Silicon Valley has always been a world unto itself where entrepreneurs and venture capitalists dream of how technology can disrupt industries and change lives. No wonder agency holding companies have tried to secure a foothold in the market for their larger firms, which would put them on the forefront of innovation with exciting clients and build credibility in digital, social media and technology for other U.S. offices.
Yet after a roller coaster ride in the Bay Area, Porter Novelli is planning to shutter its office in San Francisco. On July 1, the firm will start the process of integrating five digital and technology clients and its own team with sister Omnicom firm FleishmanHillard.
At one time, Omnicom-owned Porter had big ambitions in Northern California. In 2011, it bought Voce Communications, then one of Silicon Valley’s hottest tech and social media firms. Voce had grown to $12 million in annual revenue on a client roster that included eBay, Dolby, VeriSign and Sony Computer Entertainment.
Yet by 2018, two of Voce’s cofounders, Rich Cline and Matthew Podboy, had departed the combined entity.
Reflecting on what he calls “one of the hardest experiences of my career,” Cline says the odds of the merger being a success were impossibly stacked against them.
Despite the best of intentions on both sides, he says the culture of tech PR is an us-against-the-world mentality of tearing down old processes and building new ones. That flies in the face of the fixed processes and systems set up by big holding companies, in particular, their financial processes. While things started reasonably well after Voce merged with Porter, that changed after the cofounders reached their earnout deals, according to Cline.
“[The head office in] New York wanted 30% profitability out of us, whereas we had been happy with 10% to 15%. We would argue that we can’t hit the same profit margins as, say, Porter’s Atlanta office, but pointed out we had larger revenues,” he explains. “It didn’t matter. And so we did what we could to shrink costs before we shrunk staff.”
But with real estate a fixed and incredibly costly expense, the office let some staff go. They weren’t senior executives, but had helped to drive Voce’s startup spirit.
“I warned them that, if we lose two or three of those people, we’re going to lose another five, six and seven who will follow them out the door, and then some accounts,” Cline says.
He says Porter’s San Francisco office never really recovered.
“Ultimately, it is very difficult to fit a conglomerate’s rigid financial model with a firm created to function like a startup itself,” says Cline, now MD at Notion Strategies, a management consultancy he cofounded. “The model may work for certain industries, but I don’t think it will ever work for tech and Silicon Valley.”
Omnicom representatives did not reply to inquiries seeking comment. Porter representatives could not be immediately reached for comment.
Silicon Valley hot shops: Who is and isn’t on the list
Think of the most-buzzed-about PR shops in Silicon Valley over the years, and the reality is the Fleishmans, Ketchums, Edelmans and Hill+Knowlton Strategies of the world have never really been on the list. Instead, you might think of Cunningham Collective, the Outcast Agency or Nectar Communications. These are firms started by talent often from the client side, like Apple PR veteran Andy Cunningham of Cunningham Collective, or the VC industry, like Margit Wennmachers, cofounder of Outcast. She later worked at Andreessen Horowitz, an investment firm that had backed Facebook, Twitter, Airbnb, Twitter and others when they were start-ups.
One holding company, albeit smaller than WPP, Omnicom Group and Interpublic Group, to have success in Silicon Valley is London-based Next Fifteen, which acquired The Outcast Agency in 2005 and Nectar Communications this year. Those agencies continue to operate as independent, standalone businesses.
Next Fifteen CEO Tim Dyson says that the biggest PR firms haven’t exactly failed in Silicon Valley, but “I think they often don’t adapt as the Valley changes.”
“Silicon Valley isn’t like the rest of the world. It is constantly looking to change and it expects its partners to do the same,” he explains. “As a result, the winners tend to be smaller, more agile firms that have grown up with a Valley mindset. Businesses like Outcast and Nectar are great examples of that.”
Aedhmar Hynes, who spent more than 18 years as CEO of Next Fifteen-owned Text100 before it was merged with Bite to form Archetype and set up Text’s San Francisco office in 1997, says “success in the Valley comes down to having deep knowledge and bench strength in the tech world.”
“Over the years, I’ve seen many of the large, generalist agencies hire a strong technology leader for their San Francisco office, only to see that person struggle to attract the best tech talent,” she says. “So not surprisingly, clients will select the talent and expertise of those agencies who have a history of working with titans of the tech world. That’s hard to compete with.”
Maria Amundson, who co-owned Silicon Valley-based tech firm A&R Partners, which was acquired by Edelman in 2006, says, “It has always been a challenge for the big agencies here to thrive with the local start-up culture.” Amundson would serve as GM of Edelman’s Silicon Valley office from 2011 to 2014.
“Entrepreneurial demand for fast-turn project work and CEO-level counsel, mostly at tight budgets, isn’t a natural fit with big agencies' extra layers of management and higher overhead. And so really great, local, smaller consultancies tend to win the hottest tech start-ups,” she says. “A&R Partners capitalized on this advantage back in the early 2000s, which of course, maybe ironically, led to our acquisition by Edelman.”
Amundson says Edelman had a good run in Silicon Valley by working with larger tech clients.
“Edelman did exceptionally well with the larger Silicon Valley brands that value the global networks, specialty practices and broader networks big agencies offer,” says Amundson, who now works as a consultant.
Experts note that there are only so many big client accounts out there for agencies, with the Facebooks and Googles of the world having built sizable in-house comms teams. PR pros with extensive experience in the Bay Area point to another advantage of smaller, independent shops: They can often devote all of their energy to a significant account, nimbly embed into a client’s comms team and grow together. Firms within holding companies don’t have the luxury of playing the long game on growth when they have quarterly targets to meet, they say.
Steve Sinclair is SVP of product and marketing at Mojo Vision, which calls itself “an invisible computing company.” He has worked at Apple, where he was product manager on the iPhone for six years, as well as Google, HP and a number of startups. Sinclair says he prefers partnerships with smaller shops. His agency partner at Mojo Vision is 104 West Partners.
“Clearly, there is a cost advantage to hiring smaller, especially for a startup that doesn’t have a lot of money and has to be scrappy,” he says. “But for me, it is more about knowing I am going to get the A-team, direct access to the CEO and can embed their team with my team. As a startup, every dollar and interaction counts.”
As for the larger agencies, Sinclair says “you get great ideas and great creativity, and big agencies have a lot of resources to bring to bear, but it is a revolving door of team members and a constant effort to manage that relationship. It seems more effortless with boutique firms.”
Sheryl So, head of PR at Shopify and a former staffer at Nectar, says it benefited from Salesforce wanting an agency that could devote its energies to it. Nectar won the Salesforce account, which included U.S. product and corporate comms, from FleishmanHillard in 2014, but gave it up four years later.
“Salesforce basically wanted to take the whole shop; Nectar became like a Salesforce agency. We had smaller clients that didn’t conflict with Salesforce, so it really enabled everybody in the company to focus about 75% of their time on Salesforce,” says So. “They also loved the ability to embed us into their office once or twice a week, which is what we would do, and not something the larger agencies would necessarily do.”
And why does young talent gravitate to tech boutiques: They can more quickly make a name for themselves.
“I started off at Nectar as an account executive in 2013, and every six months was promoted. By the time I left almost three years later, I was a director,” So tells PRWeek. “Smaller firms can reward you quicker, and that helps with their retention. There isn’t the chunkiness of an Edelman or Fleishman to say, ‘These are our cycles for when we promote and give raises.’”
Corey duBrowa, Google VP of global communications and public affairs, says, “we are big fans of our Bay Area headquartered PR and public affairs firms” – which include Nectar – “and look forward to many more years of partnership.”
However, the internet giant’s strategic agency partners include bigger agencies such as San Francisco-based Revere, an Edelman company, and Allison+Partners.
“They continue to help us achieve high-impact work and provide quick and wise counsel, perhaps at no more important a time than in the tumult of 2020,” he adds.
VCs and tech entrepreneurs also speak a different language than clients in other parts of the U.S.
“If you aren’t connected into that world, if you don’t measure success in the way they do, then you will struggle,” says Dyson. “Client metrics are typically growth-driven to an extent that isn’t the norm elsewhere. So if you come in talking about brand and global reach and things that large traditional companies care about, VCs and Valley execs will ignore you.”
“It’s not that they don’t care about brand,” he adds. “It’s more that they put growth at the center, and everything else has to answer to that.”
This story was updated on June 28 to correct Wennmachers' work history timeline.