ANALYSIS: Slump sparks agency launch spree

Despite the most hostile market conditions for more than a decade, recent months have seen a spate of new PR agency launches.

Barely a morning goes by without fresh news of economic gloom in marketing services. With the quoted groups beset by declining profitability, and most small and medium-sized operations reporting - if only in private - that conditions are unprecedentedly tough, it is hardly an auspicious time to be launching a new offering in an already crowded marketplace.

But such woe hasn't stopped a sizeable and growing number of industry figures doing just that. Last week saw three senior former Edelman executives - Nigel Whittaker, John Mahony and Tari Hibbitt - announce the formation of ReputationInc. This came just a week after ex-Financial Dynamics bosses Hugh Morrison and Nick Miles launched their new shop M.

These are the tip of a growing iceberg. The last few months have seen, among others, launches from Glen Goldsmith and Katie King, formerly of Text 100, with tech specialist 2TheFore; Maria Darby, ex-head of media at Barclays Bank, with financial services-focused Joined Up Communications; Square Mile firms First City Financial, Mainland PR and former Golin/Harris Ludgate CEO Robin Hepburn's return with Waughton.

Ignoring the risk of overkill, it is also worth mentioning former Fleishman-Hillard UK MD Paul Blackburn's Resolute Communications, ex-Andersen Legal Network comms director Chris Hinze's eponymous Hinze Communications, former BBC2 publicity head Janet Morrow's Franklin Morrow, and debt capital markets specialist Moorgate Communications. From former Royal aide Mark Bolland, through to Sue Charles - the founder of De Facto more recently credited with spinning for Dolly the sheep - everyone is getting in on the act.

It isn't as if a wave of devil-may-care abandon has suddenly swept over some of the industry's best-known names. Nearly all believe they can offer lower fees or a better service to undercut larger agencies of the kind that previously employed them.

Goldsmith believes his agency - devoid of support staff, expensive premises and all the corresponding overheads - will offer experienced consultancy at less than half the price of a larger agency. That kind of no-frills operation wouldn't suit some corporations or a global account, but 2TheFore is targeting tech start-ups and SMEs.

Mahony gives a similar 'small is beautiful' argument, though ReputationInc is targeted at a different and larger-scale kind of client. He attributes the mushrooming of owner-managed boutiques to the emergence of a generation of PROs in their 40s and 50s approaching their career summit and finding themselves tempted to look for a new challenge, which often dovetails with a wish to stack up some real cash in time for retirement.

If that is to be achieved, consulting time needs to be maximised and managing time cut to the bone. For ReputationInc, this has meant employing a practice manager to handle that side of the business. The result, says Mahony, is that clients receive more direct attention from the consultant, who in turn is mercifully free of 'paper-pushing' and business processes.

Miles underlines this. While he and Morrison were arguably forced by circumstances into considering starting afresh, it is well known that two of what are widely thought to be among the best in financial PR would not have wanted for job offers. Initially, the pair were wary of starting from scratch and considered a one or two-year wait, but during their period of gardening leave from FD were convinced that there were enough client-side businesses eager to consider their ideas.

For Darby, a period of freelancing after a short stint at Tulchan Communications - itself now relatively blue-chip, having traded profitably for over a year - left her convinced a new agency could work in a downturn. Darby believes it is the quality of 'nimbleness' that sets the new breed apart from the bulkier firms in the market.

Mahony says a larger agency's size and momentum mean it is slow to respond to new trends. 'It's like trying to change direction in the Titanic, rather than a fishing boat.'

If the economic situation deteriorates still further, large agencies could find their size makes them increasingly vulnerable. Madsen Gornall Ashe partner Alastair Gornall, whose recently launched firm advises wannabe agency bosses on how and in what way to launch, says he isn't surprised at the number of start-ups. Smaller shops will not find themselves weighed down by the kind of factors that can be an advantage in a bull market, but are a burden in tougher times - large offices, with complex leases, and unoccupied space as a result of job cuts.

And human factors are at work here too, Gornall says. When large agencies cut bonuses, pay and conditions in a downturn, their best staff may be tempted to look elsewhere. For those with sufficient experience and reputation, a start-up may be the most tempting option out there.

In an industry where clients are sometimes known to follow favoured account handlers, it may be the talent of the relevant PRO that comes to count as much as the name of the employer. And once economic conditions improve, these agencies may be well-placed to take advantage.

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