It is a picture that begs a question. Namely, in such difficult circumstances, how did the performance of PR fare when set against the performance of other marketing disciplines?
It is groups such as WPP - whose CEO Sir Martin Sorrell remains deeply pessimistic as to a recovery timetable - Interpublic Group, Omnicom, Chime Communications and Incepta that can offer a cross-discipline perspective that illuminates how PR is doing compared with other parts of the marketing mix.
WPP owns a quartet of major PR brands: Hill & Knowlton, Burson-Marsteller, Cohn & Wolfe and Ogilvy Public Relations Worldwide. In late February this year it released its preliminary results for the year to 31 December 2001, which showed pre-tax profits of £490m on revenues of £4bn, up just 1.3 per cent year-on-year, or down three per cent if acquisitions are excluded.
Although WPP controls three of the world's leading ad agencies - J Walter Thompson, Ogilvy & Mather and Young & Rubicam - the proportion of group revenues stemming from advertising is gradually declining as it continues to build various kinds of marketing agencies. In 2001, non-advertising income represented 54 per cent of WPP's revenues.
Overall, 12.3 per cent of WPP's revenue in 2001 came from PR and public affairs. But while H&K managed to increase its global revenues for last year, the three other main PR brands in the group all suffered what WPP describes as 'significant' revenue declines.
The net result was a 6.7 per cent fall in PR income over the year 2000 and an erosion in PR margins from 13 to nine per cent. Ad revenue, in contrast, posted a tiny rise of 0.3 per cent. The division comprising branding, identity and direct marketing agencies bettered that with a 0.6 per cent gain. But the star performer was the Information & Consultancy part of the business, containing market research agencies such as Millward Brown and Research International, which boosted revenues by an impressive 14.4 per cent.
Sorrell was last week savaged in a press interview by his rival, Havas Advertising CEO Alain de Pouzhilac. He attacked Sorrell for 'arrogance' following Sorrell's failed attempt to force up the price of media buyer Tempus in a fierce acquisition battle last year. In a terse statement, a Sorrell spokeswoman declined to inflame matters: 'We have absolutely no comment,' she insisted.
But the WPP boss was keen to outline ways in which the downturn had hit his business: 'PR has been the part of our business that has been most affected, and that has been a bit of a disappointment. We thought that the increasing specialisation that came to PR in the 1990s would have meant the added-value offered would potentially be greater, so when a recession came PR would have been more resilient than it has proved.'
At competitor Chime Communications, which has also unveiled preliminary results for the year to 31 December 2001, operating income rose 14 per cent to £95.1m. Unlike WPP, however, PR was not the discipline in the doghouse.
'Our PR business grew 14 per cent in the first half and declined 14 per cent in the second. Meanwhile ad business was up 20 per cent in the first half and down 20 per cent in the second half,' says Chime Communications chairman Lord Bell.
As it transpired, Bell Pottinger and Good Relations were the best performers within Chime, while advertising - Chime owns HHCL & Partners, which lost clients the AA, Egg and Tango in 2001 - and tech PR were 'hardest hit'. Chime has, of course, consolidated most of its tech PR into Chime Online, whose biggest agencies are Harvard PR and Insight.
One a like-for-like basis, Chime Online's operating profit fell by 21 per cent and its operating income diminished by 3.2 per cent. The decline was greater after 11 September.
Bell thinks that, overall, some clients are switching budget to direct marketing because it is perceived as cost-effective, and that greater onus is being placed on customer relationship management (CRM) strategies due to the rise in one-to-one digital communications.
Anthony Wreford, president and CEO Europe for Omnicom's Diversified Agency Services (DAS) group, agrees with Bell that the harder market conditions favour the bigger PR agencies. Although, of course, as the owner of three global PR networks - Fleishman-Hillard, Ketchum and Porter Novelli - not to mention Brodeur Worldwide and Gavin Anderson, DAS clearly has a vested interest in promoting this view.
'As with all marketing disciplines there is inevitably a bit of a flight to quality in tougher times,' says Wreford. 'Clients are less prepared to take risks. The smaller, wackier agency will find it harder. You tend to go for the safe and reliable, which tends to mean bigger.'
Omnicom does not break down its PR figures, but between the lines one can infer DAS PR agencies may have been outperformed by other types of agency owned by the company last year.
'In Q4 last year, there were a set of circumstances facing PR that were very different to other communications techniques,' says Wreford.
Globally, Omnicom's revenue for the 12 months ended 31 December 2001 increased 12 per cent to just under £4.8bn. Subsequent figures for Q1 2002 showed PR accounting for 13 per cent of worldwide revenues - a drop of 9.3 per cent.
Annual results for 2001 showed IPG, parent of Weber Shandwick, doing less well with revenue declining 6.3 per cent to £4.7bn from £5bn a year earlier.
Speaking when IPG made public its results, chairman and CEO John Dooner referred to 2001 as a 'challenging' year. He added: 'We have addressed the situation forcefully, with a major restructuring programme and financial disciplines that will ensure we meet our commitments to shareholders in spite of the harsh media and marketing environment. We expect these initiatives will enhance our operating performance.' At the time, Interpublic highlighted 'disproportionate declines' in PR and event marketing.
Incepta, the quoted owner of Citigate Dewe Rogerson and The Red Consultancy, derives about half its revenues from PR. According to group CEO Richard Nichols, growth last year was 'broadly comparable' between Red, sales promotion specialist Dynamo and its integrated agency with a strong DM focus, Finex. All three grew revenues of between ten to 20 per cent.
However, when looked at as a whole, PR did less well due to the six per cent decline in revenue at financial and corporate specialist Citigate Dewe Rogerson, which was largely due to the drying up of IPO work in a bear market and a slowdown in City M&A activity.
It would also be remiss to overlook the proposed merger of Publicis with Bcom3, owner of Manning Selvage & Lee, that will create the world's fourth largest group. According to MS&L worldwide CEO Lou Capozzi, PR accounts for five per cent of Bcom3 revenues and grew by five per cent in 2001, broadly in line with the growth of other kinds of agencies within the group.
During the previous three years, however, says Capozzi, PR grew by about 25 per cent each year - leading the way across the group in terms of percentage growth and profit margins.
What does the future hold? And what are the expectations and growth strategies for these marketing conglomerates?
'We're believers in a long, slow recovery and think that the downturn is shaped more like a saucer than a bath,' says Sorrell. While Bell adds: 'Everyone is saying the second half of 2002 will be better. Personally I can't see it yet.'
Looking ahead, Chime is aiming to cut its personnel costs to no more than 60 per cent of 2002 operating income - they stood at 64 per cent in 2001 - but envisages continuing organic growth for its core businesses.
WPP is predicting like-for-like revenues with 2001 this year, but thinks the second half of 2002 will be stronger than the first.
The 'growth in importance' of internal comms is seen as a major opportunity for the group, which is also looking to push up its operating margin from 14 to 15 per cent.
That may be asking a lot of its PR assets, given the nine per cent they achieved in 2001 is well below the WPP group average, but shareholders like to see this kind of pressure applied. Considerable hard work lies ahead.