Ask a top agency executive how they feel about the state of the industry, and you’ll hear some variation of two words in response: “cautiously optimistic.”
After six months of the coronavirus pandemic raging in the U.S. and amid an unprecedented reckoning on racial injustice and a combative presidential election, agency leaders are not exactly painting a rosy picture of a dramatic comeback. But most say the worst of COVID-19 and its economic impacts has passed, even if pie-in-the-sky predictions of rapid economic recovery never came to fruition.
“There was this theory of the V-shaped recovery. No. There was the Nike Swoosh. No,” says Edelman global CEO and president Richard Edelman. “I see stability, and growth in health, in technology, in certain parts of corporate crisis and public affairs and the consumer brand business. But in some industries, obviously travel, tourism, cars, it’s tough.”
Edelman’s realism about a slow and steady comeback is the norm among top execs. PR Council president Kim Sample describes hearing about a mixed bag of anecdotal results from executives: not nearly the numbers that agency leaders want, but far from the worst-case scenario.
“There is still a lot of uncertainty and maybe a little less identified income in Q4 than agencies are accustomed to or comfortable with and an amount of uncertainty about what 2021 will bring,” she says. “But I think the revenue drops have not been as significant as what leaders thought they would be. They have found a lot of things to sell. A real silver lining has been that profitability has been strong.”
Edelman says his firm is “off more than 10%, which is why we had to do the reduction in headcount, but we are stabilized, and we are ambitious and feeling really good about the work,” citing initiatives for Good Humor, Unilever and other clients.
On the back of a strong pre-COVID performance, Golin CEO Matt Neale says his firm is showing a “return to modest growth in North America, driven by healthcare clients, but also a return to pre-pandemic spending from CPG and personal care clients.”
Neale cites alcohol and spirits, grocery and consumer technology as bright spots, and, like nearly all agency leaders, automotive, travel and tourism as trouble areas.
“The volume of RFPs is down from this point last year by a third, but the value has held, so the amount of work is holding consistent with where we were last year,” Neale explains.
Meanwhile, Praytell owner Andy Pray describes 2020 as “a wash,” but indicates his firm is turning the corner.
“I’m optimistic that our agency has weathered the biggest storm and we’re going into growth mode soon,” he says. “Not that curveballs aren’t coming, but we can hit them better.”
Weber Shandwick CEO Gail Heimann adds that communications has shown itself to have steadier legs than other marketing areas.
“If we look at six months ago, there was a sense that PR is more resilient than other marketing disciplines and will come out of this differently,” she says. “We’re seeing the resilience for sure. We’re seeing it anecdotally, and we’re seeing it in the business, though it’s too soon to say how the business will end up for the year.”
Many agencies had a common experience during the height of the pandemic in late Q1 and Q2: a sudden and sharp hit to consumer marketing and PR, especially in sectors completely shut down by COVID-19 such as tourism, travel and hospitality. Yet bright spots appeared in healthcare communications, technology and “pandemic brands,” such as Golin clients Nintendo, Walmart and Lego. And many firms were able to offset some pullback with corporate and crisis communications and employee-facing comms, as well as counsel on diversity, equity and inclusion after the death of George Floyd while in police custody.
Public earnings statements tell the story of a painful Q2. The best-performing PR sector of a major holding company was at WPP, whose communications shops saw a 4.5% revenue drop in the quarter. Meanwhile, Interpublic Group’s PR firm’s posted a high-single-digit dip and Omnicom’s PR shops posted a 13.9% drop in the quarter. Nearly all of the major firms at publicly held networks reduced headcount or took other cost-cutting measures.
“We were seeing significant caution and pullback from the industries you and we know had a difficult time: nonessential retail, travel and tourism taking a real hit,” says Ketchum CEO Mike Doyle, who took the wheel of the Omnicom Group firm in late June from Barri Rafferty. “On the other hand, issues and crisis reputation, we couldn’t fill those needs quickly enough.”
Neale similarly describes a strong demand for his agency’s experts on DE&I.
“We definitely saw an increase in corporate, definitely an increase in counsel around racial equity. We started some time ago a group called Team Pixel,” he says, describing the firm’s diversity-focused network. “They have been in demand like you wouldn’t believe over the past few months doing everything from counseling for ad campaigns to helping clients with their own diversity strategies and having conversations about employee activism.”
That new need for corporate counsel on employee communications and wellness, purpose, and staff and public activism is giving CEOs confidence as they close out Q3 and put plans in place for 2021. So are firms’ long-proven abilities to navigate always-on media cycles and tricky political environments.
“I feel like we’re beginning to see momentum in a lot of parts of the business and beginning to see some of the fruits of what we have built over the years,” says Heimann. “The PR industry has always been about resilience. We’ve always existed in a 24-hour global news cycle, we’ve always lived it and thrived in it and its complexities, and we’ve always had to be a little more agile and adaptive.”
She notes clients looking for help navigating two specific but complicated areas: the fragmented media environment and policy, which is no longer walled off in a public affairs practice but touches every part of the business.
“If I’m looking at what clients are looking for, it’s an ability to navigate and cut through that media environment. We have to plan to deliver on that in a very muscular way,” Heimann adds. “The other thing is that policy is in everything. A decade ago, that was in a silo, and now every client has a relationship to policy.”
Doyle notes that Ketchum has evolved its thinking for clients about COVID-19 from a series of phases with definite ends and new beginnings -- lockdown to reopening, for instance -- to a constantly changing landscape.
“I’m pragmatically optimistic,” he says. “What we’ve tried to do is adopt more of an agency mentality that we’re in this for the long haul, so we have to work really hard not to just be open to that change but to embrace it.”
Edelman describes hundreds of client advisements in the aftermath of Floyd’s death, saying, “We are deeply in the C-suite. The CCO job is more important.” He also references the agency’s collaboration with Unilever ice cream brand Good Humor to replace a well known ice cream truck jingle with racist roots with a new one created by Wu-Tang Clan’s RZA.
“It’s not just communications, it’s action and communications,” he says. “I feel really good about our ability in the next five years to be ever more present and important in what we do.”
SourceCode Communications cofounder Rebecca Honeyman describes a shift as more brands and companies embracing humanity.
“What we’re seeing is a lot of companies and brands are catching up to why we started the agency in the first place,” she says. “We talk a lot about humanity, and the pandemic has put a spotlight on brands being more human. With Black Lives Matter and diversity, there’s an understanding that the world around us has changed.”
Others say PR firms have a swagger about helping clients navigate this extremely difficult year. Pray says agencies should take pride in their ability to help brands navigate thorny issues, adding that his shop’s days of mulling whether to describe itself as something other than a PR agency are over.
“It’s a good time to be in PR,” he says. “If you’re not proud of being a PR agency, you’re out of your mind.”