Ask any traditional PR company – large or small – whether they consider £300K per annum as a sizeable PR account and I don’t think you’ll find anyone who’ll disagree with you.
What about £300K a month? There probably isn’t a PR account in the country that would come close to this kind of spend.
Guess what. Search marketing agencies are now beginning to command that kind of expenditure. Some will (rightly) argue that much of this is going on PPC campaigns ie the actually revenue and profit claimed by the agency on this will be a smaller percentage. However, in spite of this, the bigger search marketing firms are clearly achieving much better margins than most PR firms. And they are gaining a greater slice of overall marketing budgets – and taking the lead role in influencing the rest of the marketing mix.
(Quick caveat: the above applies primarily to the consumer sector – however, it can’t be long before we start to see a similar trend in B-to-B marketing).
Another trend that could get PR firms worried is that the search budgets are moving towards natural search rather than PPC ie this is a much more fee/consultancy led spend – and starts to encroach upon some of the traditional revenue areas for PR.
Others are already highlighting the need for PR firms to work more closely with their search bretheren - but it doesn’t appear to happening quick enough.
So why is the traditional public relations consultancy sector is suffering from a special form of cognitive dissonance?
On the surface, things appear rosy. Agency top line fee income is on the rise. Martin Sorrell at WPP says PR is seeing a healthy growth rate compared to other areas of the marketing mix (though PR is coming from a very low base).
However, even though agencies appear to be billing more, they don’t seem to be any more profitable. Recent research from Plimsoll suggests that one third of PR agencies are making a loss, one third are breaking even and one third are profitable (but the margins here range from a measly 2 – 3pc to around 25pc for a handful of top performing agencies).
And PR agencies aren’t helping themselves either. Another recent survey featured in PR Week showed that overservicing is rife. It almost beggars belief that 10pc of PR agencies say they regularly overservice clients by 100pc. In fact, all PR agencies appear to overservice – it is merely a question of how much. On this evidence, 95pc of PR companies overservice their clients by 25pc or more.
In which case, it is no surprise that this is leading to widespread staff dissatisfaction through repetition of the same tasks, length of working hours and volume of administration (another PR Week survey showed that the average PR company spends nearly 75pc of its time on account management and administration as opposed to value added client work).
For many years, PR consultancies have tried to improve their standing within the marketing mix – seeking to take on the mantle of brand custodian and chief marketing partner to clients. However, the reality is that for the vast majority of PR companies, PR still means one thing and one thing only – press relations. And to be fair, that is what most clients still see as the primary function of PR.
Clearly the PR industry has not been unaware of the impact of the Internet. However, it seems to have got sidetracked by peripheral, tactical issues such as whether journalists prefer to get press releases via e-mail or RSS; should the social media press release template be more widely adopted; what is the appropriate press etiquette for using Twitter, etc.
Somewhere along the line, many people seem to have missed the following:
- the Internet is the fulcrum of most buying/influencing decisions today (80pc of all web traffic begins with a search; 90pc all B-to-B buying decisions, irrespective of purchase value, will begin with a web search). Influencing the customers customer is (or should be) why PR companies exist. Yet hardly any build PR programmes based on today’s reality.
- the level of insight that can be gained into buyer behaviour and intention via the Web is immense (and yet hardly any PR companies seem to base their recommendations to clients around this).
- because the Internet landscape changes almost daily, a testing and experimentation mindset has to become the norm (again, PR agencies, with their much vaunted creativity, are still sending out crap press releases in a written format that has remained largely unchanged in 50 years).
- many PR companies are still fixated with print based media coverage – even though the anecdotal evidence is filtering through that many readers don’t read print any more (even though they may still buy or purchase a publication – unsurprisingly, publishers aren’t exactly rushing to admit this either).
- the organisational structure of PR agencies has remained unchanged since the 1930s ie directors, account managers, account execs or “Finders, minders and grinders”. The organisational structure and traditional skill set of the PR professional is out of kilter with what will deliver real marketing value in today’s world. PR companies almost all use a retainer model for billing – they need to do this in order to generate the cash flow to pay people’s salaries every month and cover their office costs. The danger is that in many cases they are recommending approaches to clients on the basis of what work will justify the utilisation of their current staff and skill set – rather than what is the best and most valuable approach for the client.
- PR metrics remain on the whole unaligned with genuine business metrics. Worse, there is no “line of sight” between PR metrics and the business goals of a client. For example, many PR companies will tout advertising equivalence as a metric of success. In other words, a positive article appears in a publication, the space occupied is measured and compared with the equivalent cost of taking that as ad space, and the equivalent cost calculated. 99pc of all PR companies using this method will also use a multiplier – anywhere between 2 and 10 – to inflate the figure on the basis that “editorial is more valuable than advertising”. It doesn’t take much to work out why this is nonsense. Worse than that, the metric never had any real, direct connection with a meaningful business outcome
Given all the above, it isn’t hard to see why PR companies believe client expectations are becoming more unreasonable – and why chronic over servicing is on the rise, which in turn is a path to ruin.
It also isn’t hard to see why SEO/SEM is taking an ever increasing share of marketing budget. It naturally begins with a focus on the end customer and provides a level of tracking, measurement, ROI visibility and “line of sight” to fundamental business objectives perhaps unparalleled in the history of marketing. In short, it is data driven and outcome focussed. The two things PR companies seem to fall down on regularly.
So is it all doom and gloom for the PR profession?
Absolutely not. Smart PRs are beginning to notice that particular PR skills coupled with SEO/SEM approaches could provide the most powerful marketing approach the world has seen. Also, what many SEO/SEM agencies are now finding is that they have the opportunity to take a much more strategic role in marketing overall – in some cases, they are already getting involved in strategic work – they just don’t know it. However, in order to sustain growth, these organisations will need to add complementary skill sets that will convince buyers of their ability to deliver.
In short, those PR firms that bite the bullet and make the necessary (and in some cases, painful) structural adjustments to develop a properly integrated (and genuine) search/PR approach are the ones best placed to thrive in the long term.