Analysis: changing industry prompts consolidation in PR software market

Cision and Vocus are two of the biggest providers of PR management and monitoring tools, and observers say both could soon be combined by private equity company GTCR.

Analysis: changing industry prompts consolidation in PR software market

GTCR acquired cloud-based Vocus earlier this week in an all-cash transaction for about $446.5m (£267m).

GTCR is now in a battle with PR software company Meltwater for Stockholm-headquartered Cision, topping the latter’s eleventh-hour bid for the vendor.

"If your contract is about to come up for renewal with either company, I wouldn’t lock myself in," advises Roxane Papagiannopoulos, president of RMP Media Analysis, who follows the developments closely on her consultancy’s blog.

"I’d see how this pans out first," she says. "Both companies offer excellent resources such as monitoring and contact databases, but if GTCR ends up with both products, as I suspect will happen, they will have to decide what products to keep." 

She predicts that "given clients are demanding a one-stop solution, they will also need to offer a best-of-breed, one-platform product that services PR and marketing, both separately and together."

"But marketing will be front of the line because that is where there is more blue sky – less contested space than in PR measurement," adds Papagiannopoulos, who worked at Vocus earlier in her career.

Steve Ashley, a senior research analyst at Robert W. Baird, who covers software and services, says Vocus’ PR business suffered during the economic downturn and sluggish recovery.

"PR clients would buy one suite instead of two or would buy a lower tier of software. The company hoped they would upgrade after the downtown, but they never did," he adds. 

Vocus reported a net loss of nearly $22m (£13.3m) last year, and $23.6m (£14.1m) in 2012.

In 2011, Vocus began to emphasise its digital marketing services. It acquired Facebook app-maker North Social and bought iContact, an email marketing services company, a year later, among other acquisitions. 

However, Ashley contends the company was not able to extract the growth that shareholders hoped for during the transition to digital marketing services for midsize businesses. He suspects new owner GTCR will look to streamline product offerings – especially if it also acquires Cision – and improve operational efficiencies.

Vocus representatives declined to comment for this article. In a press release, Vocus CEO Rick Rudman says: "Joining forces with GTCR creates a significant opportunity to utilise each other's strengths and move even faster toward our vision of creating innovative software and making our customers successful."

Dave Armon, president of Critical Mention, a firm that provides monitoring of TV and radio stations, says it makes sense for Vocus to go private. "There are times when reinvesting in a business is the smartest approach to innovate and create powerful new products and services that will appeal to the next generation of customers," he says, noting industry demand for real-time contextualized analytics. "They need to concentrate on rebuilding without the added stress of hitting quarterly growth numbers."

In an email to PRWeek, Cision Group CEO Peter Granat said: "It’s easy to see the market’s intense interest in Cision as a strong affirmation of our strategy. But I also see it as an attestation of our ability to execute on that strategy and deliver exceptional value for PR and communications professionals."

In addition to its integrated workflow solution CisionPoint, Granat cited "cutting-edge products such as our content-marketing solution also help ensure that we will meet emerging and future needs [of clients]".

Private equity company GTCR has been unavailable for comment.

Alan Chumley, SVP of research and analytics at FleishmanHillard, told PRWeek that the flurry of consolidation in the sector in recent years reflects "a classic build or buy to survive activity".

Aside from Cision and Vocus, social media marketing management firms Spredfast and Mass Relevance said this month they are merging. In 2011, News Group International acquired research and measurement consultancy KDPaine & Partners and media analysis agency Report International.

Chumley believes vendors are scurrying to keep up with client needs given the quickly evolving state of PR.

"There has been this consolidation toward a one-stop-shop. That works for a while, but then you have companies too diversified trying to do too many pieces of the market. Then you see pressure to disentangle some of the specialty pieces or these companies unable to keep pace with the smaller, more nimble entrants," explains Chumley. "So they have to buy again."

He adds that "what is interesting here is that private equity firms are involved at the high end of the market and venture caps at the low end".

"It means they both see money to be made in the short to medium term," Chumley says. "There’s inefficiency in current operations and the private equity folks see an opportunity to drive efficiencies into operations."

This article first appeared on PRWeek US.

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