The biggest Public Relations agencies; stuckness and market dynamics

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The Holmes Report came out with their top 250 (biggest) PR agencies around the world in terms of billings. I decided to delve into the numbers for financial years 2014 – 2017.

Macro picture

What the numbers suggested at a macro level were three things:

    • Overall billings growth was declining year on year
    • The amount of agencies that were appointed into the top 250 (and were dropped) declined year on year. There is less market disruption

Aggregate billings growth & top 250 list churn

    • The bottom 190 agencies (by size over successive years) accounted for less than half the billings of the top 25 for financial year 2017

Bottom 190 out top 250 PR agencies billings

Top 25 out of top 250 Pr agencies

This supports a hypothesis of slowing market growth and solidifying market dynamics at a macro level. Strategic acquisitions start to make less sense compared to improving efficiences and effectiveness. But if you were going to buy an agency MC Group in Germany looked to be the stand out choice in terms of changing the fortunes of a large agency billings

We’re also seeing a likely tyranny of large numbers kicking in for the biggest agencies. Mid-sized agencies can be more agile due to less layers of management and less complex environmetns to worry about. They may be multi-market; but they’re not truly global. Which makes strategy and planning much easier.

PR agencies are people businesses. At the core they sell manpower by the hour. Bigger agencies have more people, which means a greater management overhead, not unlike Fred Brooks’ The Mythical Man-Month essays on software engineering. There are more processes, which have built up over time and greater inertia to change. Then you get office and intra-office real politik. You can try and keep this down, but it is a function of scale; the battle against it becomes ever harder and you can only focus on its worst excesses. It tends not to surface when its impact only goes downwards in the management structure.

Agency-specific hypothesis

This next part was inspired by David Brain’s post on the performance of large agencies.

PR seems to be acquired in a more tactical manner than previously. This has been happening for a number of reasons.

A decline in Full Metal Jacket syndrome in comms planning. This nonsensical quote about Vietnamese people in Full Metal Jacket makes similar false assumptions. I’ve seen similar false assumptions in past global comms campaign planning that I have seen. Usually that meant creating something in the US and then expecting it to work on a fraction of the budget elsewhere. This means that there is less international work for agency networks. This has a negative impact on inter-office best practice transfer and building relationships.

The influence of Byron Sharp. For many consumer marketers, How Brands Grow – based on years of marketing science research is the bible. When you look at Sharp’s work there are a couple of clear points when you use public relations as a tactic.

Zero-Based Budgeting

Zero-based budgeting (ZBB) has changed the marketing planning game. It pits public relations campaign efficiency and effectiveness versus other disciplines in sharp focus. In addition, some organisations have mistaken ZBB as a one-way ratchet tightening marketing spend. ZBB isn’t about continual cost-cutting, but continual optimisation – something that seems to have been lost in translation.

PR agencies haven’t taken full advantage of the opportunity afforded by digital and social for a number of reasons:

  • There is a tension. Between the focus on financial efficiency and effectiveness that the macro numbers suggest versus the investment in tools and personnel required. Where are the studios, strategists, planners and media desks?
  • There has been an expertise drain across the industry as agencies deskill; paying new people into roles less than the person who previously filled it. This means that over time there is a trench in expertise between office leaders and the rest of the team, making it harder for the office to scale and a loss of institutional knowledge. This has led to a lack of diversity in thinking amongst many PRs; let alone gender, race and age diversity. From experience I’ve found that digital natives aren’t necessarily the best digital strategists
  • Clients haven’t embraced the change. Social in particular sits elsewhere amongst the marketing team. There is a similar division with paid media. The focus (particularly in Europe) on performance marketing over brand marketing hasn’t helped. Hubspot-style content marketing is a reductive process that isn’t the friend of PR agencies; despite their expertise in content
  • The window of opportunity closes as organic reach declines. Social media marketing effectiveness requires paid media budget. Agencies have jumped in too late with insufficient confidence. Traditional senior management agency PRs have been curiously hung up on this. Yet we see: corporate communications as adverts in the FT and WSJ and consumer PRs do paid advertorials and paid product placement

More information
David Brain’s post: Why Are The Biggest Global PR Agencies Stuck? Does It Matter?
Holmes Report

ICYMI | 万一你错过了| 당신이 그것을 놓친 경우

Applied Materials Sags on Weaker Revenue Outlook – Barron’s – looks promising overall for the semiconductor market

WSJ City – China secures access to 70% of world’s lithium supplies – Chile is the low carbon equivalent of Saudi Arabia. The rosy numbers are based on: current consumption rates that are low (electric cars are still a novelty) and doesn’t pair it with their position on rare metals – China also dominates super capacitor technology. Time for hydrogen powered cars

Why are the biggest global PR agencies stuck? Does it matter? – SixtySecondView – good, if snarky read. Expect something on this from me soon. Currently have my head in creating an Excel document full of research

‘Menopausal’ UK economy risks once-in-a-century slump, warns deputy chief at Bank of England  – I thought the analogy accurate if not insensitive. There is little chance of economic growth bearing fruit

This Is How a Newspaper Dies – POLITICO MagazineIn 1976, long before the internet arrived, Los Angeles Times media reporter David Shaw wrote in a lengthy Page One report about the newspaper’s worsening vital signs. “Are you now holding an endangered species in your hands?” he wrote. – I’d alluded to this here.

Exclusive: NSA encryption plan for ‘internet of things’ rejected by international body – WikiTribune – understandable given the NSA’s history of weak encryption. What’s also interesting the low level of trust amongst allied countries

Five for Friday | 五日(星期五) | 금요일에 다섯 가지

Things that made my day this week:

Mark Anderson of the Strategic News Service; a George Gilderesque subscription newsletter that were very popular in the mid to late 1990s. It is an interesting ‘anti algorithmic’ analysis in action. A counter point to the world that Google now represents, I don’t buy all that Anderson says, but this is very interesting to watch.

The synthetic voice of synthetic intelligence should sound synthetic. Successful spoofing of any kind destroys trust. When trust is gone, what remains becomes vicious fast.

— Stewart Brand via Simon Willison. It seemed very appropriate when considering the Google Duplex demonstrations from the other week.

It’s Nice That | Gucci and Frieze team up on major new video series, The Second Summer of Love – well worth a view

Singapore’s utopian clean looking city and high quality Japanese animation are a marriage made in heaven. Makoto Shinkai directed this for the forthcoming Singapore Thomson East Coast Line on behalf of Japanese construction giant Taisei Corporation.

This would usually be the part where I would talk about how I am looking forward to Deadpool. But I won’t. I wanted to marvel at the collective hullucination of Deadpool marketing. Deadpool marketing isn’t trying to get you to go and see the film, but instead brings elements of the film to you. Once you are properly tuned in, it then makes perfect sense to see the film. The problem is that there are so many fragments from DVD rewraps to teasers and TV appearances that it would be impossible to capture or choose a favourite.

Instead I am going to share a video of the Korean show King of Masked Singer, where Ryan Reynolds preformed Tomorrow from the musical Annie in a unicorn mask.

Fans in show panel and the audience lost their shit

ICYMI | 万一你错过了| 당신이 그것을 놓친 경우

Fuji Xerox to Install Personal Booths for Teleworking at Subway Stations | NIKKEI XTECH – I’d prefer this to WeWork

Memes That Kill: The Future Of Information Warfare | CB Insights – interesting read

The Ultimate Analog Music Is Back, Ballfinger Reel-to-Reel Tape – Bloomberg – they look amazing – Dolby needs to reticence SR

Humans Do Dumb Things with Smart Cities – MIT Technology Review – and what kind of behaviour were they expecting?

Does higher education change non-cognitive skills? | Marginal Revolution – in economics terms university may bring out socially beneficial traits, but only to people who are open to it

This wasn’t the internet we envisaged

The debate over privacy on Facebook got me thinking about the internet we envisaged. Reading media commentary on Tim Cook’s recent address at Duke University prodded me into action.

What do I mean by we? I mean the people who:

  • Wrote about the internet from the mid-1990s onwards
  • Developed services during web 1.0 and web 2.0 times

I’ve played my own small part in it.

At the time there was a confluence of innovation. Telecoms deregulation and the move to digital had reduced the cost of data and voice calls. Cable and satellite television was starting to change how we viewed the world. CNN led the way in bringing the news into homes. For many at the time interactive TV seemed like the future of media.

Max Headroom

Starship Troopers

The Running Man

Second generation cellular democratised mobile phone ownership. The internet was becoming a useful consumer service. My first email address was a number@site.corning.com format email address back in 1994. I used it for work, apart from an unintended spam email sent to colleagues to offload some vouchers I’d been given.

My college email later that year was on a similar format of address; on a different domain. I ended up using my pager more than my email to stay in touch with other students. At college I signed up for a Yahoo! web email. I had realised that an address post-University would be useful. Yahoo! was were I saw my first online ads. They reminded me of garish versions of ads in newspapers.

I used to go to Liverpool at least once a week to go to an internet cafe and check my email account. I found out that I had my first agency job down in London when I was called on my cell phone whilst driving. The internet was as much as an idea as anything else and the future of us netizens came alive for me in the pages of Wired and Byte. Both were American magazines. Byte was a magazine that delved deeper into technology than Ars Technica or Anandtech. Wired probed the outer limits of technology, culture and design. At the time each issue was a work of art. They pushed typography and graphic design to the limits. Neon and metallic inks, discordant fonts and an early attempt at offline to online integration. It seemed to be the perfect accompanyment to the cyberpunk science fiction I had been reading. The future was bright: literally.

Hacking didn’t have consumers as victims but was the province of large (usually bad) mega corps.

I moved down to London just in time to be involved in the telecoms boom that mirrored the dot com boom. I helped telecoms companies market their data networks and VoIP services. I helped technology companies sell to the telecoms companies. The agency I worked for had a dedicated 1Mb line. This was much faster than anything I’d used before. It provided amazing access to information and content. Video was ropey. Silicon.com and Real Media featured glitchy postage stamp sized clips. My company hosted the first live broadcast of Victoria’s Secret fashion show online. It was crap in reality, but a great proof of concept for the future.

I managed to get access to recordings of DJ sets by my Chicago heroes. Most of whom I’d only read about over the years in the likes of Mixmag.

All of this pointed to a bright future, sure there were some dangers along the way. But I never worried too much about the privacy threat (at least from technology companies). If there was any ‘enemy’ it was ‘the man’.

In the cold war and its immediate aftermath governments had gone after:

  • Organised labour (the UK miners strike)
  • Cultural movements (Rave culture in the UK)
  • Socio-political groups (environmentalists and the nuclear disarmament movement)

I had grown up close to the infamous Capenhurst microwave phone tap tower. Whilst it was secret, there were private discussions about its purpose. Phil Zimmerman’s PGP cryptography offered privacy, if you had the technical skills. In 1998, the European Parliament posted a report on ECHELON. A global government owned telecoms surveillance network. ECHELON was a forerunner of the kind of surveillance Edwards Snowden disclosed a decade and a half later.

One may legitimately feel scandalised that this espionage, which has gone on over several years, has not given rise to official protests. For the European Union, essential interests are at stake. On the one hand, it seems to have been established that there have been violations of the fundamental rights of its citizens, on the other, economic espionage may have had disastrous consequences, on employment for example. – Nicole Fontaine, president of the european parliament (2000)

I advised clients on the ‘social’ web since before social media had a ‘name’. And I worked at the company formerly known as Yahoo!. This was during a brief period when it tried to innovate in social and data. At no time did I think that the companies powering the web would:

  • Rebuild the walled gardens of the early ‘net (AOL, CompuServe, Prodigy)
  • Build oligopolies, since the web at that time promised a near perfect market due to it increasing access to market information. Disintermediation would have enabled suppliers and consumers to have a direct relationship, instead Amazon has become the equivalent of the Sears Roebuck catalogue
  • Become a serious privacy issue. Though we did realise by 2001 thanks to X10 wireless cameras that ads could be very annoying. I was naive enough to think of technology and technologists as being a disruptive source of cultural change. The reason for this was the likes of Phil Zimmerman on crypto. Craig Newmark over at Craigslist, the community of The Well and the Electronic Frontier Foundation. The likes of Peter Thiel is a comparatively recent phenomenon in Silicon Valley

We had the first inkling about privacy when online ad companies (NebuAd and Phorm) partnered with internet service providers. They used ‘deep packet inspection’ data to analyse a users behaviour, and then serve ‘relevant ads.

Tim Cook fits into the ‘we’ quite neatly. He is a late ‘baby boomer’ who came into adulthood right at the beginning of the PC revolution. He had a front row seat as PCs, nascent data networks and globalisation changed the modern world. He worked at IBM and Compaq during this time.

Cook moved to Apple at an interesting time. Jobs had returned with the Next acquisition. The modern macOS was near ready and there was a clear roadmap for developers. The iMac was going into production and would be launched in August.

Many emphasise the move to USB connectors, or the design which brought the Mac Classic format up to date. The key feature was a built in modem and simple way to get online once you turned the machine on. Apple bundled ethernet and a modem in the machine. It also came with everything you needed preloaded to up an account with an ISP. No uploading software, no drivers, no DLL conflicts. It just worked. Apple took care selecting ISPs that it partnered with, which also helped.

By this time China was well on its way to taking its place in global supply chains. China would later join the World Trade Organisation in 2001.

The start of Tim Cook’s career at Apple coincided with with the internet the way we knew it. And the company benefited from the more counter culture aspects of the technology industry:

  • Open source software (KDE Conqueror, BSD, Mach)
  • Open standards (UNIX, SyncML)
  • Open internet standards (IMAP, WebCAL, WebDav)

By the time that Facebook was founded. Open source and globalisation where facts of life in the technology sector. They do open source because that’s the rules of business now. It is noticeable that Facebook’s businesses don’t help grow the commons like Flickr did.

Businesses like Flickr, delicious and others built in a simple process to export your data. Facebook and similar businesses have a lot less progressive attitudes to user control over data.

Cook is also old enough to value privacy, having grown up in a less connected and less progressive age.  It was only in 2014 that Cook became the first publicly gay CEO of a Fortune 100 company. It is understandable why Cook would be reticent about his sexuality.

He is only a generation younger than the participants in the riots at the Stonewall Inn.

By comparison, for Zuckerberg and his peers:

  • The 1960s and counterculture were a distant memory
  • The cold war has been won and just a memory of what it was like for Eastern Europeans to live under a surveillance state
  • Wall Street and Microsoft was their heroes. Being rich was more important than the intrinsic quality of the product
  • Ayn Rand was more of a guiding star than Ram Dass

They didn’t think about what kind of dark underbelly that platforms could have and older generations of technologists generally thought too well of others to envisage the effects. You have to had a pretty dim view of fellow human beings.

More information
Tim Cook brought his pro-privacy views to his Duke commencement speech today | Recode
Bugging ring around Ireland | Duncan Campbell (1999) PDF document
The ECHELON Affair The EP and the global interception system 1998 – 2002 (European Parliament History Series) by Franco Piodi and Iolanda Mombelli for the European Parliament Research Unit – PDF document
Memex In Action: Watch DARPA Artificial Intelligence Search For Crime On The ‘Dark Web’| Forbes
X10 ads are useless – Geek.com
Disintermediation – Wikipedia