raise their cyber-profile.





Alley meets the Valley



Hi-Tech specialist were among the fastest-growing, with Middleberg

(119%), RLM (183%), PepperCom (80%) and Schwartz (120%) leading the

charge. Start-up Sloane & Co. also got off to a cracking start.



’Everyone is doing technology work to some degree,’ says Fleishman’s Van

Meter. ’Between the demand of the technology clients and the scarcity of

qualified people, the stresses on firm management has increased for

everyone.’



Numerous agencies, like Morgen Walke, repositioned themselves to attract

more dot-com and hi-tech accounts. ’From a standing start in early 1999,

we earned the business of more than 50 publicly traded companies,’

including a lot of hi-tech outfits, says David Walke. ’Now, those

companies represent 30% of our business.’



Many, like Aaron Kwittken, are less enamored with the dot-coms. He says

less than 15% of GCI’s portfolio of clients is dot-coms.



’We’re very skeptical because we have been burned in the past, and it’s

not going to happen again,’ he vows. ’Now, we’re interviewing them, not

the other way around.’



While many in the media are making dire predictions, including the

recent Wall Street Journal front-page article warning ’Get ready for a

pileup of corpses in the land of dot-coms,’ many in New York PR agencies

are unwilling to toss in the towel just yet.





Many mergers, many acquisitions



Turning from clients to their own businesses, it’s clear New York

agencies are engaged in their fair share of merging with each other.

Among the acquisitions last year: GCI Group bought Boxenbaum Grates,

KCSA bought Brown Radman Wolper, Middleberg bought Hayes & Associates

and Publicis bought LobsenzStevens. New York investor relations firms

were in particular demand. Young & Rubicam bought Robinson, Lerer &

Montgomery, Lighthouse bought Morgen Walke and UK advertising group

Incepta’s takeover of New York-based IR specialist Sard Verbinnen also

caused a stir. Industry buzz quickly swarmed around the deal’s dollars

58 million price tag, which many scoffed at as a ridiculously high

multiple.



Last year, Shandwick CEO Scott Meyer launched a 1,000-day plan to build

the largest PR firm in the world by the middle of 2002. Looking to grow

Shandwick’s roster of truly global clients, Meyer says the agency needs

to build a strong New York operation and that he plans to be in the top

five by 2002. Meyer adds that he is already in advanced discussions with

’three or four’ New York firms, with acquisitions in healthcare also

’imminent.’





More prosperity elsewhere?



More and more of the city’s biggest agencies, however, are finding PR

prosperity elsewhere. New York represents a surprisingly small amount of

the overall US business for PR big leaguers like Fleishman-Hillard

(14%), Hill & Knowlton (17%) and Shandwick (9%). And while H&K grew by

only 3%. (H&K’s Hoog says part of the reason for the small growth in New

York business is that the agency is structured on the ’best teams’

concept without regard to geography and much of the business was pushed

to other offices.)



’Many of the acquisitions of the past few years have been outside the US

market, enabling agencies to increase bench strength in other markets,

while much of the growth in the New York market continues to be

organic,’ says Helen Ostrowski, head of Porter Novelli’s New York

office, which reported a 13% fee income increase to dollars 28.2

million.



Many clients, Ostrowski says, continue to express a bias for New York

agencies, given their perceived expertise and influence in the marketing

and financial arenas, but she anticipates a further drop-off. That’s not

to say you’ll see New York’s stock drop anytime soon among PR pros.



Many, like MS&L’s Lou Capozzi, feel New York will always be a pivotal

market for the industry - or at least for quite some time. Capozzi,

whose New York office saw an 11% increase to dollars 20.2 million, says

the firm is also ’working hard to expand our global footprint and to

build even stronger operations across the US. This year, Los Angeles

surpassed New York as the largest revenue center for MS&L.’



Still, Capozzi says, New York is at the heart of the PR industry: ’As

New York goes, so goes the world.



NEW YORK, NEW YORK: TOP 70 PR AGENCIES 1-15


Rank     Agency Name                Audit   NY income (dollars)   Change

99   98                                         1999         1998      %

1     1  Burson-Marsteller                65,690,000   62,562,000      5

2     3  Ruder Finn                       45,994,000   40,510,000     14

3     2  Edelman                          45,230,508   41,213,135     10

4     5  Ketchum                          32,080,000   28,734,000     12

5     4  BSMG                             31,125,567   31,094,869      0

6     6  Porter Novelli                   28,243,000   24,921,000     13

7    12  Rowland Worldwide                25,664,000   16,136,000     59

8     9  Fleishman-Hillard                24,840,000   19,119,000     30

9     7  Hill & Knowlton                  23,900,000   23,100,000      3

10  N/A  Weber                            23,180,304          N/A    N/A

11   15  Ogilvy                           20,736,500   14,779,000     40

12   11  Morgen-Walke                     20,559,741   17,743,326     16

13   10  Manning, Selvage & Lee           20,188,000   18,216,500     11

14   14  GCI Group                        19,261,816   15,193,294     27

15   13  Cohn & Wolfe                     18,503,000   15,926,000     16

16   16  GlobalComm Group*                17,793,288   13,806,586     29

17    8  Incepta (Citigate)               16,363,477   20,932,000    -22

18   17  Shandwick                        14,004,000   10,813,000     30

19   26  Middleberg & Associates          11,390,018    5,196,231    119

20   20  Chandler Chicco Agency           10,948,527    8,735,194     25

21   18  Dan Klores Associates            10,800,000   10,393,000      4

22   27  DeVries                           8,829,439    5,069,182     74

23   21  KCSA                              8,580,000    8,465,150      1

24   19  Golin/Harris                      8,482,164    9,200,000     -8

25   23  Makovsky & Co.                    8,201,000    6,872,185     19

26   22  Noonan/Russo

          Communications                   7,690,000    7,930,000     -3

27   34  Connors Communications            6,629,935    3,333,452     99

28   28  Kratz & Jensen                    6,067,319    5,004,565     21

29   25  Gibbs & Soell                     5,321,000    5,215,000      2

30   29  G.S. Schwartz & Co.               5,011,113    4,003,507     25

31   33  Alan Taylor                       4,994,420    3,599,223     39

32   32  LaForce & Stevens                 4,774,805    3,747,848     27

33   40  PepperCom                         4,585,526    2,542,861     80

34   24  Cairns & Associates               4,436,326    5,510,073    -19

35   31  M Booth & Associates              4,425,129    3,905,157     13

36  N/A  The MWW Group                     4,364,801          N/A    N/A

37   30  Patrice Tanaka & Co.              4,339,000    3,952,000     10

38   37  Stanton Crenshaw

          Communications                   4,185,000    2,805,000     49

39  N/A  Publicis Dialog                   4,136,621          N/A    N/A

40   38  Hunter & Associates               3,751,791    2,603,524     44

41   35  PResence EURO RSCG                3,500,000    3,031,477     15

42   36  Lou Hammond & Associates          3,484,500    2,951,000     18

43   47  Southard Communications           3,452,175    1,850,000     87

44   45  PR 21                             3,060,642    1,914,016     60

45   48  Cone Communications               2,966,935    1,807,000     64

46   55  Vorhaus & Co.                     2,715,459    1,460,786     86

47   41  Development Counsellors

          International                    2,325,607    2,400,000     -3

48   39  M Silver & Associates             2,321,364    2,600,000    -11

49   43  Sumner Rider & Associates         2,285,999    1,942,732     18

50   44  Trimedia                          2,250,000    1,925,000     17

51   52  Bliss, Gouverneur &

          Associates                       2,100,000    1,600,000     31

52   56  Neale-May & Partners              2,100,000    1,300,000     62

53   42  Eric Mower and Associates         2,037,318    2,020,022      1

54   46  Middleton & Gendron               1,973,625    1,859,521      6

55   62  RLM Public Relations              1,972,913      696,351    183

56   49  Spring O’Brien & Co.              1,971,000    1,775,000     11

57   53  Linden Alschuler & Kaplan         1,885,000    1,505,000     25

58   54  Sawchuk, Brown Associates         1,708,637    1,484,565     15

59   50  Collins & Co.                     1,653,583    1,743,001     -5

60   61  Schwartz Public Relations         1,575,600      715,100    120

61   59  Cooper Katz & Company             1,498,386      993,442     51

62   63  Nelson Public Relations           1,487,750      594,151    150

63   60  Access Communications             1,431,000      903,000     58

64   66  Sloane & Co.                      1,340,000       43,000   3016

65   65  Belsito & Co.                     1,288,255       76,400   1586

66   57  Donley Communications             1,284,475    1,297,075     -1

67   58  Bender/Helper Impact              1,232,087    1,189,145      4

68   51  Earle Palmer Brown                1,217,597    1,600,000    -24

69  N/A  Nichol & Co.                      1,110,000          N/A    N/A

70   64  Clifford Public Relations         1,047,271      592,043     77


TOTALS                                   662,786,587  566,751,689     17


                                    US income            US income

Rank    Agency Name                 (dollars)   NY%      (dollars)   NY%

99  98                                   1999  1999           1998  1998

1    1  Burson-Marsteller         164,850,000    40    142,815,000    44

2    3  Ruder Finn                 53,408,000    86     45,601,000    89

3    2  Edelman                   128,174,735    35    101,868,218    40

4    5  Ketchum                   123,630,000    26    101,485,000    28

5    4  BSMG                      122,062,000    25    109,573,000    28

6    6  Porter Novelli            106,606,000    26     79,522,000    31

7   12  Rowland Worldwide          25,664,000   100     16,136,000   100

8    9  Fleishman-Hillard         181,152,000    14    136,272,000    14

9    7  Hill & Knowlton           138,140,000    17    113,000,000    20

10 N/A  Weber                      76,760,938    30     57,866,543   N/A

11  15  Ogilvy                     92,220,200    22     54,457,700    27

12  11  Morgen-Walke               25,895,289    79     23,143,604    77

13  10  Manning, Selvage & Lee     62,628,000    32     50,173,300    36

14  14  GCI Group                  65,511,850    29     44,539,245    34

15  13  Cohn & Wolfe               30,230,000    61     25,982,000    61

16  16  GlobalComm Group*          20,775,481    86     15,907,100    87

17   8  Incepta (Citigate)         23,509,066    70     23,514,000    89

18  17  Shandwick                 153,429,000     9     91,485,000    12

19  26  Middleberg & Associates    11,390,018   100      5,196,231   100

20  20  Chandler Chicco Agency     10,948,527   100      8,735,194   100

21  18  Dan Klores Associates      10,800,000   100     10,393,000   100

22  27  DeVries                     8,829,439   100      5,069,182   100

23  21  KCSA                        8,580,000   100      8,465,150   100

24  19  Golin/Harris               55,100,751    15     48,500,000    19

25  23  Makovsky & Co.              8,201,000   100      6,872,185   100

26  22  Noonan/Russo

         Communications             8,680,000    89      8,230,000    96

27  34  Connors Communications      6,629,935   100      3,333,452   100

28  28  Kratz & Jensen              7,747,369    78      6,192,972    81

29  25  Gibbs & Soell              12,793,000    42     11,689,000    45

30  29  G.S. Schwartz & Co.         5,011,113   100      4,003,507   100

31  33  Alan Taylor                 4,994,420   100      3,599,223   100

32  32  LaForce & Stevens           4,774,805   100      3,747,848   100

33  40  PepperCom                   4,585,526   100      2,542,861   100

34  24  Cairns & Associates         4,436,326   100      5,510,073   100

35  31  M Booth & Associates        4,425,129   100      3,905,157   100

36 N/A  The MWW Group              27,002,400    16     17,220,267   N/A

37  30  Patrice Tanaka & Co.        4,399,000    99      3,952,000   100

38  37  Stanton Crenshaw

         Communications             5,275,000    79      3,100,000    90

39 N/A  Publicis Dialog            23,505,716    18     11,403,700   N/A

40  38  Hunter & Associates         3,751,791   100      2,603,524   100

41  35  PResence EURO RSCG          3,500,000   100      3,031,477   100

42  36  Lou Hammond & Associates    3,484,500   100      2,951,000   100

43  47  Southard Communications     3,452,175   100      1,850,000   100

44  45  PR 21                       7,047,625    43      3,509,305    55

45  48  Cone Communications         9,590,066    31      6,312,000    29

46  55  Vorhaus & Co.               2,715,459   100      1,460,786   100

47  41  Development Counsellors

         International              2,325,607   100      2,400,000   100

48  39  M Silver & Associates       2,321,364   100      2,600,000   100

49  43  Sumner Rider & Associates   2,285,999   100      1,942,732   100

50  44  Trimedia                    2,250,000   100      1,925,000   100

51  52  Bliss, Gouverneur &

         Associates                 2,100,000   100      1,600,000   100

52  56  Neale-May & Partners        8,500,000    25      5,100,000    25

53  42  Eric Mower and Associates   2,037,318   100      2,020,022   100

54  46  Middleton & Gendron         1,973,625   100      1,859,521   100

55  62  RLM Public Relations        1,972,913   100        696,351   100

56  49  Spring O’Brien & Co.        2,261,000    87      1,693,000   105

57  53  Linden Alschuler & Kaplan   1,885,000   100      1,505,000   100

58  54  Sawchuk, Brown Associates   1,708,637   100      1,484,565   100

59  50  Collins & Co.               1,653,583   100      1,743,001   100

60  61  Schwartz Public Relations   1,575,600   100        715,100   100

61  59  Cooper Katz & Company       1,498,386   100        993,442   100

62  63  Nelson Public Relations     5,951,000    25      5,996,000    10

63  60  Access Communications      10,500,000    14      6,800,000    13

64  66  Sloane & Co.                1,340,000   100         43,000   100

65  65  Belsito & Co.               1,288,255   100         76,400   100

66  57  Donley Communications       1,329,077    97      1,297,075   100

67  58  Bender/Helper Impact        4,928,346    25      4,797,011    25

68  51  Earle Palmer Brown         11,489,355    11      8,793,524    18

69 N/A  Nichol & Co.                1,110,000   100            N/A   N/A

70  64  Clifford Public Relations   1,047,271   100        592,043   100


TOTALS                          1,813,250,931    37  1,406,902,081    40


SOURCE: PRWeek Agency Rankings 2000

Auditing: denotes a full audit or review; compilation audit; unaudited

statements signed off on by either the CFO or CEO/partner.

A random audit process will be used for agencies providing unaudited

figures.

* Includes TSI and Mindstorm Communications.



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