The ergo deal (to become Edelman.ergo) should be viewed in the context of Edelman’s purchase of ELAN in France
, Deportivo in Sweden
and Smithfield in the UK
, all during the past 18 months. If we consider the types of agencies that these are – ELAN strong in digital, for example, and Smithfield a specialist in financial – a pattern appears in Edelman’s buying spree.
Ergo, with 120 consultants and offices across the country, is not only big enough to help Edelman become a top four agency in Germany, but also strong in corporate crisis work and public affairs, enabling Edelman to become a ‘full service’ agency in yet another European market.
But in order to keep its overall growth on track, Edelman realises he needs to become comparatively less reliant on the US and UK markets where the firm already makes annual revenues of $482m (£320m) and $75m (£50m) respectively.
Last week’s deal means Edelman.ergo will now enjoy a turnover in Germany of more than $30m (£20m), which is a further step in reducing the dominance of the UK office in Edelman’s European operation.
Indeed Richard Edelman and Europe & CIS CEO Michael Stewart are considering developing Berlin as a fifth global ‘hub’ (alongside New York-Chicago, San Francisco, London and Singapore).
Such is the potential of the East German city to develop business not only in its homeland but also in Eastern Europe – Edelman’s plans in Russia hit the buffers in 2012 – and even into China. From this perspective Edelman starts to look a lot less Anglo-American.
What is even more intriguing is Edelman’s strategy of offering truly integrated marketing solutions from each of these global hubs. In this sense Richard Edelman has decided to ‘go it alone’ in a PR-led drive for domination in the marketing consultancy market, creating converging services in-house rather than partnering with ad or media shops.
This is something that Edelman has branded ‘communications marketing’.
Edelman strongly believes that the firm’s traditional strengths in ‘earned media’ can win over blue chip chief marketing officers and chief communications officers alike, and that it can take the lead in reputation-led integrated marketing campaigns using a unique mix of experts. "Our creative campaign ideas are inherently more conversational and rigorous," says Edelman.
But Edelman is acutely aware that in order to do this he must not only develop the ‘full service’ offering now found in New York, London and Berlin, but also fundamentally restructure the whole organisation to offer best-in-class skills in ‘paid and owned media’ as well as classic PR.
Since he was interviewed last July, Edelman is now tweaking that strategy to put more emphasis on paid media (advertising or paid SEO) and less on clients’ community management (the ‘owned media’ that has been a rich seam of business for the past few years).
As a result the firm is keen to hire more media buying specialists and the type of analytics and data specialists that are more likely to be found in progressive media agencies than traditional PR shops.
At the same time Edelman has realised that its core earned strategy must work harder to win over the YouTubers and video influencers who are taking an ever-bigger share of young consumers’ media habits.
According to Edelman, all this is being driven by the decline in influence of the mainstream media, which means that clients are looking for new ways to connect with their consumers and other stakeholders.
Edelman believes that earned media specialists have a natural advantage in this new world, but only if the consultancy services adapt further to the new media landscape.
The biggest challenge is likely to be one of sheer scale. Because although Edelman now rivals any single agency brand in America – on a par with say BBDO or DDB – in billings terms, it remains a fraction of the size of the big holding groups.
Think for example of the clout of WPP’s Group M, which buys $106bn (£70bn) in global media each year.
That said, it is encouraging to see a PR agency with the ambition and confidence to take the lead in holistic MNC campaigns, and with the determination to transform itself accordingly.