PR Industry Wrestles With Whether to Talk up Slowdown

Holding Companies See Growth at Shops Dip, but Trade Group Reports 7.5% Revenue Increase

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NEW YORK ( -- The PR business, so adept at glossing over other people's problems, is having a tough time figuring out how to communicate its own biggest issue: an industry slowdown.

Some agency chiefs are at odds with data suggesting things aren't all that bad despite the general U.S. economic malaise. For instance, the Council of PR Firms, an important trade organization, is reporting a 7.5% revenue increase in the first quarter of 2008, down from 8.8% the year before. But Mark Hass, worldwide CEO of Publicis Groupe's MS&L, who became a member of the council's board this year, doesn't think the survey paints an accurate portrait of what's going on in North America.

Said Mr. Hass: "If the council, which is an authoritative voice, says the North American PR business is healthy, people will ask, 'How come every other industry in North America is struggling with this apparent recession and PR is fine?' I think it hurts the credibility of the Council, and I wish we took a more buttoned-up approach to this kind of research."

He said he has issues with the study because it doesn't "weight for different-size firms or size of the business" in North America. Kathy Cripps, president of the council, disagreed. She said the survey is a good indicator of the industry and that "traditionally" it hasn't reported on the size of the agencies taking part.

In their first-quarter results, the holding companies that own many of the large and midsize agencies saw their PR growth dip. The two largest groups, Omnicom and WPP, dropped from 13% growth in 2007 to 7% and 9.9% growth, respectively, during the first quarter of this year. Publicis Groupe did not offer a breakdown of its PR business. Many of the CEOs who spoke to Ad Age said a good portion of the growth they have seen this year has been organic and has come from business won near the end of 2007.

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Kim Hunter, founder of the minority-focused Lagrant Communications, said this will be his agency's best year, but it won't be so for many others. "I don't think the industry is headed for a slowdown; I think it's in a slowdown," Mr. Hunter said. "A lot of these guys will embellish [because] nobody wants to admit they're not having a good year, but it's like, come on, folks, we're all intelligent people. This is very endemic of our industry in that we always try to put a positive light on a bad situation."

Mr. Hass said his agency has experienced growth in North America this year, albeit slower than expected, but said growth in Asia and Europe has been "great."

Dave Senay, president-CEO of Fleishman Hillard, an Omnicom agency, described the first few months of 2008 in one word: fickle. "Even in areas where the pipelines are full, the one reason they are full is that clients are hesitant to commit [to spending]," he said.

Richard Edelman, president-CEO of the eponymous firm, said he has seen a softening of the market, specifically in the corporate-reputation practice. "The marketing side of the business is still growing," he said. "But the corporate side in some cases is seeing some belt tightening." Mr. Edelman said the agency is optimistic for 2008 and not bullish the way it was last year.

However, Weber Shandwick, an Interpublic company, remains very bullish about 2008. Its president, Andy Polansky, anticipates a strong second quarter with double-digit growth.

"With respect to the back half of 2008, there is some anxiety that many people in the industry share," Mr. Polansky said. "But it's more an anxiety that's predicated on the environment we're in and not on clients pulling back."

Howard Paster, exec VP-public relations and public affairs at WPP Group, said the only area in which he's seen softness is the public-affairs business. "That's typical in a presidential-election year," he said, because of less legislative activity. "Anybody who is prudent in business is paying attention to macroeconomics. You would be foolish not to be alert."
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