‘What will the pain be and how will it net out?’: Agencies gauge coronavirus impact

Firms are losing work but gaining other assignments amid the pandemic.

Some agency work is disappearing because of the coronavirus pandemic, but PR firms are also picking up business as companies struggle to keep customers and employees informed, according to agency leaders. 

“In the next 14 days, we will really understand how this will impact us,” said James Wright, global CEO of Red Havas and global chair of Havas PR Global Collective, on Wednesday. “But clients are already canceling events.” 

Most agency executives point to China and the greater Asia-Pacific region as the place where most cancelations are taking place. They also note that clients are shifting business from one area to another. 

Wright says companies are discussing how they can divert assignments into content marketing. “Some of the pain we’re taking from the reduction in client budgets is being moved into other areas,” he explains. “But in other cases, it’s just being pulled. In the U.S., we haven’t had a client yet who has pulled back, but we have seen that in our Asian business.”

Other executives aren’t saying how the pandemic specifically is affecting their business, but they acknowledge that assignments are being lost. Edelman CEO Richard Edelman characterizes it as “a shift, opposed to a down-scaling.” 

“Yes, of course, there is some effect on special events and experiential,” he explains. “We’re just going to have to deal with it.”

Edelman adds that it’s too soon to tell if the uptick in some areas will make up for the loss of business in others. 

“I can’t tell you that yet. We’re doing pretty well; so far, so good,” he added. “I can tell you the China operation is back in business and China is bouncing back. We’re seeing a bunch of RFPs, so we are feeling good about that. And if [China] is the leading edge, we feel good.”

Early this week, Golin CEO Matt Neale said he was also noticing shifts in client work and pullbacks in Asia.

“We are seeing clients migrate from physical launches to virtual meetings and online events as restrictions on non-essential travel are put in place,” he said. “Outside of mainland China, we have seen no impact to our clients’ public relations spend. For several clients, demand has gone up for internal and external crisis communications planning.”

Assignments are also shifting from one practice area to another, says BCW CEO Donna Imperato. 

“We have turned events that clients may have wanted to cancel into virtual events, and we have also filled in with a lot of crisis work. So as far as Asia goes, we're good,” she said. “That's where the pandemic started and now it's slowly [retreating]. So hopefully we can hold ourselves through this.”

More than 135,400 people around the world have contracted and been sickened by the virus, according to The New York Times. By Friday morning, it had killed at least 4,988 people, with 1,808 of those deaths outside mainland China. The virus has infected people in at least 111 countries. 

The number of cases is growing in the U.S., with at least 1,663 confirmed by lab tests; 41 people have died, according to the Times. Congress reportedly has been told to expect between 70 million and 150 million infections in the U.S. 

The pandemic has not affected the work that Porter Novelli is doing for government clients, such as the Department of Health and Human Services and its Centers for Medicare and Medicaid Services. However, the virus has altered other assignments, says EVP Sean Smith. In some cases, Porter is being asked not to attend events but handle communications.

“In one instance, we were relieved of our expectation that we would be on-site helping an event because the client had scaled back,” he says. “However, we were still required to pitch reporters and talk to other stakeholders and influencers on the messaging that the client was going to deliver at that event, so while we weren't required to be there in person, our services were still necessary.” 

Discussing FTI Consulting’s Q4 2019 earnings at the end of February, the firm’s Mark McCall said the agency was receiving more work because of the virus. This week, he said that trend is continuing, but it varies internationally. 

“It’s different by region. In the Americas and in much of Europe, it is much more focused on internal comms and how to work with employees,” says McCall, global leader of FTI’s strategic comms division. “If you go to Asia and China, the type of work we’re doing is more externally focused. We have been dealing with this for quite some time: How do clients that operate and manage supply chains work with customers in these situations.”

He adds that some of the new work was bolted on to existing assignments, and that it’s too early to predict the financial impact. 

Coronavirus has already had a major effect on the U.S. economy. Thursday was Wall Street’s worst day in 30 years, and Gary Cohn, President Donald Trump’s former top economic adviser, said that night that the country is “in a recession.” 

Wright agrees with his peers that business is being moved from one bucket to another, and he’s also noticing clients worried about whether major events will take place, such as the Olympic Summer Games in Tokyo and the Cannes Lions International Festival of Creativity. 

“At the moment, there are offsets,” he adds. “Some are being canceled and also some are looking at an increase in scope, but the big question over the next six months is what will the pain be and how will it net out? I think it will net out in a pretty uncomfortable way for most industries, and we should all be erring our budgets on the side of caution.”

The disruption is also rippling beyond the agency world and through the supply chain, all the way to vendors, says Michael Lasky, an attorney at Davis & Gilbert. Lasky, who works closely with agency executives, said he is noticing a “sharp increase” in requests for legal advice about cancelation and force majeure clauses in contracts. 

“[That is] very active,” he says. “There are a significant active number of discussions and counsels going on where basically they are asking ‘What do we do about the fact that client X no longer wants to proceed with a product contract because we can’t get the event to go forward.’”

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