FEATURE: The state of technology

Many in the PR world saw the late 1990s as a gold rush, and they mined the tech industry for all it was worth. But, of course, it turns out there was plenty of fools gold in the hills of Silicon Valley and elsewhere. And as that gilded facade continues to flake off in the days and months after the tech downturn, many PR agencies are still struggling.

Many in the PR world saw the late 1990s as a gold rush, and they mined the tech industry for all it was worth. But, of course, it turns out there was plenty of fools gold in the hills of Silicon Valley and elsewhere. And as that gilded facade continues to flake off in the days and months after the tech downturn, many PR agencies are still struggling.

However, many agencies boldly predicted last year that they had learned their lessons, and 2003 was going to be the year that their fortunes turned around. And while the economy is beginning to show marginal improvements, and the end of 2003 and early 2004 saw a flurry of new pitches, it's nowhere near where PR agencies hoped and prayed it would be. For despite the optimistic chatter of 2003, the year was rougher than many agencies let on. Revenue was down again in 2003 for many agencies. Some argue that it's merely a reflection of the marketplace. Others say that while comparing revenue in 2000 to revenue in 2003 is like comparing apples to oranges, they also recognize that the PR that worked in 2000 won't work today, and that change is essential for survival. "Companies are starting to re-engage with PR, but it's slower than we would like," says Sabrina Horn, president of the Horn Group. "We are an impatient bunch of people. We're seeing new startups and lots of jobs open, which are positive indicators. Everyone wants to get back into the game. But that's not going to happen." "You have to stay focused on what you can offer that differentiates you," adds MS&L SVP Jon Kasle. "That is how companies think and that is how agencies have to think. You have to be as innovative as they are." This could be the year that Darwinism rears its head in the tech PR community, and only the strong will survive. While some agencies fell in the wake of the dot-com bust, 2004 could be the year when the industry sees not just which agencies, but also which technology companies can adapt, grow, and survive, and which can't. "Being hungry as an agency is a good thing because it keeps you on your toes and keeps you looking at what you are offering," explains Waggener Edstrom CEO and president Melissa Waggener Zorkin, whose agency saw its tech revenue grow last year by 20%, to $75.9 million from $63.3 million, more than two-thirds of which came from its existing clients. Wag Ed's success comes first and foremost from its staff, she contends, pointing to the agency's 81% retention rate, which means that staff stay and grow, and so do clients. The agency's independent status is a strong factor, she argues, as she is dedicated to focusing on staff, not a holding company's bottom line. For clients, this means that account teams remain stable, and for the agency, Waggener Zorkin can be nimble and hire to develop practices, such as consumer and public affairs. Staff is also key to the success of A&R Partners, which says it saw its revenue increase slightly last year. Agency president and managing partner Bob Angus doesn't dispute that business has quieted a bit since the tech boom, but says his agency has managed to get through it by hiring and keeping good people. And those good people helped the agency defend its accounts, "and you do that with great service," he says. "You've got to have that before you can go after more business." Angus says A&R took advantage of the hiatus to carry out training with staff. "We didn't want staff that were experts in internet promotions," he says, "we wanted the AEs to become experts in their clients' markets. So we held training courses in areas such as security. We had analysts come in for consulting sessions. We trained them in writing better and how to put together compelling pitches. We got them smarter in the markets they are serving. The secret to holding on to your clients is holding on to staff. You have to continuously stimulate and challenge them." But that's not always an option for some. The Bohle Company saw some budgets shrink, while other clients went out of business altogether, which explains its 35% revenue drop in 2003, to $1.8 million from $2.8 million. Agency president Sue Bohle says such budget cuts cause agencies such as hers to work their staffs much harder. And with hungry agencies chasing new business to replenish those shrinking coffers, staff is stretched even thinner between servicing existing clients and pursuing new ones. Furthermore, as companies take an insufferably long time to complete a search, many agencies are left in limbo, letting some opportunities pass by while waiting for companies to make up their minds, Bohle points out. Despite all this, however, Bohle believes she doesn't need to do anything differently than she is doing now, and that many agencies will do better as the economy does better. Many agencies believed that would happen last year and it didn't, says Access Communications president and CEO Susan Butenhoff, whose revenue slipped by 24%, to $8 million from $10.5 million, thanks to the loss of such clients as Siebel Systems and Sega. But Access did pick up clients like Epiphany and Silicon Graphics. "I think there was a lot of false hope" that agencies would do better as companies began to do better, explains Butenhoff. Companies are willing to invest in PR again, she says, but they want to make sure they have a few quarters of growth before letting that improvement trickle down into their marketing budgets. This means that many agencies will have to continue to settle for lower budgets, says Butenhoff. The trick is not to go after every small piece of business, but to invest in a few and grow them into larger accounts. She says some agencies are chasing every small account in sight just to bring money in and suspects that once those accounts are in the door, the agencies don't invest in them, instead casting an eye toward the next business opportunity, and those accounts are out the door as quickly as they came in. Trying to bounce back There were more business opportunities in 2003 than 2002, but so far, 2004 looks spotty, says Kasle. MS&L's tech practice was down slightly in 2003, with account losses such as Earthlink, but the firm also strengthened relationships with global clients like Royal Philips Electronics. MS&L will continue to do much of what is has been doing, says Kasle, but it's not going to try to be all things to all people. The practice will remain focused on building key staff and offering capabilities that focus on more than just media relations, with particular attention to strategy. If an agency can't offer that, says Kasle, than it's nothing more than a tactical arm that merely responds to marching orders and isn't much of a partner. If anything, Kasle says he would like to see the tech practice better communicate what it has to offer. Better marketing is what Schwartz Communications believes will turn 2004 around. The agency's revenue dropped 18% last year to $16.1 million from $19.5 million, although president Steve Schwartz contends 2003's revenue is "ancient history" as business picked up significantly at the end of the year. Schwartz says he has invested a "tremendous amount" in marketing, and the agency practices what it preaches. The agency's core client base is startups, and now that VC funding is starting to flow again and tech IPOs are picking up, Schwartz anticipates his agency's fortunes will rise again, too. "We're entering a period of tech optimism, and we're one of the best positioned agencies for that," says Schwartz. "We have the talent and the credentials to help entrepreneurs and innovative companies succeed." Another agency that works with startups is McGrath/Power PR, whose revenues fell 24% to just over $2 million from $2.7 million. CEO Jonathan Bloom says the start-up pipeline has been absolutely constricted the past few years as funding dried up. But VCs are starting to fund startups again. Bloom also sees midsize companies struggling, too, as they don't have the VC funding that startups have, nor do they have the deep pockets of industry leaders. As companies continue to struggle, so will the PR agencies that work with them. "I'm not so sure there's a silver bullet out there," says Bloom. "Everyone can say what they think the crystal ball shows, but I'm not sure if the crystal balls are working. I really think we need another year for things to stabilize." Porter Novelli says it grew its tech practice by growing relationships with existing clients, such as Hewlett-Packard, PeopleSoft, and Qualcomm. The tech practice has grown because the agency has been able to pull in expertise beyond technology, asserts Steve Jursa, global technology practice leader, who draws on the agency's other disciplines, such as government affairs, investor relations, or crisis management. There's also an emphasis on making sure staff from divergent practices know how to work together. Just because an agency has numerous practices doesn't mean they know how to work together, cautions Jursa. But he returns to the matter of growing existing client relationships, which Jursa says comes from heeding their needs, and not being obsessed with winning new business. The tech practice picked up a "decent amount" of new business. But if all the best people are working on new business, then that talent is not serving existing clients. "If you can figure out how your customer makes money, and build programs to help them reach their target customer, then you've proven your value," says Jursa. "It's, 'Do you know how to implement what the client tells you to do,' versus, 'Do you know how to help your client make money.'" Hill & Knowlton says it was also able to grow existing accounts through investing in areas such as analyst relations, hiring ex-Gartner analyst Josh Reynolds as US head of analyst relations. Clients have taken to having a former analyst at their disposal to bounce ideas off, develop messaging, and generally get inside analysts' heads, asserts Joe Paluska, US tech practice director. He sees tech PR becoming more like politics, as it is becoming more issues based. Because of that, he says H&K's tech practice has been able to grow through offering other services, from consumer to public affairs, according to whom clients wants to reach - whether it's policy makers or b-to-b buyers. Focusing on clients' customers Firms like OutCast Communications and Voce Communications, up 24% and 20% respectively, found success last year by focusing on programs that helped clients focus on their customers. Voce grew in 2003 thanks to initiatives such as its customer-intimacy programs for firms like Oracle. Many people talk about lead generation, says agency president Richard Cline, "but unless someone comes and in says they read an article and want to buy your client's product, it's hard to measure." So for Oracle, Voce produces CIO events, where executives talk about their success with Oracle's products, followed by golf with current clients and prospective clients from not just the same industry, but from the same markets and sectors. Current customers are lulled into speaking on behalf of Oracle thanks to an afternoon of golf with their peers. Prospective customers get to spend time with companies that can offer success stories, and companies such as Oracle get to see those customers they worked so hard to win help it woo more prospective clients. "You want to make sure you're putting the right customers with the right prospects," says Cline. "It makes a huge difference." The attitude of many clients is "what have you done for me lately," asserts Cline, which is the main reason for doing these programs. "That's why they're paying you." OutCast also recognizes that its clients want to show proof of their customers' success. "We wouldn't have got Mercury Interactive on the cover of Forbes if I hadn't got 12 CIOs on the phone," says OutCast partner Margit Wennmachers. "I know that sounds like, 'Well, isn't that what you're supposed to do?' But the devil is in the details. Putting the right people in front of the right people takes just as much skill as good media relations. As the tide rises, those agencies that are smart and service-oriented will rise with it. The people who work with us enjoy working with us, and that is our number-one referral for new business." During the boom, communications was very product-centric, says Text 100 CEO Aedhmar Hynes. Now it is much more customer-centric, with a focus on helping clients better understand their own customers. And that has proven valuable as Text 100 expands its international presence, which it is doing organically instead of acquiring agencies or developing partnerships, says Hynes. New international offices gained through acquisition or partnerships do not necessarily mean the talent the client wants will be there, she says. "By growing organically, we can provide consistency and scalability," says Hynes. "When we won Xerox in India, we moved some of our Rochester [NY] people to India, so we could quickly adapt the knowledge. We moved someone from New York to China to work on IBM. The ability to transfer that knowledge is a hallmark of how we can demonstrate that we are getting under the skin of our clients' business." Even a boutique firm like Airfoil PR, a nearly 4-year-old firm in Detroit, managed to grow 41% in 2003, to $2.3 million from $1.6 million, by getting under its clients' skin. The agency has developed a research division, which CEO Lisa Vallee-Smith says surprises many clients. "It's rare for an agency our size to have a research division," says Vallee-Smith. "But it has helped us scale existing accounts, to provide competitive intelligence, along with media tracking and measurement. On the other hand, when we approach new-business opportunities, it gives us a leg up over other agencies our size, and puts us on a more level playing field with some larger agencies." Some of those large firms are seeing business pick up a bit, but not as much as they'd like. At Fleishman-Hillard, the tech practice has held steady, but has lagged compared with the growth of other practices. The agency suffered the blow of losing global account JD Edwards, which was acquired by PeopleSoft. But by year's end, Fleishman won Maxtor's global account. Budgets are coming back, but not at the level agencies have hoped, explains Bob Hallman, co-chairman of Fleishman's tech practice. So in the meantime, the focus is on serving existing clients, not keeping an eye on the door wondering when the next new client will walk in. "Right now, you really need to continue to prove the value you bring to your existing clients," says Hallman. "That is your first and foremost opportunity for growth. Then you can move into new areas. When we saw the downturn coming, we battened down the hatches and protected our talent. We moved people to other practices. We have kept that talent and invested in that talent. And they will still be with us as tech picks up again." Keys to survival Hallman argues that PR agencies will survive based on what makes them special and differentiates them from the competition. From Hallman to Butenhoff to Bloom, many tech PR practitioners warn against agencies trying to be all things to all people. That will simply dilute what an agency does best. "The most significant variable aside from pricing is experience," Butenhoff says. "Everyone is still living with a hangover, so companies want to make sure that you have directly relevant experience in this channel or this market. It's about results, and your point of differentiation. It doesn't matter if you have 15 different trademarked practices. It's about being accountable and delivering results." "Agencies will have to do everything they have done, but up the ante in terms of creativity," adds Bloom. "And agencies will have to be more realistic to what they promise." Horn is trying to get companies to look at her firm not as a PR agency, but as a communications agency. She says the difference is about being a firm that only focuses on tactics and churns out press releases, versus a firm that can bring strategy and insight, as well. Horn says she isn't changing much about what she does, but is hoping to simply educate tech companies about the role a firm such as hers can play. But she also invested more into areas such as research and interactive services to draw clearer lines of differentiation from the competition. As the traditional media channels have narrowed, marketing people need more than just traditional PR, she argues. But it's PR's job to communicate to all constituencies, regardless of the means. And the agencies that will succeed are those that offer clients numerous ways to communicate with their constituencies, instead of being so media-centric. For Rich Moore, Edelman's global tech practice president, success stems from a focus on quality client service. "I know that sounds simple, but you can't overstate it," he says. Edelman's tech revenue dipped last year, but saw a strong surge at the end of the year with wins from several companies, including Veritas, Manugistics, and Tibco Software, which, Moore says, reflects Edelman's understanding of clients' business and its ability to offer teams with direct experience, smart strategy and execution, and research to back up their efforts. If any agency can maintain that focus, then it's easier to grow existing accounts, and, thus, worry less about winning new business. "Marketing budgets seem to be easing up, but the days of big budgets are over," Moore points out. "Clients are much more critical, much more aware, and much more pragmatic about where they can apply their dollars. In the current climate, I am more interested in steady quality growth, not in accelerated growth." As the economy continues to recover, expect to see new technology and PR leaders anointed, says Moore. Those new tech leaders will want and relish more strategic PR, and those PR leaders will provide it. And that will enable PR to drill deeper into the core of marketing and be seen as more central to the overall marketing mix, with well trained staff offering services from research to online capabilities. No one can pretend to know when all this will happen, concedes Moore. But the industry will see an increasing flight to quality, and those agencies that can keep a focus on differentiated, high-quality services and high-quality staff will see business grow from existing and new relationships. "Agency management needs to be self-critical, self-reflective and open to challenges," adds Waggener Zorkin. "Those [tech] companies that have strong leaders, continue to innovate, and are resilient, they can hit the wall and bounce back. Agencies need to embody that, too." Key tech account wins While 2003 was a hard year, the new-business climate wasn't completely barren for tech PR firms. Below are selected key account wins awarded throughout 2003 and the beginning of 2004 5W PR EDS Access Communications Epiphany, Silicon Graphics Antenna Group Nanosys Armstrong Kendall Marimba Bite Communications Juniper Networks Blanc & Otus Hitachi Data Systems Citigate Cunningham Rambus E&E PR PMC-Sierra Edelman Huawei Technologies, Manugistics, PMC-Sierra, Samsung Semiconductor, Tibco Software, Veritas FitzGerald Communications Akamai Technologies, Medialive International Fleishman-Hillard Maxtor Formula PR Kyocera Wireless FS Communications Brocade GCI Group Dell, Wayport Hill & Knowlton Brightmail Hoffman Agency Dolby Laboratories, Royal Philips Electronics Horn Group Adaptec Ink PR Bluetooth Special Interest Group Ketchum Gateway LaunchSquad Wheels of Zeus Lois Paul & Partners Motorola Semiconductor Makovsky & Company CeBIT America Maples Communications Fujitsu Computer Systems McGrath Power Vodafone MS&L Royal Philips Electronics Noblemen Communications Silicon Graphics OnPR Siebel Systems OutCast Communications Dell, TiVo Porter Novelli RioAudio Ruder Finn Sony Electronics Schwartz Communications Gateway, Netegrity Shift Communications Quantum Sparkpr Nvidia Sterling Communications Netgear SutherlandGold RealNetworks Text 100 ARM Holdings, BroadVision, Earthlink, Fuji Photo Film USA Voce Communications NEC Solutions America Waggener Edstrom Connexion by Boeing, Kyocera Mita Weber Shandwick Cisco Systems

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