The road ahead in 2019

A long read for the holidays reflecting on developments in PR, politics, and business in 2018 and analyzing the implications and trends set to define next year.

Photo credit: Getty Images
Photo credit: Getty Images

In a flash, 2018 is almost gone, an incredibly memorable year in so many good and bad ways, not least it being PRWeek's 20th birthday in the U.S. market.

The following is a wide-ranging compendium of trends, observations, and takeaways from the year, and a look forward to what will undoubtedly be an even more tumultuous and exciting 12 months ahead.

Changing of the guard

The skills required by PR pros change constantly and digital savvy is just table stakes now. Running parallel to that, there’s a natural generational clock that ticks and results in a new crop of leaders coming through every few years.

It felt a little like that in 2018 as many senior in-house PR executives "retired" – a phrase that seems to have become de rigueur to describe someone leaving a company nowadays. Nobody simply "leaves" or, heaven forbid, gets "fired"!

Many of these PR pros aren’t retiring in the traditional way of using the word. They are simply moving on to pastures new after a long tenure at one employer, sometimes taking the opportunity to enjoy a sabbatical, sometimes transitioning directly to their next role.

Some departures presage a change in structure at the host company, as positions that have evolved with them over time as they ascended the organization don’t necessarily make sense when they leave, or that particular job is done. It often provides an opportunity to freshen up the structure.

Chief brand officer Colin McConnell departs Prudential Financial at the end of the year after a career at the financial giant stretching back to 1991. The company is retiring his role and splitting up the reporting structure for its marketing and communications groups on the org chart, but says it is sticking with the same strategy.

Matt Davis, president of Dow Chemical North America and SVP of global corporate affairs, also retires at the end of this year, after working at the company for more than three decades. He saw Dow through last year’s merger with DuPont and made preparations for it to be split into three separate publicly traded companies in 2019 – Dow, DuPont, and Corteva Agriscience – and felt this was as good a time as any to seek new challenges.

The NFL’s EVP of communications and public affairs, Joe Lockhart, "retired" from the under-fire football organization in January to spend more time with his family. But that didn’t last long and he returned to the fray in May, ending the year as vice chairman of public affairs at Edelman.

Ray Day retired from Ford last year after a 28-year stint and then replaced another retiree at IBM, Jon Iwata, who served 34 years in various communications and marketing positions at the tech behemoth.

Further up the executive food chain, Unilever’s CEO Paul Polman and CMO Keith Weed are both also retiring next year.

Nobody conducted himself with quite such élan as CBS chief communications officer Gil Schwartz, who retired in November following two decades of service at the embattled broadcaster, which spent much of this year mired in a crisis surrounding its disgraced former chairman and CEO Les Moonves.

In a memo sent to CBS staff, Schwartz wrote typically enigmatically: "As fans of arcane SEC filings have noted, I had the option of stepping away early this past summer, but given the exigencies of corporate life at that juncture, I elected to stay in place for a while."

The comms veteran, who moonlighted as Fortune columnist Stanley Bing, added that it seemed like a "much more appropriate" time to move on and do some more writing "in an atmosphere of perhaps some greater serenity."

Schwartz sagely observed that people are always talking about companies having "PR problems" that are usually a set of decision-making and operating problems related to management issues, not PR. These management problems can be solved by PR, at least in part, but they are not PR problems per se.

His famous dictum was that PR pros should "get in front of the elephant" to avoid having to clear up the mess behind it.

Wise words and all very true. However, the mess left behind by Moonves’ unsavory activities at CBS proved one step too far for Mr. Bing and served to hasten his journey into a less stressful retirement.

One thing’s for sure, while PR pros don’t operate under the same duress as firefighters, servicemen and women, or brain surgeons, they certainly exist in a highly charged and stressful environment that calls for experience, a cool head, and sage counsel under fire – all qualities these PR pros have in abundance.

While there is certainly a requirement for the modern CCO to completely embrace data, digital, social, and content in their skillset, the heavy lifting of reputation management and crisis response are still key tools in the armory – and CEOs rely on them for this.

CCO reporting lines

Many of the CCOs referenced above simply wouldn’t take an in-house communications job unless they reported directly to the CEO. They see that as non-negotiable when recruiters contact them in regard to vacant roles.

But the senior communications function is increasingly reporting into a level below the CEO. At Home Depot, comms reports into the general counsel, as it does at United Airlines.

The reporting line dynamic came under the spotlight in PRWeek’s inaugural Communications Bellwether Survey, produced this fall in partnership with Boston University to mark our 20th anniversary.

MillerCoors’ chief public affairs and communications officer, Pete Marino, sits in the camp that insists on a direct line to the CEO, otherwise he’s "not interested." "Being in a role of a table of equals and seeing what it can do for a business has really shaped my perspective on it," he adds.

However, Paul Cohen at Visa reports to the CMO and says: "As long as the reporting relationship doesn’t hinder the dialogue you need to have with the C-suite, there is no issue with having comms report to marketing," explained the financial services company’s SVP and head of global comms.

I’m sure it can work in some enterprises, especially when the CMO has come from a communications background, such as Beth Comstock when she was at GE, Kristin Lemkau at JP Morgan, or Jon Iwata when he was at IBM.

However, I can’t help feeling the lack of a direct reporting line to the CEO was a big factor in the poor response by United Airlines to the Dr. David Dao crisis, and believe organizations that bury this key counsel lower down their executive org chart are asking for trouble down the line.

Agency consolidation

Agency mergers and acquisitions dominated the PRWeek news agenda in 2018, from the mega-merger of WPP firms Burson-Marsteller and Cohn & Wolfe, to the impending disappearance of well-established PR firm monikers such as Text100 and Olson, down to dozens of smaller deals such as Allison+Partners acquiring OneChocolate and Ruder Finn snapping up RLA Collective. The trend continued this week when U.K. holding company Chime snapped up Method Communications to spearhead a nascent global technology group.

Away from pure PR, WPP merged iconic ad firm J Walter Thompson into Wunderman, controversially renaming the combined entity Wunderman Johnson, and folded Y&R and VML together under the clumsy rebrand VMLY&R.

At the holding company level it’s about building scale and simplifying the way they go to market, on the behest of clients that are sick of spending as much time mediating the politics between their multitudes of different agency brands as constructing great brand campaigns.

Small and medium-sized firms are seeing opportunities born of clients’ desires to deal with the senior staffers at agencies rather than seeing them once a quarter and when account review time rolls around.

It was telling that Procter & Gamble added niche firms such as MMI Agency, Small Girls PR, and Badger & Winters to its PR roster, noting that "the media landscape requires greater breadth and speed of content and … different agencies may have capabilities we need at different times."

There is no doubt there will be more consolidation across the board in the agency world in 2019, so watch this space.

PRWeek at 20

As PRWeek exits its 20th year in the U.S., it’s worth reflecting how far the industry and profession has come in the last two decades. It’s also worth noting that the more some things change, the more others stay the same.

The splash on the first issue of PRWeek stated that "Company CEOs rate PR over advertising," touting a survey of CEOs, CCOs, and top managers at 250 companies that showed PR was leading the way in company reputation and was a more effective communications tool than advertising.

"Successful firms are starting to realize that PR can be more effective in building and keeping a great reputation than all the ads in the world," said one CEO – 82% of respondents said PR was a top management or board-level discipline.

However, 85% were spending more on advertising than PR, and 54% said the discrepancy would grow in the next five years. One CEO presciently noted: "PR people are doing a great job for a lot of people, but maybe they still need to PR themselves."

Twenty years on, there is little doubt PR has more than earned its seat at the table and senior executives fully understand its importance in high-level business strategy, branding, and reputation.

But, paradoxically, in-house PR budgets are shrinking and enterprises are increasingly engaging their procurement departments to put the squeeze on their PR agency partners.

Like I said: "Plus ca change, plus c’est la meme chose."

PRWeek Awards at 20

The 20th iteration of the PRWeek Awards will be bestowed in New York City on the evening of March 21. The lineup of big brands, big agencies, and great work on the shortlist, plus the diversification and representation of smaller companies and PR firms shows the breadth and depth of the profession.

It’s the most impressive body of work I can remember in my eight years editing the brand and represents a worthy slate of case studies to help the PR profession demonstrate its effectiveness and bid for larger budgets.

This year, there will also be four special awards to mark our 20th anniversary and celebrate the best campaign, agency, in-house pro, and agency executive. It’s a must-attend event, so make sure you snag your ticket here before they sell out.

Tax windfalls

At the JP Morgan Healthcare Conference in San Francisco in January, pretty much every pharma CEO was in attendance. The air was heavy with testosterone. There were more speakers from the main stages named "Mike" than there were women.

After their stage presentations, each senior C-suite delegation adjourned to smaller spaces nearby for analyst and press conferences. It was soon after President Trump’s Tax Cuts & Job Act announcement, which he signed into the law books exactly a year ago Saturday, proudly proclaiming that the money saved would be invested in American workers.

The act reduced corporate tax from 35% to 21% and cut the rates applied to repatriation of cash back to the U.S. by companies. When asked how they were going to spend the money, most of the CEOs talked about investing in R&D, passing some of the cash onto workers, and, most notably, spending it on share buybacks.

There was audible laughter in one presser when someone asked if the money would be used to help cut drug prices. And absolutely no one was intending to invest some of the cash into marketing and communications. The general feeling was that execs were paying lip service to most of those items and the number one priority was share buybacks.

Some firms did invest in headline-generating boosts to their lowest-paid workers but, sure enough, CBS reported yesterday on a survey by investment research firm TrimTabs that showed U.S. companies spent $1 trillion in 2018 buying back their own stock.

CBS explained that the buybacks boost a company’s stock price by reducing the number of shares on the market. It’s simple supply and demand economics. CBS reported high activity in billions of dollars of share buybacks from companies including General Motors, Pfizer, and AbbVie. It is telling that the last time the share buyback record was broken was back in 2007, just before the financial crisis and subsequent recession.

Add these new reserves to the further measure in the President’s bill that enabled companies to repatriate cash to the U.S. with lower tax rates, and you see a picture forming of companies squirreling away cash and benefiting their shareholders rather than investing in workers and jobs.

Despite the cash windfalls, the year ended with high-profile job cut announcements iconic companies such as General Motors (14,000); Ford, following its $11 billion restructuring announcement (20,000 according to a prediction by Morgan Stanley); and Thomson Reuters (3,200). In November, the Bureau of Labor Statistics reported the highest rate of job cuts at American companies since April 2009.

Companies are hunkering and down and preparing for stormy waters ahead. All of these narratives and navigating the tricky dynamics with the White House have kept in-house communications professionals very busy this year and will continue to do so in 2019.

Big cities

Amazon’s high-profile beauty contest to determine where it would locate its second HQ was a big news story in 2018 and ended controversially with some suggesting the cities chosen – New York and Arlington, Virginia - had been predetermined and the rest of the process was a publicity stunt. But it was another sign of the consolidation and concentration of economic power in urban areas.

Google responded with plans to spend a further $1 billion in New York City and lease three new properties as it expands its presence there from 7,000 employees to more than double that.

Apple is expanding into Austin, Texas and building a new $1 billion site that will eventually employ up to 15,000 workers. It added 6,000 jobs in the U.S. this year and set a goal of adding 20,000 within five years.

Academic studies suggest 50 megacities will dominate global business and start transcending national boundaries, with vast social, economic, and political consequences.

To accommodate this, cities will need to invest heavily in upgrading creaking infrastructures and people living in the areas left behind will have to reinvent themselves, move to the urban conurbations, or waste on the vine.

It is telling that, according to the U.S. Census, the five wealthiest counties in the country are all located near Washington, D.C. - Loudoun County, Va.; Fairfax County, Va.; Howard County, Md.; Falls Church City, Va.; Arlington County, Va. – while the five poorest are in rural parts of Kentucky, Mississippi, and Alabama - McCreary County, Ky.; Holmes County, Miss.; Sumter County, Ala.; Bell County, Ky.; and Harlan County, Ky.

It’s another indicator that the us-versus-them culture that spawned President Donald Trump in the U.S. and Brexit in the U.K. is set to exacerbate and continue.

The ethical line in the sand

It’s a perennial conundrum for agencies of all types, especially PR firms: Where is the line drawn in deciding what type of business is acceptable to take on and when does it stray into unethical territory?

Most firms look to their staffers for a steer, asking whether their people are comfortable working in specific regions, industries, or with a particular client.

Let’s be clear: If agencies overdid the navel-gazing process too much they’d never get out of bed in the morning and get to work. But there have to be some ethical lines that aren’t crossed.

In 2018, PR firms wrestled with a variety of client work that potentially crossed those lines, depending on how your compass is set.

There’s a pitch out at the moment for Philip Morris International’s U.S. assignment. Agencies including Edelman and Weber Shandwick refuse to countenance working for the tobacco industry, even if the brief revolves squarely around transforming the company and promoting a smoke-free future. Burson Cohn & Wolfe and MSL, on the other hand, happily work on assignments for the tobacco giant elsewhere in the world.

Weber Shandwick gave up its Egypt business last year and vowed to no longer take on any work on behalf of foreign governments trying to influence U.S. policy. APCO Worldwide took over the contract and continues to actively pursue other business opportunities in the Middle East. There’s certainly a lot of money on offer in the region at the moment for PR assignments, and many firms in addition to APCO are happy to fill their boots.

In the aftermath of the brutal state-sponsored murder of journalist Jamal Khashoggi, Senator Elizabeth Warren sent a letter to PR firms engaged in contracts in Saudi Arabia, asking for information on the scope of their services for the regime. The firms dinged included MSL, Fleishman-Hillard, Hill+Knowlton Strategies, and Portland.

Warren wrote: "This ongoing status as a representative of Saudi government interests raises questions about whether your firm prioritizes profit margins over basic human rights, and whether it is ethically and morally defensible for American lobbyists to be providing services to a repressive foreign regime that does not share America's values."

Different agencies; different policies. The line is constantly moving, and it’s a constant source of discussion at PR firms in the U.S. and around the world, especially with the increased scrutiny from stakeholders from politicians to staffers to consumers.

Fast food wars

Whether it’s Denny’s, Burger King, IHOP, McDonald’s, or Wendy’s, fast-food outlets and quick-service restaurant are battling it out to see who can get the most attention on social media with their wacky stunts.

From pretending a cat stepped on the social media manager’s keyboard with the Twitter account open, changing the name of your company in honor of bacon, or capitalizing on the buzz around your soy sauce, these brands represent the cutting edge of social media activations.

It’s great for buzz and profile-raising - the jury’s still out on whether it’s helping them increase sales.

eSports

According to industry analysts Newzoo, the global esports economy in 2018 will be worth $906 million, up 38% year over year and continuing on a steep upward growth curve, with a global audience of 165 million and a total audience of 380 million people.

Brands are set to invest $694 million in the esports industry, rising to $1.4 billion by 2021 and representing 84% of total esports revenues. Those are big numbers and big audiences and marketers and communicators need to get to grips with this new ecosphere quickly, especially if they want to get in front of the lucrative Generation Z demographic, which represents one in four of the U.S. population.

Cannabis

When players like Anheuser-Busch jump in and big brands including Diageo, PepsiCo, and Coca-Cola admit they are closely monitoring the situation, you can safely assume something is going mainstream – and that’s what’s happening with the cannabis market.

Through its Labatt subsidiary, AB InBev is linking up with medical cannabis enterprise Tilray on a $100 million partnership to research non-alcoholic cannabis-infused drinks for the Canadian market.

In July, Tilray became the first cannabis company to file for an IPO and it was valued at $7.29 billion at end of trading Thursday. Add that to the news tobacco behemoth Altria is taking a $1.8 billion stake for 45% of Canadian cannabis grower and distributor Cronos Group (it also owns 10% of AB InBev by the way), Constellation Brands partnered with Canadian cannabis company Canopy Growth Corporation in 2017, while Molson Coors Brewing set up a joint venture with another Canadian producer Hexo earlier this year.

While much of the business market associated with cannabis has so far concentrated on Canada, it is rapidly spreading to the U.S. New York governor Andrew Cuomo recently announced he will pursue cannabis legalization in 2019, a move that is expected to pass through the Democratic state legislature.

New York would join 10 other states and the District of Columbia in allowing recreational cannabis use. The governor is excited by the potential of massive tax revenues.

From a communications point of view, there are many elements to the narrative and many moving parts, all of which will require sound PR strategies, effective storytelling, and smart public and government affairs counsel.

Women taking the lead

Diana Littman became the latest woman to take on a senior leadership role at a top 10 PR firm when she jumped ship from Marina Maher Communications to become U.S. CEO at MSL, replacing Ron Guirguis.

Littman reports directly to holding company Publicis Groupe’s CEO Arthur Sadoun, rather than global PR lead Guillaume Herbette.

She is MSL’s fifth U.S. CEO in the past six years and will have her hands full turning round the firm’s fortunes in the world’s largest PR market, the fortunes of which have lagged its operations in Europe and Asia.

But it’s good to see another woman joining the senior ranks of PR agency leaders, following the rise of Burson Cohn & Wolfe’s Donna Imperato and Ketchum’s Barri Rafferty, and continued success of Gail Heimann at Weber Shandwick.

World’s most valuable brand

Microsoft usurped Apple as the world’s most valuable brand in terms of market capitalization at several stages toward the end of 2018.

It completes an amazing transformation for the Redmond-HQ’ed tech behemoth, from being one of the world’s most hated brands to completely transforming its fortunes.

It said goodbye to iconic founder Bill Gates, reduced its reliance on the reviled Windows product, and focused its future on the cloud under the progressive leadership of Satya Nadella.

Maybe there are some lessons here for Facebook if it wants to turn around its fortunes?

RIP AOL, Yahoo, Oath, and Tumblr

Verizon threw in the towel over the last-ditch attempt to rescue value from pioneering internet super-brands AOL and Yahoo under the Oath brand and rebranded its content assets as Verizon Media Group.

The company took a $4.6 billion write down on the value of Oath, pegging the brand at just $200 million. When you remember that Verizon bought Yahoo for $4.5 billion in 2017 and AOL for $4.4 billion in 2015, there’s no hiding from the fact that’s a stunning reversal.

T-Mobile CEO John Legere ramped up his Twitter feed in typically humble and mild-mannered style to note: "I've been telling Verizon this for years. In fact, I told them the day they bought those ‘90s relics."

It’s worth considering this rags to riches to rags case study when looking at Facebook and where it sits today. No brand should consider itself immune to the slings and arrows of outrageous fortune, especially in the notoriously volatile new technology space.

Uber, Lyft, Pinterest, and, possibly, Airbnb will be the latest tech players looking to test the waters and go public in 2019.

WPP

Things look very different at the world’s largest marketing services holding company compared to 12 months ago.

Founder and former CEO Martin Sorrell has departed and new leader Mark Read is slowly starting to make his mark on the enterprise, reducing the number of brands, considering which parts to sell off, and simplifying the business.

WPP is typically a bellwether for the marketing service business generally, and its fortunes reflect the overall health of the sector. Read will certainly be looking to get WPP’s share price heading in an upward direction in 2019 after a turbulent 12 months' trading.

Fearless Girl

The #MeToo movement was a constant theme in 2018 and has triggered a fundamental reassessment of entrenched behaviors in the workplace that were unacceptable.

Prompted by The New York Times’ expose of entertainment mogul Harvey Weinstein, who made his first appearance in court on Thursday, the high-profile reputation damage continued throughout the year, with CBS CEO Les Moonves a particularly notable example.

I was a little sad to see the Fearless Girl statue move from its iconic position directly oppposite the charging bull on Wall Street, but glad she found a permanent location at the New York Stock Exchange with more space for tourists to visit.

Sports rights

I remember well interviewing the then ESPN president John Skipper at PRWeek’s annual conference in New York City in 2012.

The top takeaway I remember was the observation that his business was all about winning sports rights negotiations.

The rights landscape has become even more competitive in recent times as digital media owners aggressively chase sports content. Skipper reappeared this year after some high-profile personal problems with cocaine that led to him exiting ESPN, as executive chairman of Perform Group, which owns streaming sports subscription service DAZN.

It will be interesting to see how he fares going head to head with his former employer on the sports rights battlefield. The presence of DAZN’s new business model has already persuaded HBO to quit pay-per-view boxing, and this is a prime example of the changing habits in media consumption, especially among younger viewers.

The Catholic Church

There is no sign of an end to the sexual abuse scandals involving clergy members. This is a brand with fundamental challenges that it can’t seem to draw a line under.

Politics

Meanwhile, White House chief of staff John Kelly has quit, defense secretary Jim Mattis is bailing in February, President Trump is pulling U.S. troops out of Syria and Afghanistan and has told ISIS they have been defeated (what could possibly go wrong with that strategy…?), and he is prepared to condone a government shutdown to build his border wall.

Wall Street is set to have its worst year since the financial crisis a decade ago. Then there’s the Mueller Report finally looming on the horizon.

Buckle up folks, it’s going to be quite a ride in 2019!

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