As I watched the Prime Minister this morning unveiling the rescue plan for the UK financial system and saw the massive stock market drops across the world I have to say I switched a gear in my thinking and planning. I have been banging on about the PR industry in an economic slowdown for a little while now, but I was still hoping that I was wrong.
So what’s going to happen? Maybe what happened last time will provide a clue. The trouble is of course that the advertising dominated holding companies that own most of the big PR frims conceal the PR figures behind the excuse of Sarbannes Oxley so, as far as I know it, my little chart below (the 2007 column is our estimates) is about the only financial data out there on the global firms, but putting aside its accuracy or otherwise for individual companies (and I’m happy to be corrected by the way… just give me the figures), the general picture last time was not good. Of course, last time we had a tech bubble and a financial bubble and the big firms had only just got to a global scale properly and were much less well managed.
| PR Firm | 2007 Rev (USDM) | 2001 Rev (USDM)˜ |
| Weber Shandwick | 470 | 527* |
| Fleishman-Hillard | 460 | 343 |
| Edelman | 414 | 238 |
| Burson Marstellar | 270 | 304 |
| Hill & Knowlton | 220 | 306 |
| Ogilvy PR | 210 | 169 |
| Ketchum | 200 | 168 |
| Porter Novelli | 160 | 238 |
˜ 2001 was the last year that PR firm released their worldwide revenues, which was published by the Council of PR Firms, PRWeek and O’Dwyers
* includes BSMG Worldwide
Richard Edelman will tell you that the fact that we are a private firm and don’t have to give profits to outside shareholders meant that last time we could hang on to more of the good people and so were better placed when the economy turned around. The figures above bear out the wisdom of this strategy then. I’m still glad I work in a firm where every shareholder is in the firm, but I suspect this economic downturn and financial crisis will have different effect on the big firms for a number of reasons.
1. Many of us are now winning big business off the global ad agencies . . that was only sporadic in 2001
2. A number of us have good digital offers that open up new revenue streams (again, sometimes at the expense of the ad guys)
3. We are better spread globally (I’m very glad Edelman Europe has owned offices now in Russia and Abu Dhabi for example)
4. The case for PR is so much better understood by the business community
5. The case against advertising has really built up since 2001 . . I think marketing budget cuts may be made there first this time
6. Our offers have diversified and matured in areas like CSR, employee engagement and CEO counsel
7. Companies from the ‘developing economies’ are spending on PR outside their own market in bigger numbers than ever
There are probably others too and so while I am becommming resigned to the fact that I will be navigating my firm through choppier waters over the next couple of years, I do think we and some of our bigger competitors are better placed than last time.
Anyone have any views from the small and medium side of the consultancy world?
[tags] PR Week, PR global rankings, Weber Shandwick, Fleishman-Hillard, Edelman, Burson Marstellar, Hill & Knowlton, Ogilvy PR, Ketchum, Porter Novelli [/tags]
sixtysecondview.blog 
It’s a cliche, but recession is a time of opportunity. Why? Because the client scrutiny on value increases and cosy relationships are undermined. Dead wood, bad business practice and unsustainable models are washed away. This means less competition for those people seeking to offer a genuine service. In effect, a window appears for good practitioners to build long-term reputation.
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Completely agree with James. This will sort the wheat from the chaff.
We have a couple of years of pontificating about the future of this, and the direction of that. Now it comes down to the work.
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You are right guys….gonna be bumpy though
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Couldn’t agree more with your comments David and James is dead right it is times like this which sort out the men from the boys.
A colleague recently wrote something about the credit crunch on our blog.
I think it helps that me and my partner have been through recessions before and I was in the thick of its with a pure-play dotcom business when the bubble burst in 2000.
The trick with a downturn is to decide whether you hide in the trenches or get out and fight. We’re going on the offensive.
Ian
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really great, thought provoking post david – thanks!
personally, i’m bullish about the next 12 months but i think after that we’ll see cutbacks from all marketing budgets across the board and it will be up to the measurement bods to really define the value of all the marcom functions. thankfully digital is well placed for this but you’re right, it will be rocky.
i couldn’t leave a post on your blog about this recession without reminding you that it was, in fact, Fannie Mae and Freddie Mac that caused all of this in the first place. good, to great, to calamitous in less time than it takes for jim collins to issue a new edition of his seminal work!
ed
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I was thinking about this a couple of days ago – http://www.mmdblog.com/?p=112 – the end part of that post reflects upon the Russian PR market.
As an agency (at parent company level) our global fees I think are not so very fsr off your tier.
At the moment PR agency bosses – myself included – are franly in the dark (and only a loon would boast oterwise). It is now – literally right now – that 2009 budget commitment for firms with a JAN 1st financial year start are being debated. Not by our ‘clients’ but by their CFOs.
Russia is a small PR market – compared to the USA or UK – and we five or six market leaders represent a larger than usual number global top 100 firms. So far we are seeing two things:
– an assumption that if sales are coming anywhere the ‘BRIC’ countries look pretty good (notwithstanding, as I have blogged today, less good than a week ago. But Real World respectable even so). That’s nice.
– but, secondly – and this of course gives me the sleepless nights – the decision-making process on 2009 budgets has shifted. If in most years clients with Calendar year financial years ‘tip you the wink’in October and raise the PO in November; this year I suspect POs for Q1 will not be signed off until deep into January.
It is easy to be a PR agency boss in a bull market. Between now and, say, June next year, agency bosses – even littl’uns like me – will earn their money like never before in the last ten years. I have budget plans for 30% growth and 30% retrenchment and everything in between.
Scary. But not uninteresting.
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great post
as a 1 man consultant I would say, outside of complete global market breakdown (shotguns / living off the land) I do feel strangley bullish
seems to me, the migration to social media monitoring / online PR, which offers a far more effective (and cost effective) way of engaging conusmers, can only be helped by a downturn
I also couldn’t leave a post without suggesting to ed that we are actually seeing is the final death of 30 years of Reaganomics – kidding ourselves that this crisis is based in the short term, will only make its re occurance more likely.
This isn’t a downturn. This is de-leveraging back to a 60s style economy.
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Just like supermarkets are cutting their prices to meet consumer demand, this is a good time for PR practitioners to evaluate what they offer. Nothing should be taken for granted.
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I’ve recently blogged on the management and financial issues facing PR firms as they go into a recession.
[Go to http://dummyspit.wordpress.com/2008/10/10/how-pr-agencies-survive-a-recession/%5D
I don’t think that some firms are taking the threat of a downturn seriously enough yet. It’s really important to define value and give excellent client service but also to manage commercial relationships with clients. Too often in early stages of past downturns, good firms have come unstuck when a couple of clients either go down the plughole or have a loss of ethical behaviours when it comes to honouring contracts. The consultancy gets left holding big bills for time and bought-in services that often breaks them. So my advice is track the cash and manage the relationships assiduously.
I also agree with some bloggers (Liberate Media, etc) that there may be some reinvention of the PR advisory firms back towards virtual firms and alliances rather than the big structured extensive business. It’s a workable strategy in a recession, especially if it is prolonged, as costs can be managed tightly while service standards remain high. If you thought that ‘tech-wreck’ at the beginning of this decade was tough, I reckon it was only a training run for the coming downturn.
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