Agency business verdict: must do better

It was interesting to see Richard Edelman's response to the long-anticipated FleishmanHillard rebranding earlier this week.

It was interesting to see Richard Edelman's response to FleishmanHillard's long-anticipated rebranding earlier this week.

Fleishman removed the hyphen from its name, unveiled a new logo, a new tagline, and led on integration.

Edelman placed some clear water between the two agencies' models, suggesting his eponymous firm is expanding the “definition of PR” while Fleishman is becoming a “full-service provider.” I'm not sure there's as much difference between the two as Edelman makes out, beyond the obvious fact that one sits within the holding company structure of Omnicom and the other is fiercely independent.

They are both positioning their offerings firmly within the context of PESO, participating in each element of the paid, earned, shared, and owned media mix, with a natural emphasis on the earned, shared, and owned elements but an increasing interest in paid.

None of these elements exists in a vacuum, and in an increasingly digital environment it makes sense to have all four in your locker. But the most interesting point Edelman made was his observation that “our industry has grown more slowly than advertising and much slower than digital in the past year.”

This is certainly a suggestion that is backed up by PRWeek's Agency Business Report, our comprehensive analysis of the numbers, trends, and issues shaping PR firms that was released this week.

The report shows larger firms grew more slowly year over year than the prior 12 months. Indeed, one holding company group – WPP – shrank, and this worrying trend continued when last Friday's Q1 announcement revealed a drop of 4.1% in the Burson-Marsteller, Hill+Knowlton, and Ogilvy owner's PR and public affairs revenues. Little wonder that Ogilvy this week laid off up to 20 staffers in its DC office as federal spending cuts took their toll.

As I stated in the ABR, 2012's growth figures would have been greeted with popping champagne corks three years ago as the economy came out of recession, but our aspirations are much higher nowadays, and it is disappointing to see growth levels being outstripped by colleagues in advertising and digital.

Edelman says the “world is moving in our direction,” but WPP's results suggest otherwise. The leader of the world's largest PR firm would no doubt point to the drawbacks and inflexibility of the holding company model for a service-oriented business such as PR.

It was telling that mid-sized firms such as Global Strategy GroupZeno (an Edelman subsidiary), W2O Group, and Allison+Partners posted more impressive growth numbers in 2012. Of course it's easier to grow 30% when you're a $20 million business rather than $600 million, but the mid-sized agencies' numbers were markedly more impressive than the previous 12 months.

They attribute their success to a number of factors, including a one P&L model, using digital to reflect global scale, and lower turnover of staff, especially at the key senior levels.

If, as Edelman contends, PR is “best poised to serve clients in a dynamic marketplace that can be disrupted by a poor customer experience well catalogued in social media,” next year's ABR numbers amongst the top 10 firms need to be far more impressive than those outlined in our 2013 edition.

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