Tech PR: the comeback kid

Tech PR is making a return, though some say it never went away.

Tech PR is making a return, though some say it never went away.

Nobody in tech PR wants to party like it's 1999 again. They're more content to party like it's 1996. While no one is quite ready to break out the champagne, those in tech PR are feeling quite confident that the worst is over. The hand-wringing of a year ago is all but gone, and the cautious optimism of even six months ago is now sounding more optimistic than cautious. Most agencies acknowledge their business-development pipeline is more full than it has been in months, and they are busier than ever. But no one expects, or wants, tech PR to return the unrealistic heights of 1999. They're saying it looks more like the mid-1990s before the dot-com boom. "Tech is coming back," declares Luca Penati, EVP and GM of Edelman's Silicon Valley office. "There's no doubt in my mind. I remember when [Sun Microsystems CEO] Scott McNealy said [the downturn] was like someone turned off the lights. I think someone has turned the lights back on, but they're using a dimmer." She says that Edelman has seen an increase in business leads and RFPs, but adds, "the most important sign has been existing clients asking for more projects. We're seeing organic growth, substantial budget growth. One client even increased its budget by 50%." But that kind of increase is rare, as most firms are finding that budgets are slightly bigger than last year at best. "We're seeing tech back at the right levels again," observes Steve Jursa, Porter Novelli's global tech practice leader. "Budgets are healthier than they were a year ago. But there is an increased level of demand for ROI. [In-house communications teams] are under tremendous pressure to show the ROI for money they spend. "Going into the dot-com boom, everybody rushed in and there was an explosion of agencies," he adds. "Things did dial back, but I'm not sure it's as bad as the dot-com bust would indicate. There has always been a steady number of good, solid tech companies out there doing marketing and PR. If you were to erase the boom years, where we were before and where we are now is not that different. It appears that tech is back, but I'm not sure it went anywhere." For many agencies, the downturn was rough. Jonathan Bloom, CEO of McGrath/Power, calls 2002 "a nuclear winter" in terms of business development. The phone wasn't ringing, clients were cutting budgets, and it was a dismal year for business. But he says business is blossoming again, particularly among smaller companies, who Bloom calls "the lifeblood of Silicon Valley PR. They are looking for PR again, and so are start-ups." Many things are being attributed to this comeback. A recent BusinessWeek article cited double-digit revenue gains in Q2 by the likes of Dell, IBM, Microsoft, and Intel as a sign that the industry is rebounding. Consulting firm Gartner is predicting global technology spending to grow 5.4% to $2.4 trillion in 2004, up from the $2.27 trillion expected in 2003. Gartner also anticipates 5% growth at least through 2007, when spending should hit $2.77 trillion. And as Gartner is advising its clients to invest in technology that will help their businesses grow, those businesses are looking for the same thing from PR. High influence, low budgets Joe Paluska, deputy director of Hill & Knowlton's US tech practice, points to a recent joint study by research firm Penn, Schoen & Berland Associates and H&K, which shows that when it comes to influencing IT purchasing decisions, word-of mouth, events, and PR all ranked high, while advertising ranked as the least influential. Unfortunately, he points out, there's still a disconnect between clients' desire for PR and the budgets they're willing to allocate. According to a recent IDC study, advertising gets about 30% of the marketing budget, while PR only gets 5%. "Things are getting better in the economy," says Sterling Communications president Marianne O'Connor. "We're seeing tech IPOs again. So now that things are turning around, PR is about driving business goals. It's not just about who has the wildest, most creative ideas - though creativity is still very important. But clients are being more pragmatic." "People have a general intangible sense that things are looking up; now is the time to make your mark," adds Casey Sheldon, president of Weber Shandwick's global tech practice. "In this environment there's less noise, so you can stand out. Companies have to move ahead with marketing their products and positioning [themselves]. Marketing decisions are being made, but they are cautious, thought-out decisions. Before it was, 'We have this money, what should we do with it?' Now it's, 'We have this idea,' and they say, 'Great, now find the money.'" Money is still a key issue, as budgets are tight. Bob Angus, president and managing partner of A&R Partners, says that he has also seen a steady increase in new business opportunities from both start-ups and established players. But an increase in demand for PR services has not softened the strong buyer's market that agencies have seen for the past few years, and will continue to see for at least a few more. "Clients know they can get more for their budgets and typically have multiple agencies ready to bid for their business," says Angus. "This is a good trend for the industry. Agencies are winning business today on the strength of their expertise and willingness to roll up their sleeves to accomplish great results." Tough competition for new business The other trend agencies are noticing is how much more drawn-out business development can be. Pitches and RFPs are a much more time-consuming process. Part of that comes from it being a buyer's market, but agencies are now paying for the sins of the way they behaved during the boom, when many made outrageous demands and provided tepid results. Which explains some of the behavior firms encounter when pitching prospective clients. "We're now seeing a lot of crossed arms," says Paul Rand, director of Ketchum's global tech practice. "But if you've done your homework, the walls come down and [they] makes themselves much more accessible. But agencies are eager to find new clients. We're working on developing more innovative offerings. We want to show a different way of approaching the market. You need to differentiate yourself." Hoffman Agency president Lou Hoffman predicts another year before budgets begin to get healthier. When clients squeeze their agencies too hard, he says, it doesn't make for a healthy relationship, as agencies aren't as motivated to "run through walls for their client." But clients' attitudes about agencies will change soon enough, as in-house PR leaders understand they are accountable, and won't want to partner with the agency that can provide just the cheapest solution. So what agencies must do, says Margit Wennmachers, cofounder and partner at OutCast Communications, is offer more than the ability to communicate a client's activities and decisions. "There is more scrutiny by clients of what makes sense," says Wennmachers. "Not every PR program is the same. At the end of the day, I hope we've become smarter businesspeople. PR has often been left out of that equation, in terms of helping a company achieve its business goals. If you want to be successful with the CEO, you have to be able to interact with that person on a business level. You need to have the smarts and credibility. There's more demand for that now, and that will be the best thing about the bubble bursting." ----- Putting their money where their mouths are Most agencies are happy to say that tech is back, and many are willing to prove it. Nearly two-dozen agencies responded to a call for quantitative information that clearly demonstrates just what agencies mean when they say, "Tech is back." Over the past year, tech client billings have increased for 16 agencies that replied, while billings remained flat for three, and down for one. For the happy 16, increases ranged from a 5% uptick to one firm that went from eight to 24 clients in the past year, for a 600% increase in client billings - 80% of which comes from new clients. Another agency went from 11 to 24 clients, for a 100% increase in billings. But excluding those agencies, the average increase was about 12%. Most agencies credited those new clients for overall billing increases, adding that increases from existing clients are marginal at best. So when agencies say, "Tech is back," they tend to be referring to how much more full their business-development pipelines are these days. Almost every agency reported an increase in the number of pitches over the past six months versus the six months prior. From November 2002 through April 2003, agencies reported participating in anywhere from two to 24 competitive pitches, with an average of about 12 pitches during that period. But from May to October, agencies participated in anywhere from five to 49 competitive pitches, with an average of 23 such pitches during that time period. Agencies have also been winning more clients during the past six months versus the six months prior to that, giving credence to many agencies' belief that more companies are jumping into the tech PR pipeline for the first time, or are reengaging agencies. From November 2002 through April 2003, agencies reported winning anywhere from one to 11 new clients, with the average number being about five. But during the past six months, agencies won anywhere from four to 18 new clients, for an average of 10 new clients. The following agencies provided qualitative data: A&R Partners, Access Communications, Antenna Group, Citigate Cunningham, Connect PR, ContentOne, Edelman, Greenough Communications, The Hoffman Agency, Horn Group, Lewis PR, McGrath/Power, O'Keeffe & Company, OutCast Communications, Ruder Finn, Sterling Communications, Sparkpr, Text 100, Topaz Partners, and Waggener Edstrom.

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