Numbers point to a bright future

The PR industry is flying high after a strong 2005 and a prosperous first quarter in 2006. And, finds Julia Hood, agency CEOs are bullish about their ability to grapple with the new-media environment, the talent situation, and increasing globalization

The PR industry is flying high after a strong 2005 and a prosperous first quarter in 2006. And, finds Julia Hood, agency CEOs are bullish about their ability to grapple with the new-media environment, the talent situation, and increasing globalization

Agency CEOs are harder to get on the phone than they used to be, at least for journalists covering the industry. That's a good sign. Instead of spending time courting their business media, they are bringing in new clients, supporting their existing ones, recruiting stars, traveling the globe, and most importantly, focusing on adapting their business to grow and thrive in a fastchanging, but opportunity-laden, environment.

When they do slow down to talk, industry leaders are bullish in the extreme, buoyed by the strength of the first 2006 quarter just passed, a healthy second half of 2005, new life in the technology business, and confidence that they can compete for top talent. Times are good for PR agencies now – probably better than ever.

Nothing will likely ever again surpass the heady excitement of the dot-com era, but today's adrenaline is more akin to the measured pace of the marathoner, not the sprint that ultimately ended in collapse for an entire sector. Some 15 months ago, there were certainly signs that the market was in a positive upswing, but the industry was also distracted by the Armstrong Williams/Department of Education issue, which involved Ketchum and became a national story and the topic du jour.

Several darkly predicted that the issue would prove catastrophic for the entire industry. While agencies were forced to review their ethics guidelines, and Armstrong Williams continues to be invoked as an example of PR gone wrong, the squall ultimately passed, and the profession was left with some instructive lessons on dealing with a homegrown crisis. The reason it is important to bring it up now is to remind the industry of how much has changed since that topic dominated industry chatter, events, and plans.

By mid-year, and even earlier for those agencies that were really on the ball, the conversation had most definitely shifted to the impact of the new-media environment. The theme for this year's Agency Business Report is "PR's Big Moment." Over the past three years, a constant mantra citing the death of the 30-second spot has had no adequate follow-up, not from advertising, and not from any other marketing discipline.

Moreover, many of the ad agencies' offerings of viral or buzz or word-of-mouth marketing (for example, Burger King's subservient chicken, introduced to the world by advertising agency Crispin Porter & Bogusky) owed much to techniques grounded in PR. The PR industry suddenly became in danger of ceding its rightful place to other marketing disciplines. But now PR agencies are asserting that rightful place as facilitators, caretakers, and innovators of media relationships. Increasingly, that is what is driving marketing strategy today. How ironic that for years so many in PR would, in the interest of aggrandizing their role as senior counselors, downplay the media side of the business.

Now, without abandoning the important assertion that PR is more than smile-and-dial, but a strategic partner on multiple levels, PR firms are confidently finding ways to tackle the most challenge marketing and reputation problems that companies are facing today. But there are still areas of vulnerability to navigate in order to continue the momentum.


Acorporate media relations team at a major US company was asked recently about the impact of the blogosphere on their company. The answer was a kind of collective shrug: "We're aware they are a reality, we keep an eye on them, but they aren't that big a deal." This company, no stranger to innovation and understanding the consumer consciousness, represents the reality of large companies that are juggling multiple marketing channels, where blogs are only a small part of the picture. But the PR agency world talks of little else these days. That's not to say that the PR industry is overestimating the importance of the new-media environment, but that companies see it in a larger context.

Also, there is still a strong sense that traditional media remains vital for communicating companies' messages. While there has been a big focus on the decline in newspapers, many are simply logging on to read The New York Times rather than tucking it in their briefcase.
"There is a debate, of course, about what is the importance of the mix of traditional and new media, and traditional media will always be an important part of the mix," says Ketchum CEO Ray Kotcher.

Ketchum is one of the firms that has kept a constant, public focus on the importance of strong media capabilities, even when it was more fashionable to diminish it in favor of strategic counseling. During the past year, numerous firms have added to or enhanced their new-media approaches.

Fleishman-Hillard launched its Next Great Thing offering, which aims to bring awareness of what new media can do for clients across disciplines. Weber Shandwick and Edelman hired highprofile bloggers to add to their capabilities, and Edelman in particular has been aggressively using the tools of new media as a platform for its own marketing efforts. Peppercom launched PepperDigital, and MS&L has helped GM find some positive stories to tell by helping launch its popular blogging initiative. Burson-Marsteller, under new leadership, is working to educate its staff on new-media applications from the ground up, supplying more employees with the ability to tap into new technologies. Blogs have captured the imagination of PR ambitions, primarily because they play to the discipline's strengths.
"The advertising community is pretty floored when it comes to blogging," says NextFifteen CEO Tim Dyson. "Having said that, the advertising industry has definitely grabbed hold of Internet marketing and is winning that battle."

The key is not to look at any of the platforms in isolation.

"Marketers are facing a proliferation of channels and brand-building options," says Harris Diamond, CEO of Weber Shandwick. "The news outlets are also facing tremendous pressure out there. One of our goals is to take advantage of those channels."

Increasingly, the competition will not be other PR firms, but other marketing agencies. That is already happening, and one large agency CEO references a specific example of budget increases in PR that have come as a direct result of the new environment. But it is not yet enough. There is still much to lose if PR misses its big moment. Identifying what is uniquely PR is a critical component of the ongoing momentum.

"I have thought for a long time that, as information proliferates, gatekeepers who can vet, analyze, filter, and synthesize information will be more valuable than ever," says Gary Stockman, president of Porter Novelli. "There will be a role for intermediaries, like traditional media and others. Our USP is our ability to interact with those intermediaries. That gives us an advantage."

Stockman says he thinks media relations will continue to be an area that commands more respect as time goes on. "What we believe here is that media relations is a specialty that needs to stay strong." There is a distinct sense of urgency in the business not to miss this opportunity.

Says Kotcher, "The core competence that PR has that no other discipline can claim is that media capability."

Or, as one agency CEO put it, advertising agencies "can't do media relations, don't want to do media relations, and can't make money doing media relations." Too bad for them.


What makes this energetic focus on media so interesting is it follows so closely on a critical trend that has been evolving for a few years now – that of specialization. Agencies of all sizes are no longer able to sell themselves on the "generalist" tag.

"The marketplace has actually driven that out," affirms Lynn Casey, CEO of Padilla Speer Beardsley. "No one wants to buy general services anymore. And even if we wanted to commit ourselves to every inquiry that crosses the desk, we know there's a firm out there that has that specialty."

More firms are deciding to take only business they can do well. (It grabs helps, of course, that there's a lot more of it to go around.) Large agencies and small are cultivating less breadth, and more depth in key areas, as a key differentiator.

But the bottom line is talent. At the time this article was being completed, PRWeek learned that Lisa Sepulveda, EVP of Edelman's New York consumer practice and one of the creative brains behind Dove's Real Beauty campaign, had been plucked to become CEO of Euro RSCG Magnet.

This is only the latest high-profile poaching in an industry desperate to hire and retain the best people.

"More and more I have a real sense that the real competition for 2005-2006 is for talent," says Hill & Knowlton CEO Paul Taaffe. "We are seeing wage pressures move around the world, and there seems to be a shortage of talent at some levels because a lot of people left the industry in the early part of the decade."


As long as PR has been around, there has been a belief that the business world would go global. No doubt that is happening now. Much of the global buzz focuses on Asia, particularly China, and for good reason.

"When you are in Beijing or Shanghai, you really do feel it in the air. This is a continent on the move," says Marcia Silverman, CEO of Ogilvy PR Worldwide.

Between 25% to 30% of the firm's business comes from Asia, primarily China. Other markets on the radar include Eastern Europe. Some acquisitions are rumored and not just in discipline area, as has been more often the case in the past few years, but geographically as well.

Some 20% of Fleishman's clients now originate from outside the US, according to CEO John Graham. "Our growth rates in our international business have exceeded the growth in our US business for the past three years," he says. Global business doesn't just stem from the US anymore.

"Business used to be hubbed out of a major city in the US or from London," says Andy Polansky, president of Weber Shandwick. "Now we work with hubs out of Brussels, Beijing, and Cologne. I think it speaks to the depth we have in different offices."

It's just one more sign that the PR business, in new media, in the talent wars, and it global reach, has everything to play for.

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