Global growth is no longer being driven solely from the US. Instead, companies in all parts of the world are looking beyond their own borders.
The PR agency business is going increasingly global, even if truly global pieces of business are still relatively uncommon.
“In PR, there aren’t a lot of global accounts,” affirms Howard Paster, EVP at WPP. “You are still likely to have big individual assignments, and the business grows that way.”
The difference now is that growth is coming more out of the regions, rather than simply into them via expansion of briefs from US-based multinational entities.
What might have been termed a “local” account, meaning working within a country for a company based there, is changing rapidly, as companies look beyond their borders. China, with Haier and Lenovo becoming household names in the US, is an obvious example, but it’s not unique.
Agencies are once again investing in burgeoning markets. Weber Shandwick this year, for example, expanded into Eastern Europe, opening offices in Poland, Croatia, and Bosnia and Herzegovina.
The move was primarily an investment, rather than purely a response to specific client needs, and also motivated by the established presence of its sister advertising agency McCann. Global integration across marketing disciplines is just as uncommon as global PR accounts, but within many regions integration is increasingly sought.
There are several trends that dog the industry wherever conversations about it take place – including PRWeek’s global roundtable. One is the talent crunch, which seems to plague every corner of the industry. Another is the growing global strength of healthcare, where cross-pollination of practice areas, such as consumer and public affairs, isn’t just a US phenomenon.
Another global trend is the power of sport. The FIFA World Cup is going on in Germany right now. While this alone isn’t a serious driver of the resurgence of that nation’s PR industry, its influence on the global public spirit is significant. Similarly, the 2008 Beijing Olympics has both symbolic and commercial resonance.
For this year’s Global Special, PRWeek is focusing on three countries where the business is experiencing dynamic change and growth. But the focus might have been on Eastern Europe and Russia, the Middle East, or South Africa, or any number of countries where the market is maturing, and PR is increasingly seen as a strategic partner.
But in Brazil and Germany the story is no less compelling, and following is a look at the business is those countries. But still the market that continues to generate the most excitement is still China.
“For most of the global firms with networks throughout Asia,” says Scott Kronick, president of Ogilvy PR in China, “I believe the China offices rank as the largest single growth opportunity.”
Ogilvy continues to dominate the market among multinationals that are fast gaining strength. But it has not yet reached its potential, or so says virtually everyone in the market. The possibilities are visibly expanding far beyond the b-to-b community, towards the in- creasing Chinese consumer base.
“Most important is its emerging middle class,” says David Liu, MD, Beijing, at WS. “A lot of the opportunities are related to this growing middle class, and increasing wealth and spending. China has become one of their biggest markets in the world.”
US firms working in China may have divergent client rosters, with the balance between local and non-local accounts at wide disparities. Ogilvy grew up in the China market through local accounts, but work with companies such as Intel has expanded its inbound opportunities.
Conversely, WS revenues are dominated by multinational work. Liu’s goal is to grow the Chinese part of the business, but as Chinese companies gain in marketing sophistication, there’s still a “learning period” for many, he says.
“Our growth here is over 50% every year. Sometimes we don’t have the spare capacity to invest time in educating Chinese companies, because they don’t always know what they want and don’t give you a clear brief,” he says. “It’s very time consuming.”
But local CEOs are getting it more than ever, says Cindy Tian, MD of Burson-Marsteller in China. “When I worked for one domestic company in the area of brand repositioning, the CEO of the company was our direct client contact, who put the programs one of his top priorities,” she says.
In China, the rule has been growth through acquisition, but that has slowed in the PR market. “There’s no shopping list of reasonably sized, multi-service Chinese PR firms,” says WPP Group EVP Howard Paster. One factor is that growth is moving beyond Beijing, Shanghai, and Guangzhou, to what are often called “second-tier” cities, or burgeoning markets with untapped potential, such as Tianjin, Xi’an, Shenyang, Wuhan, Nanjing, and Jinan.
Among the practice areas ripe for growth is healthcare. Jean-Michel Dumont, EVP, China, at Ruder Finn, says healthcare has been “at the bottom of the pile…in spite of its enormous needs.” But this is changing, he says. “[This is] a segment where PR pros historically come from the healthcare world and have a very low understanding of how to best leverage PR.”
Financial PR is also changing. “One interesting thing going on is the relationship with Hong Kong, which did have a mature business and continues to do a lot of financial PR,” says Paster. But he says that more of the business is now migrating to the mainland.
For Hill & Knowlton, the public affairs business is growing, cutting across programs rooted in other areas, such as consumer. James Heimowitz, president and CEO of H&K, North Asia, says that multinational corporations coming into China are often “trying to protect their own ideas of good corporate citizenship. But they weren’t really listening to what the local host environment felt was important to them.” A big part of the job is to “help them become critical listeners,” he says.
The Chinese media is a topic of some angst for the US business community, with Google and Yahoo both finding themselves under fire for accommodating the Chinese government on issues of access to information and press freedom. While these attitudes may be shifting, the thaw will need to continue in order to foster a truly uninhibited PR market. “A fully mature PR business needs an unregulated press,” says one industry executive.
Patrick Horgan, MD of China for APCO Worldwide, calls the media landscape in China, “a complicated topic and a changing picture.” Government-controlled media such as TV station CCTC, People’s Daily, and Economic Daily still dominate, while news portals such as Sina.com, and Sohu.com are providing opportunities for increasingly popular blogs and chatrooms.
Without hard numbers, or commonly accepted data from a central trade body, it is hard to assess the market in terms of local versus multinational agencies. But large, US-based firms say that local shops compete primarily on price and the strength of their media contacts. “Many companies employ both local and multinational firms,” says Glenn Osaki, senior director, Asia-Pacific, for MS&L.
Healthcare, technology, and corporate responsibility are a few of the key areas for Brazil's practitioners, as well.
In the past five years, Brazil has become “a very well-developed business market,” says Juan Carlos Lynch, president and CEO of RF affiliate RFB/Lynch Partners South America, which opened a Sao Paulo branch last year.
As a result of this growth – due in part to recent industry privatization and an influx of international trade – Brazil’s PR market is entering a new phase.
The number of PR firms alone has skyrocketed from a few regional boutiques and long-present multinationals Burson and H&K to more than 200 in Sao Paulo alone. In addition, universities are offering PR education,and industry associations have formed. According to Rodrigo Azevedo, president of Communique-se, a PR-centric Web portal, the largest firms took in an estimated $10 million to $12 million US in 2005.
When Valeria Perito, principal and GM of Sao Paulo-based Ketchum Estragéria, first opened her practice in 1986, clients were interested in little more than press releases, she says. Clients “are now much more savvy about objectives, and how we will position, reposition, or build a brand image.”
Rissig Licha, EVP, senior partner and MD of Fleishman-Hillard Latin America, agrees, saying that strategic counsel, IR, crisis management, and “more in-depth internal and media communications,” are essential now.
Brazil’s 186 million Portuguese-speaking inhabitants are a mix of races and nationalities, and the country is home to Latin America’s largest Asian immigrant population. But Brazil is a nation of economic and social disparity, the vestiges of its former unstable military regime. As in the US, sub-market targeting is key.
But, says Ron Mincheff, MD at Edelman Sao Paulo, “Brazilians are very aware of international tendencies.” A nation of early adopters, Brazilians are “willing to try new things,” he says, from low-cal food to mobile phones.
That, says Perito, factors into Ketchum’s efforts to incorporate the Web, wireless, and other new technology in PR strategies. Brazil is very much online. In fact, in many regions, “it’s easier to have Internet access than to have medicine for diabetics,” says Lynch.
But that may be changing, too. While agriculture, mining, financial services, energy, and life marketing – the latter, a vital outreach component in entertainment hub Rio de Janeiro – continue to be important to PR, Brazil’s healthcare and pharmaceutical sector is at the forefront of growth.
Since recent legislation has allowed industry expansion, pharma companies - with their integrated need for issues management, government relations work and strategic communications -- has embraced PR, says Renata Monte Alegre, GM at H&K Brazil, “especially since they are not allowed by the Brazilian legislation to advertise in the media.”
Health outreach in general is becoming more significant, says Mincheff. Weekly magazines and papers cover obesity, smoking, and other medical breakthroughs. There is also continued focus on beauty, to cater to Brazil’s famously image-conscious population. And Brazilian media is looked upon in high regard for cutting-edge health information.
"We don't depend on the police to bring us justice, but the media will." Mincheff jokes.
In addition, corporate good citizenship has become critical to Brazilian consumers, says Cristina “Kiki” Moretti, GM and founder of In Press Porter Novelli Brazil. “CEOs are now finally [grasping] the importance of image, reputation, and social responsibility.”
All this leads to what may be the most considerable challenge facing Brazil’s PR industry: Structuring firms to handle everything. Staff need agency experience, legal experience, experience in economic issues and journalism, says Lynch. “The old model of one or two smart [pros] with a lot of assistants delivering press releases will not be the most successful.”
A few years ago, it was difficult to find any US-based agency with a positive view of the market in Germany, but a lot has changed. Several large agency CEOs say busi- ness in Germany is now looking healthier than it has for a long time.
One reason for the optimism is the afterglow of last year’s election of Angela Merkel, who defeated Gerhard Schroeder to become Chancellor of Germany. Merkel chairs the Christian Democratic Union and with a sister party leads a coalition government together with the Social Democratic Party.
Merkel’s coalition is pushing for policy changes that aim to spur economic growth, including cutting corporate taxes.
But according to a recent Bloomberg story, change will not come easily. “We’re looking to move a mountain,” the financial minister told the wire service last week.
Still, with World Cup fever in full bloom, the mood is upbeat, with stabilization and modest gains embraced.
“We’ve had some ups and downs,” says Karl-Heinz Heuser, CEO of Burson-Marsteller in Germany. “But business for the last three years has been stable, growing every year about 8% since 2003.”
Helmut von Fircks, MD of F&H Porter Novelli in Germany, says that the office has been invited in more pitches over the past nine months than it ever has in that same span of time.
“The new government has a very strong view to the economy, and industry becomes more optimistic,” he says. “The consumer becomes more optimistic.”
Many of the larger firms in Germany are privately owned, but then so are many of the large companies.
Many of Germany’s larger firms are privately owned, but then so are many of the large companies. “Family-owned businesses are huge [here],” says Ralf Hering, CEO of Hering Schuppener, affiliated with GCI Group. “A typical element of the German economy is that these large family owned businesses did not go to the capital markets.”
Hering says that dynamic has meant that there is much more of a “consensus culture” in Germany, where protecting employees is paramount and restructuring is a bad word. He cites a recent example of a CEO who was shot at shortly after announcing layoffs.
Public affairs is a growth driver, according to Timo Sieg, CEO of Pleon, which is a partner of Brodeur. “The European Commission’s agenda for Europe, the continuing dialogue between politics and the economy, and the agenda-setting power of Brussels are strongly influencing PR programs,” he says.
PR, as a discipline, is still maturing, says Wolfgang Kusters, GM of Fleishman in Germany. “In the big German corporations, the importance of PR is acknowledged, but in many cases they rely more on in-house PR departments,” he says. “When we pitch, one of the most important factors is that we have the outside view of the company, and we have a lot of benchmarking opportunities.”
Global firms will benefit from range of experience in other markets, as well as in strategy. “We’re consulting clients on the shift away from top-down communications,” says Cornelia Kunze, GM of Edelman in Germany, “and towards dialogue and engaging in conversations, including the possibilities of the blogosphere.”
But new-media platforms have not totally penetrated. “Blogs are not a hot topic in Germany,” says Petra Sammer, MD of Ketchum in Germany. She says her firm keeps track of some 500 corporate blogs. “We think [the small number] has something to do with our cultural behavior. We’re not very good at small talk and chatting. It takes time before we write something down. A blog needs to be fast.”
As the German economy begins to show new signs of life, the PR industry continues to push for relevance to top management. “PR is still fighting for a place at the table of the board,” says Astrid von Rudloff, CEO of WS in Germany. “There are some single top consultants, certain persons perceived as the ‘CEO whisperer,’ but this is a small minority. One of our biggest challenges is to establish PR on this level.”