Agency financials reveal winners in numbers game

All the major networks, bar WPP, have now joined private firm Edelman in reporting their full-year and Q4 2013 financials - and, on the surface, the results reveal a two-tier growth trend developing among PR agencies.

All the major networks, bar WPP, have now joined private firm Edelman in reporting their full-year and Q4 2013 financials – and, on the surface, the results reveal a two-tier growth trend developing among PR agencies.

If the numbers available are to be trusted, Interpublic Group – which owns PR firms including Weber Shandwick, GolinHarris, and DeVries – and Edelman are powering ahead of the competition in terms of growth.

Weber Shandwick's CEO Andy Polansky has good cause to be smiling this morning as the Constituency Management Group division of parent company IPG, which houses PR, reported organic revenue growth of 11.7% in the final quarter of 2013 to $374.8 million, and full-year growth of 7.8% to $1.3 billion.

Impressive stuff - comparable with Edelman's 11.4% organic growth performance in 2013 when you take into account the cost of servicing a holding company structure versus an independent setup.

And it is clear Weber played a big part in this growth. The PR figures outstripped other disciplines in the group, with the Integrated Agency Networks division, which includes IPG's advertising networks of McCann (run by Polansky's former boss Harris Diamond), Draftfcb, and Lowe, only growing 2.2% in Q4 and 1.7% in 2013.

None of these comparisons are perfect, and there is certainly an element of comparing apples with oranges, and vice versa. But there can be no doubt Weber and Edelman have built impressive momentum in terms of organic and new-business growth.

I talked at length about Edelman two weeks ago, when PRWeek revealed its 2013 numbers, so let's have a look at Weber, which makes up the largest share of CMG's revenues - though it should be noted Polansky told us IPG's PR agencies in the CMG unit saw “double-digit growth in the quarter and high single-digit growth for the year” across the board.

Weber has grown both organically and via new business, expanding work with existing clients through new initiatives such as its Mediaco content division and taking on more integrated work, and winning new accounts such as Chobani, Getty Images, TripAdvisor, and Burger King for the UK and Ireland.

IPG's flagship firm has also had a relatively stable year in terms of churn in senior leadership, something Edelman continues to struggle with in some regions.

Omnicom – home of FleishmanHillard, Ketchum, Porter Novelli, among others – is the really curious case in this analysis. The bullish noises coming out of the network's PR agencies belie the extremely ordinary numbers the network unveiled earlier this week: organic revenues were actually down 3.7% in Q4 and rose a paltry 1.5% in the full year.

Unlike at IPG, advertising is outperforming PR at Omnicom, with Q4 organic growth at 4.1% and full year at 4.8%. PR represented 9.1% of revenue in 2013, compared to advertising at 48.3%, CRM at 35%, and specialty at 7.3%. Unsurprisingly, none of the three main Omnicom PR firm CEOs were available for comment when PRWeek contacted them for our results story.

Publicis doesn't split out numbers by discipline, but overall organic growth figures were flat in Q4 and up 2.6% across the full year of 2013. WPP doesn't report until later this month, but there have been few indications that the Martin Sorrell-led network – home of Hill+Knowlton, Burson-Marsteller, and Ogilvy – will improve markedly on its disappointing PR performance of the past 18 months, though clearly the jury is still out until the numbers are unveiled.

In the case of Omnicom and Publicis, their impending merger is no doubt weighing heavily on minds, and who knows what impact that has on financial reporting as the two networks jockey for position ahead of the deal close.

Some Omnicom PR leaders complain about items included in the group PR segments that drag the figures down for the core PR shops. But, due to the interpretation of the Sarbanes-Oxley reporting rules adopted by the networks, there is no hard evidence to support that claim.

Patrick Resk moved from VP of financial operations at Omnicom's Diversified Agency Services group unit, which houses the PR businesses, into the CFO seat at PorterNovelli in October 2012 - so he has detailed knowledge of the way the network reports numbers from both ends of the spectrum.

When I spoke to him for last year's Agency Business Report, he told me: “There are some pieces of PR that sit within advertising that get carved out, but it's not material. The bottom line is Fleishman, Ketchum, and Porter make up most of it.”

In the same piece, Ketchum CEO Rob Flaherty noted the global nature of the big networks and resultant impact on overall numbers, with low-performing regions dragging the others down. But, presumably, Weber and Edelman are just as vulnerable to this as they are at least as global as the others.

FleishmanHillard would point out that it handled at least $800 million in one-off creative and paid media for the Obama campaign in 2012, revenues it replaced in 2013, including $130 million in new business. So, although it was flat year on year, it was flat against an exceptional year. Other firms would no doubt say they also had one-off revenue lifts from the US election and London Olympics in 2012 to match in 2013.

As I say, apples, oranges... it's difficult to make definitive statements. And nothing would please me more than to be able to report stellar growth figures across the board from all the major agency networks in 2013. But that wasn't the case, so it's difficult to draw definite macro conclusions based just on numbers.

PRWeek is in full Agency Business Report mode at the moment, so we will be digging a lot deeper in the coming months to provide you with the definitive analysis of the PR agency world in our May edition.

In the meantime, it seems those large agencies that have successfully evolved their businesses to encompass genuine integration across disciplines; grown work with existing clients, especially in digital, social, and content; and bagged new business they can integrate and sustain are the ones that are truly thriving.

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