Judging by the major marketing services holding companies’ Q2 earnings, the pandemic thoroughly plugged up agencies’ new business pipelines in nearly every sector.
Revenue at Omnicom Group’s PR firms, which include FleishmanHillard, Ketchum and Porter Novelli, dropped nearly 14%, while the PR agencies in Interpublic Group’s Constituency Management Group like Golin and Weber Shandwick were down by the high single digits.
In addition to budget cutbacks by existing clients, agency presidents and new business leaders tell PRWeek there was little to no new business to make up for the shortfall in Q2.
Fortunately, Q3 is starting off much better by all accounts.
New business at Ketchum began to pick up as early as April and May, but not in the form of big accounts, says Michael O’Brien, president of client experience, who leads new business development for the Omnicom shop.
“Almost all of it was very immediate, project-based requests. It was not looking beyond the horizon and more about, ‘We need help right now to do X, Y and Z,’” he says. “The budgets were smaller than usual because they were very contained and focused on crisis and issues management and employee engagement.”
However, O’Brien says that’s changing. “Longer-term opportunities have since come roaring back. Companies are now looking beyond pandemic support,” especially in healthcare and retail, he says.
MSLGroup is also seeing more AOR RFPs being dusted off the shelf, says Isabel Long, SVP of U.S. business development at the Publicis Groupe-owned firm.
“Several AOR RFPs we had expected to pitch for in early Q2 were put on hold. These were reviews companies wanted to do, but could no longer prioritize because of the immediate challenges of COVID-19,” she says. “Clients are starting to go back and ask themselves, ‘What is our long-term goal? What is the work we want to be doing? And who do we want to partner with on it?’ Businesses are thinking more long-term again rather than just about the immediate.”
Like many agencies, Red Havas had a slow March and April, before new business opportunities picked up in June and July. James Wright, the firm’s global CEO and global chairman of Havas PR Global Collective, expects that momentum to carry into August and Q4, despite many states struggling to flatten the curve. A particular bright spot is New York, which has avoided a resurgence in new cases after being the epicenter of the virus.
“[It’s where the firm] has had quite a number of new business opportunities. It is not as much as you’d expect in a normal summer, but it is certainly not miles away from that, either,” says Wright.
The office has seen RFPs for brands in other states, like Florida, Texas and California, which are struggling with a rise in new cases, for help on COVID-related comms.
“There are also some major business-transformation RFPs out there from organizations that made some changes as an initial reaction to the pandemic and can now see a bit more into the future and what they need to look like,” says Wright.
He points to brands with business models built on urbanization, like retailers, restaurants and bars and transit. Google said this week that employees won’t be called back to the office until next summer, and with others following suit, brands in urban centers have a tough task getting people downtown or pivoting to the home-based economy.
RFPs for second-wave COVID-19 planning for fall and winter are also popping up.
“Companies want to be able to keep the wheels turning at a better rate than the first time around,” explains Wright.
Agency leaders point to health communications as a sector fueling a Q3 rebound in new business.
“It is one of the fastest-growing sectors right now,” says Kate Cronin, Ogilvy U.S. lead for PR and influence and co-president of Ogilvy Health. “A lot of businesses are looking to become wellness companies, while hospitals are moving into telemedicine.”
Employers of all kinds are looking to engage workforces in wellness by creating mindfulness apps, she notes.
Amy Wendholt, head of global new business at APCO Worldwide, identifies several sector opportunities.
“Health continues to show significant growth. Additionally, work related to tourism, hospitality and real estate grew, as well, as these sectors try to respond to the impact of the pandemic,” she says. “Nonprofit and charity work has also increased and government work remains strong.”
“Although the crisis is certainly far from over, we are starting to feel the work return to pre-pandemic priorities,” she adds.
However, not all industries are recovering at that pace.
“Certain sectors, including agriculture, engineering and construction and security and defense have been lagging,” Wendholt says.
Other leaders cite public affairs as a bright spot for new business, given the presidential election this November.
“An important part of our practice beyond our corporate work is advising Democratic candidates running for office, and we are seeing record amounts of money being spent on campaigns around the country,” says Jon Silvan, founding partner and CEO of Global Strategy Group. “While the interest in the presidential race might be intuitive, there is also enormous activity for control of the Senate.”
The firm is also seeing a “very robust effort” by trade associations, unions and advocacy groups to push their legislative and policy agendas, he adds.
A boomerang effect in Silicon Valley
At the start of the pandemic, companies in Silicon Valley acted quickly to cut budgets, but then rapidly restored them.
“Tech companies have less systemic bureaucracy within their organizations and so their decisions to cut were quick and fierce,” says Jason Mandell, cofounder and partner at LaunchSquad. “It was like during the downturn in 2008, when we lost 40% of our revenue in weeks, but probably half of that came back to us, like a boomerang, in 90 days.”
New business also started to rebound from companies financed by venture capitalists who are less concerned about the next quarter.
“They think many years ahead. So once leadership and the boards got a handle on COVID-19, they were able to be more deliberate in the decisions they made about the long-term,” explains Mandell. “So we’ve seen an active pipeline of opportunity emerge in the last couple months, especially in health tech. It is huge, we’ve never seen this much investment in health tech.”
LaunchSquad’s recent wins include Carewell, which provides personalized services, content and vetted products for caregivers.
Client reductions also hit Highwire PR, but not significantly, says Kathleen Gratehouse, a principal at the firm.
“We have also seen an uptick in new business with RFPs from good clients,” she says.
Messaging for COVID-19 and diversity and inclusion is in particular demand and, as a result, Highwire has avoided layoffs and salary reductions. Still, Gratehouse is concerned that the pandemic could be in the infancy of its lifespan, as well as about high unemployment.
“It would be a mistake to think that the economy isn’t going to have a bigger impact on our business at some point down the line. I just hope it’s not too bad,” she says.