Smarter communications: Agency Business Report 2014

Global strategies, fueled by compelling content and integrated offerings helped agencies successfully navigate a tricky 2013.

Edelman's Samsung program is an example of agencies expanding work with existing clients through social and digital.
Edelman's Samsung program is an example of agencies expanding work with existing clients through social and digital.

Two large agencies – Edelman and Weber Shandwick – stood out last year in terms of growth that relied on three themes characterizing 2013 as a whole: content, integration, and globalization. 

Edelman achieved full-year organic growth of 11.4%, increasing revenues from $665 million in 2012 to $741 million in 2013, while Weber reported organic growth of approximately 10% (its holding company Interpublic Group’s Constituency Management Group, which contains its PR shops, was up 7.8%).

The numbers at holding company firms are always somewhat opaque, because of the withholding of figures for constituent agencies due to Sarbanes-Oxley. But Omnicom’s PR performance of 1.5% organic growth and WPP’s PR and public affairs unit posting a 1.7% decline, suggest their agencies were nowhere near Edelman and Weber in terms of revenue growth.

The top two performers are in line with our overall agency ranking numbers . Of the 142 agencies that reported this year and last, average US growth was 11%, up from 9% in 2012, but down from 2011’s 14%. Across all 177 agencies, that figure rises to 13%, up from 12% last year, down from 15% in 2011. For the top 50, average growth was 12%, compared to 13% last year and 17% in 2011. The numbers portray a solid year, but also one of transition.

"We have benefited tremendously from a complete integration of our digital and PR businesses," says Richard Edelman, president and CEO of Edelman, "not just financially, but also the two elements together adding up to more than the whole."

Edelman cites its UK office’s work on Unilever’s Project Sunlight initiative as a good example.

"It began and ended in social, as the ask was through Facebook," he adds. "Where digital starts and ends and where PR starts and ends is very hard to determine."

Midsize firms are also prospering by giving clients an integrated offer. At Columbus, OH-based Fahlgren Mortine, staffers work across all disciplines, including PR, advertising, creative, Web design, mobile, and research and planning. But CEO Neil Mortine distils the essence of what they do down to the core skills of client engagement, planning, creative, and social and digital.

Their typical client is now a CMO or CCO. "There’s a blurring of the lines between the disciplines," he says.

Coyne PR also repositioned around integration after a tough year in which it lost two of its biggest clients – Burger King and General Mills – and 15% of its revenue.

"Everything’s now built around storytelling, compelling content, and engagement," says agency CEO Tom Coyne. "We’re more creative about engaging consumers."

Now, the firm can be involved in building a complete brand identity from the ground up, including product design, advertising, social and mobile, and PR.

"We can do it smarter, better, and faster than the competition – and cheaper," adds Coyne.

New global contender
One newer name on the global PR agency block also flexing its integrated muscles is Chinese firm BlueFocus. Started in 1996 by five entrepreneurs in Beijing, the agency went public in 2010 and embarked on an aggressive acquisition strategy that included buying Chinese ad agency Bojie Advertisement.

Last year, it paid $50.4 million (£36.5 million) for a 19.8% stake in British-based Huntsworth group, owner of Grayling, and bought a majority stake in UK social media agency We Are Social for an initial payment of $30 million. BlueFocus’ 2013 revenues were $576 million (up 65% from $350 million in 2012) and its aim is to expand tenfold by 2020. Helen Thomas, president of BlueFocus Communications Group of America, says PR now accounts for about a third of revenues.

"It’s an integrated group, no longer just PR," she adds. "Storytelling is at the heart of all modern campaigns. We want to build bridges between the US and Asia and help brands to go back and forth – especially on social."

At its new offices in Beijing, about 2,000 employees work in a Silicon Valley campus-style environment with free breakfast, subsidized lunch, and stock options. 

It is looking for further acquisitions of entrepreneurial firms in the US, but will allow those agencies to keep their identity under the BlueFocus umbrella.

"The US is a critical market," says Thomas. "We are starting from scratch here, but have a track record of being entrepreneurial to make things happen."

The Chinese market has also grown significantly for Weber Shandwick in the last five years, and the agency posted strong growth in Korea, Hong Kong, and India in 2013. But CEO Andy Polansky is quick to emphasize such growth will not be achieved by compromising the agency’s global policies.

"We have to be consistent in how we do business," he says, "and be sensitive to local markets. But that does not relate to [breaking our code on] best practices."

Content and integration in action

Richard Edelman says PR is at the core of programming on Unilever’s Project Sunlight sustainable living initiative and illustrates the integration of digital and PR.

"The advertising contribution in Project Sunlight was the film," he says. "Beyond the film, everything else was done by PR firms. They have the concept and the execution in social."

Edelman activated the concept in global markets ranging from Indonesia, UK, Brazil, to India. Weber Shandwick implemented the program in the US.

Last year, Weber launched a specialist content-creation and distribution unit called Mediaco, which helped drive growth in 2013. CEO Andy Polansky describes Mediaco as a "game-changer that particularly fueled our success in consumer."

Noteworthy activations through Mediaco include the Live.Love.Lux. lifestyle-content website for Electrolux; a content-marketing initiative for the LifeWise Health Plan of Washington; and a brand media strategy for Ricoh – all activities that produced measurable results beyond simple traffic metrics.

Edelman’s Unilever work is an example of agencies expanding work with existing clients through social and digital, not just relying on new business. Samsung is another example.

"We have a very built-out digital program for Samsung now, which is much larger than PR," says Edelman.

He cites Samsung’s Oscars selfie, which was handled by media agency Starcom and socialized by Edelman, as an example.

"It was Starcom’s idea, but we were responsible for social," he says. "There are times when we are implementing somebody else’s idea, but the fact we have the social channel is key."

Further acquisitions
Another big player from Asia looking to expand globally is Dentsu, which acquired Mitchell Communications Group on January 1, 2013, and installed CEO Elise Mitchell as CEO of Dentsu’s PR operations in the US, with a remit to acquire and build a new PR group, though no additions have yet been forthcoming.

Dentsu also owns US ad agency Mcgarrybowen and digital shop 360i, and last year finalized its acquisition of global media firm Aegis for about $5 billion.

"I’ve talked to a lot of agencies and developed a strategy around what our approach should be to acquisition," says Mitchell. "The Dentsu/Aegis deal created new opportunities because the network changed overnight – anyone we acquire can tap into a new, world-class network."

Mitchell says M&A is not always easy because there are a lot of great agencies out there, but they’re not always the "right fit." "I hope to complete one acquisition this year," she adds.

At her eponymous agency, Mitchell is also ramping up digital and social and content.

"Clients want and need it," she adds. "Agencies need to be proactive and stay ahead of the curve. More clients are asking for strategy support and activation on content."

The talent merry-go-round that characterized 2012 didn’t stop last year. Edelman hired and lost several senior-level staff, but it is focused on mitigating this.

"We try to grow quickly enough to give people options to move around [geographically and account-wise]," says Edelman. "We’ve also promoted a lot internally."

He cites a change in Chicago as an example, where president Rick Murray left to be replaced by Jay Porter.

"Jay started on accounts in Chicago, went to San Francisco to run the office, and handled the Starbucks account. Now he’s back in Chicago five years later running the office," says Edelman. "That’s a perfect career plan."

While there is a shift in the qualities required by senior talent, Edelman doesn’t attribute this solely to age.

"I’d describe it as a skills evolution," he says. "We’ve got to have people who are always thinking digitally. Mark Hass [former Edelman US CEO] is the keenest digital guy around.* That’s why I reject the idea of it as generational."

Edelman believes it is more about people who welcome all the assets PR can bring to bear on a problem. With the right mix of skills, a focus on integration, and a global outlook, Edelman says PR can take the lead.

"We can challenge ad agencies as lead creative," he says. "We have started to do this with Diageo, Heineken, Adobe, and Humana."

Humana adopted Bell County, Kentucky, and got people to lobby restaurateurs to revamp menus, changed school menus, and people lost weight: an Edelman lead idea where the ad agencies came along afterward.

"The best work we’re doing has this integrated aspect, between brand and reputation, brand and corporate affairs," he adds. "But it also has the benefit of being smarter through research and faster and conversational through social and digital."

*As the May issue of PRWeek went to press, Mark Hass was US president and CEO of Edelman. He has since stepped down from the role.

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