Edelman Ditches Plan to Be a Marketing Services Holding Company

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Richard Edelman
Richard Edelman Credit: Darryl Estrine

While many big agencies have been expanding their service offerings -- and will likely feel further compelled to in the wake of the Publicis-Omnicom merger -- Edelman is retrenching to focus on what's it's always been known for.

For the past two years, the PR giant has been building the foundation for a PR-centric holding company with diversified services. But its CEO, Richard Edelman, now says he's no longer worried about having a piece of every type of service that makes up the overall marketing pie.

Mr. Edelman -- who's also chairman of Daniel J. Edelman, the network that houses PR giant Edelman and smaller PR shop Zeno -- explained the company will instead double down on its existing expertise in PR, research and social digital. And rather than invest in shops dedicated to various marketing disciplines, Mr. Edelman said he'd rather create strategic partnerships with those shops, including Madison Avenue firms and Hollywood talent agencies. He used the example of India-based marketing firm Rediffusion, with which Edelman has shared duties for the Tata automotive business.

Last week's mega-merger news only solidifies the refocused strategy, he added, describing PR's likely position in the marriage of the two companies as "the tail of the dog." While Publicis and Omnicom focus on integrating their data operations and finding efficiencies with their respective ad assets -- as the execs of both companies have said in the past week on conference calls -- Edelman is going to concentrate on building up PR. Its competition under the merged holding company umbrella includes Fleishman-Hillard, Ketchum and MSLGroup.

It took both time and money to come to this conclusion. Forgoing the holding company ambitions comes after the agency invested a few million in setting up consulting and ad units in various markets and gaining little traction with them, Mr. Edelman admitted.

For example, for the past couple of years the shop has been "creeping into the advertising business by taking on assignments in secondary markets like Seattle or Dallas where there aren't so many firms," he said. "We did ok, [but] how big do you have to be to have scale in advertising? It doesn't make sense for me. I'd rather realize that and not pretend to be what we can't be."

That's not to say Edelman isn't eager to compete with the ad giants; he just doesn't want to do it by bulking up on traditional creative or media expertise. "We're up against heavy artillery [in advertising]. I don't want to do what they do, [but] If we can go up against them in trying to shift money away form advertising, that's brilliant and perfect," he said.

Edelman recently forecasted $706.85 million in revenue for fiscal-year 2012, which ended June 30. It's an 11% boost in revenue compared to the same period the year before.

One goal going forward for Edelman will be finding ways to convince clients to play with their marketing budget so more dollars are being funneled into PR. According to him, there's a lot of opportunity outside of the U.S. and UK, in markets where "advertising is a mature business and PR is not, and where there are opportunities to shift spending away from advertising," he said. "Japan is an example. There are some big PR firms in Japan that do $50 million; the ad agencies are some 30- or 40-times that [size]."

And as with traditional PR capabilities, he sees opportunities in growing and scaling PR-centric digital, largely through acquisition, outside of the U.S. and UK -- in those markets, digital accounts for about 20% of Edelman's business. "We're going marrow-in-deep."

The change in course won't have any affect the shop's public affairs advertising group in D.C., which has always touted an advertising capability like most large PR agencies with offices in the region. Edelman works on public affairs advertising for companies like Standard & Poor's and the American Petroleum Institute.

So what does this mean for all of the senior leadership changes that the firm made last year as it mapped out its holding-company strategy? Alan VanderMolen, who was promoted into the new role of vice chairman of the Daniel J. Edelman network, will now turn his attention to inking partnerships with appropriate firms and leading an ambitious growth strategy for Zeno Group in the U.S. and abroad.

"We want a fully scaled Zeno," said Mr. Edelman. "Zeno now is $30 million. We want it to be between $50 and $100 million in the next five years."

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