Tom Foremski stirs the pot

Tom Foremski, formerly of Financial Times fame and now champion of Silicon Valley Watcher has been letting people know for some time that he feels the PR industry is about to go through a real shake up as traditional media outlets die and blogs and podcasts fill the void. On January 12th he wrote a piece entitled" "Disruption in mainstream media but where is the disruption in the mainstream PR industry?. . .it's coming." Word has it PR Week followed up on that piece and has interviewed him with a view to producing a profile on the man. I'm encouraged to hear this as it shows PR Week is thinking about the very real challenge our industry faces with the rapid decline in traditional media.

http://www.siliconvalleywatcher.com/mt/archives/2006/01/disruption_in_m.php

Spin Bunny is back

I'm pleased to see the return of Spin Bunny even if it is poking fun at my inability to make an entry for the month of December. Any bets on how long it is before it's taken down again by the lawyers?

Steve Jobs - President of Silicon Valley?

I saw a couple of pieces in the last few days suggesting Steve Jobs really is the biggest celebrity in Silicon Valley these days. The piece I link to in the Merc talks about him making a bigger splash than Ellison and McNeally did at events held the same day. I also noticed a piece in, the ever so well written, Palo Alto Daily that suggested Disney is considering buying Pixar and making Jobs its Chairman. It's a wild idea you have to admit. What is clear is that Steve Jobs is the hottest property in Silicon Valley these days. The fame is clearly not without good reason. Since returning to Apple he has given them a great product strategy, got them back on terms with Microsoft and now he's managed to make the switch to Intel - a move that in his first tenure as CEO would have been unthinkable (remember the Apple ad with a snail on an intel chip?). All this will likely take Apple's stock to $100 by the summer. Given the competitive nature of the tech market I can only imagine the conversations taking place in the boardrooms of other tech giants right now.

http://www.mercurynews.com/mld/mercurynews/business/13598836.htm

Tech Flaks are Back?

I just noticed this piece on Drew B's blog so thanks for highlighting the article. Some of the facts in the piece are wrong but the market is definitely much better than it was a few years ago. So much so that some firms I thought would crash and burn seem to be surviving thanks to the up-tick. What's clear to me is that the market in the Bay Area is not really being driven by the larger tech firms. On the whole they appear to be holding their spend firm. What's increased is the number of startups who are out spending. Those of us who went through the dot com bust are watching this trend with some caution. Hiring, yes but only for clients we really believe will be around in year's time.

Have you been Abramoffed?

I gather DC's K Street community is keeping a low profile right now, hoping that the Abramoff scandal will soon blow over and allow them to get back to work. I'm curious to learn whether any PR work has been affected by this affair. There is an argument that PR agencies will benefit as funds are redirected and an argument that they'll suffer simply because of PR's association with PA. I've seen no evidence yet within my business of either but I'm nevertheless curious. Has anyone yet had their budgets 'Abramoffed?'

A New Year for Tech or another year of ups and downs?

If like me you keep an eye on NASDAQ's symbol for its computer sector stocks (NASDAQ:IXCO) you will have noticed that in the last year this index has moved around a great deal. Currently it's sitting at 1050 (ish). Back in April of last year it was sitting around 850. That may look like a good trajectory until you realize that at the start of '05 it was at almost 1000. The reality is that in the last couple of years this index has risen and fallen with the peak always being at the end of the year. Only back in 2003 did the index show a steady rise from the then low of around 500. Put another way the index (and one assumes the industry) is looking to break out of the cycle. In my humble opinion this will only happen once the sector gets firmly on a new course.

If you look back to the 80s the tech industry grew at an alarming pace as the PC took off and the revolution started. In the 90s the Internet gave the sector an even bigger horizon which of course the market has since dialed back. However, since the Internet backed boom we've not seen a solid new 'big opportunity' for tech. We've seen several firms try and create the next wave but in general the market is rightly skeptical. What the market wants is something solid to latch on to. This means a new technology, not a new marketing slogan. We appear to be some way from a radical shift in technology such as would be created by say a move to nano technology. Yet there are two important trends that I'd point to. First is Google. It may seem obvious but Google is the new Microsoft in the eyes of the street. In the same way that Microsoft cornered the PC market, Google is deemed to have cornered the Internet. The difference between their model and Microsoft's is simply that you don't have to use Google, you just tend to. This makes them far less prone to the legal problems Microsoft has faced in the last ten years.

The other equally obvious, but no less important, trend is wireless. Every single device on the planet is going wireless. Right now people are making things that are wired wireless, phones, PDAs etc. In the next generation we'll have a raft of devices that are going to be born wireless. The interesting part to me about this market is that nobody has cornered it...Yet. RIM aka Blackberry, has made a good attempt but Palm has fought back thanks to the ever so unreliable but quite functional Treo. At the same time, rumors abound that Apple will enter the space. If they do we can expect them to do well, given the success of the iPod. To my mind there is a technical barrier that needs to be overcome which is bandwidth. The really hot wireless technology will emerge once the pipe is big enough for interesting applications. In Europe 3G has already been launched with mixed success it seems. I'll confess to feeling that this is because people are applying the bandwidth to the wrong application - namely the phone. If we all wanted a video phone why don't we have one on all our land lines?

My summary is therefore that Google will undoubtedly have another blow out year. I saw one stock analyst has already said there shares could hit $2000 (that's each btw). Such a valuation may seem crazy but think back to what happened to Microsoft's stock. Therefore I think the smart brands in '06 will be the ones that can figure out how to ride the Google wave. My other prediction centers around the gaping wireless opportunity - right now I believe RIM has a great chance of owning this space, assuming it can come up with a) an exciting vision b) some slightly more innovative devices (i heard from one source that RIMs CEO refuses to incorporate an MP3 player in the Blackberry - to that I say to him go sit on an airplane and look at what people have with them) and c) a settlement on its troubling lawsuit. If they can't execute well here someone like Apple may well step in and eat their lunch and grasp one of the most interesting markets for the next five years.

How long before PR people have no daily print media to pitch?

Personally I think we are decades away from the complete death of the daily newspaper in the paper format. Not least because of the large number of commuters that quite like having something to swat their fellow travelers with. However, today's news that the LA Times has followed the New York Times and the Wall Street Journal in making significant layoffs does to me at least signal how close we are getting to the end of the daily paper as we know it.

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-11-17T011655Z_01_N16638889_RTRIDST_0_MEDIA-LATIMES.XML

The new PR economy

Not long ago PR Week carried a news piece on the growth of the PR industry. This was based on a survey by the private equity firm Veronis Suhler Stevenson (VSS). VSS's survey says that US PR industry produced revenues of $3.41Bn in 2004, a 12% growth over the $3.05Bn in 2003. The survey went on to say that Technology remained the largest sector, with 27.4% share. Tech PR posting its first growth of any year since 2000, with a 5.8% rise over 2003. Meanwhile the consumer sector posted a hefty 20.7% increase over 2003 now accounting for 25.5% of the PR market. The last, and perhaps most interesting point in the survey, was the view that the PR industry has a relatively bright future, forecasting a 10.1% growth rate in 2005 and an 8.9% growth rate for the next five years, on average.

At first glance this is great to read. It certainly matches what I think most agency heads are experiencing when it comes to market opportunity. In our case we far exceeded these growth levels in our last year, with our US business posting a 23% gain in revenues. These kinds of growth numbers are of course reminiscent of the dot com boom years and we all know what happened after that. While I'm still seeing a great climate for PR in the US I wonder if the growth curve is even. I suspect it is not. I suspect that what we are seeing is some agencies growing rapidly while others are in decline. The net effect being solid industry growth. I also suspect that within sectors we are seeing some very uneven growth.

The good news overall is that our industry is growing though. That growth is sparking new firms to appear, for example I noticed a new Tech firm being launched in Boston last week. The emergence of new firms is also a sign that people are seeing an opportunity to capitalize on a weakness in the market for a certain type of service. The current 'weakness' that seems to be on the lips of the founders of these new firms is 'senior counsel.' I'll be blunt here, I think the real weakness is not senior counsel but value for money. Of course it doesn't sound as appealing to say you are launching a new firm based around value for money but that is where the market is. The growth of the PR market post the dot com boom is different. In the boom it was a simple supply and demand problem. Now we have the same problem BUT we have both an experienced client base and the procurement factor. By procurement factor I mean that for most large clients that agencies not only have to convince marketing communications professionals of their credentials but they also have to persuade procurement departments of their value.

Welcome to the new PR economy.

Bait and Switch - What should be done?

One of my businesses recently lost out in a pitch to one of the ‘large’ agencies. The pitch had been a drawn out affair with lots of agencies in the fray. In the end it came down to a final two and we lost. I should say now that I hate losing so that needs to be factored in to the equation here. What annoyed me was that we lost out to a blatant bait and switch. It transpires that the winning agency brought a ton of people in to the pitch, of which only two junior people were ever going to work on the business.

I know that there are reasons why agencies do this. The best one is that the people who are good at pitching are not always the best at the work and vice versa. Other reasons are that the demands made in the pitch are rarely what a client wants once the work really starts. PLus there's the fact that the right people are either away or busy with existing client work. That said I do believe we need higher ethical standards on this issue. The client I mentioned is already annoyed to find that their new team is totally different to the one that pitched. Much as I’m skeptical about the ability of our industry to enforce codes of conduct and ethical standards I feel something needs to be done.

One way to solve this is to make resource planning a key part of all pitches so that the client can see in black and white what resources will be applied for the budget. The content here could then be an integral part of the initial contract. Another way to solve this would be for an organization like the Council of PR here in the US or the PRCA in the UK to promote a code of conduct on this issue and for them to set out rules their members agree to abide by.

Am I alone in finding the bait and switch issue frustrating? Personally I feel it does our industry no credit and only serves to re-enforce the image that PR is a less than ethical business.

Huntsworth and Media Square stick to their knitting

So Huntsworth is selling its non-PR businesses to Media Square in a move that makes both firms more interesting. Huntsworth inherited a collection of non-PR businesses when it merged with Incepta, not to mention a pile of debt. In selling to Media Square it becomes a more streamlined business with little or no debt, which has to music to the ears of the investors. For Media Square they get a business that reaches around the world and has good scale. What's striking is that this move goes counter to the way the larger comms Groups have tackled things. If WPP had been Huntsworth they would likely have merged with Media Square just to build a larger group that offered a full spectrum of marcomms services. These businesses have chosen a different path which I have to applaud. I'm delighted to see the management of these businesses stick with what they believe they know and do best.

Of course this does all mean that Huntsworth now really has to show that its non-PR businesses were holding it back and equally Media Square has to show that its competence in the marketing services area can be applied to the businesses that have of late struggled under the Incepta/Huntsworth umbrella. Time will tell I guess.

Measurement - Does anyone really care?

One thing is clear to me right now; measurement has failed to get on the PR agenda. Just read the main stories in the PR trades. Not one of them talks about measurement. Sure it shows up on RFPs, sure clients want to talk about how well things are going and they even want charts showing what a great job is being done for the money. But the sad truth is that PR measurement still doesn't command a meaningful part of most company's budgets. Some simple, albeit unscientific, research reveals that out of the five clients I asked not one does measurement in the same way (actually not all bother to measure). Furthermore none of those that do measure have a well defined budget for measurement when planning programs.

A broader look at measurement shows that many people do use firms like Biz360 or Carma but even then from what I can tell the PR staff tend to pay little or no attention to the results these services provide unless of course they think it will help with some internal presentation to justify the funding of the department. We shouldn't blame our clients for the sorry state of affairs here. After all, how much effort do most agencies put in to being measured? We are the ones who make moey from doing PR so we are the ones who should make sure our clients use tools to make sure that what we do is actually worth the money.

My own view on this is that we need an industry standard form of measurement in the way the ad industry has. This means we need to know what we are to measure, how often we measure it etc. We also need to start to establish an agreed way to invest in measurement. This could be either a certain percentage of fees applied, or a minimum expenditure. I for one would love to see such measurement be carried out in such a way that work done in PR could measured alongside work done in other areas of marketing so that we can finally start to see just how PR stacks up against other forms of marketing.

The current thinking on measurement seems to be to let everyone just do their own thing. Let’s face it this isn’t working. Now I know some PR people don’t want measurement because: a) they’ll have to do some work for the fees they charge otherwise they’ll be found out; b) funds applied to measurement will likely be taken out of the money they would otherwise have been given to run programs, host lunches etc.; and c) they argue that PR is to hard to measure accurately anyway, so why bother? My response to these people is if we don’t adopt measurement then we can expect PR to lag disciplines like advertising for many years to come.

I’d love to see publications like PR Week, O’Dwyer’s as well as organizations like the Council of PR Firms take these issues on and really move the needle. Anyone else want to see this happen?

Profit share or risk avoidance?

Today's Wall Street Journal carries a piece on how small advertising agencies are taking a share of their client's revenues for product and services they create the ads for. This will sound familiar to those in the tech agency world who were surrounded by startups in the late 90s all waving stock certificates in return for services. There were of course some significant winners such as Niehaus Ryan Wong that got founder stock in Yahoo!. Sadly it turned out that even that couldn't save the firm and it went under in early 2002 as the full effect of the downturn in the tech sector hit.

If the advertising industry wants to take this path then I wish them luck. I for one hope the PR industry stays well clear of this murky business. While at one level it sounds great we need to remember we are PR people not VCs. These programs are divisive and rarely profitable. They are a cheap way for a client to get marketing support while the agencies shoulder the risk.

I do wonder whether this news piece came from it being a slow news day or because Chris Lawton, that wrote it, has been inundated by firms all saying they are doing this. I truly hope it was a slow news day.

Fingers crossed for Interpublic

Michael Roth, CEO of Interpublic, has 14 days left to file accounts or risk the delisting of the business by the NYSE. This follows a string of accounting scandals and a government probe. Only a few days ago Interpublic had to announce it was firing staff that had presumably been fixing the numbers. The delisting of Interpublic would of course be terrible news for the business and would likely result in the scenario Business Week probed this week - namely a break up of the Group. That could mean brands such as Weber Shandwick, MWW and Golin Harris going on the block. Presumably WPP or Omnicom would snap them up at relatively low prices.

I for one wish this wasn't the case. As a competitor I hardly want these businesses to do well. However, I have to say that no industry wants accounting scandals and government probes into one of its major players. Such things tend to scare away investors that help fund our businesses not to mention people that may be thinking of working in the PR industry. So while having my fingers crossed is unlikely to do much I do rather hope Michael meets his deadline for all our sakes.

BRIC and Brands

A lot has been written about the incredible rate of development of the Chinese and Indian economies. Less has put down on paper concerning Brazil and Russia. In large part this seems sensible as the fundamentals of these two economies are less impressive…at least at this stage. What is clear is that these four countries, which account for over 40% of the world's population, are the economies to watch. What is less clear is what that means for world brands.

Every year Business Week in conjunction with Interbrand produces a list of the top 100 brands in the world by value. Every year, for what seems an age, this list has been topped by Coca Cola, Microsoft, IBM and GE. Indeed the top ten has hardly changed in recent years. Aside from the leaders I already mentioned the likes of Intel, Disney and McDonalds are also permanent fixtures it seems. What some analysis of the top 10 and even the top 100 shows is that America dominates. In the top 10, for example, eight are American. In the top 100 around 60 are from the US of A. These statistics seem pretty constant from the data Interbrand shares. This raises an interesting question: "Is China the next super power or simply the place where Coca Cola et al will employ the most people?"

That's a tough question to answer in part because as the world's top brands expand, they inevitably have to look at ways to reduce cost and complexity AND at how to tap new markets. This naturally draws them to places like China and India where educated work forces at relatively low cost are abundant and where potential new customers exist... by the million. So I guess in short the answer is: forget the “or,” how about “yes and “yes.”

What is very clear is that as the BRIC markets open up and as their educated work forces become middle class these countries will have huge economic power. Does that mean we will see a sudden shift, with a raft of new Chinese, Brazilian, Indian and Russian brands taking the world by storm? I very much doubt it. Toyota and Nokia are the only non-American firms to gain a regular place in the top ten in the last decade and this didn't happen overnight. Instead it seems more likely that Coca Cola, IBM and GE will remain among the world’s top brands.

That may seem a little dull but I believe it will be important legacy for the US. America has become used to being the world economic and military super power. All the statistics say that position is set to change in the next thirty years with China and India overtaking the US thanks in part to the sheer size of their populations. But when the super power torch is handed to one of these countries as it inevitably will be, it will likely be done so with American brands still dominating the world economy. That’s a conundrum the new super powers will have fun figuring out.

What a difference a year makes

Last summer PR companies were still scratching their heads trying to figure out how to deal with the emergence of blogs and wikis as forms of communication. Debates raged on whether separate groups should be formed within agencies or if we should even be forming new types of agencies. A year later may of those debates still continue. Some small firms do exist solely to serve this market but they are mostly one or two person outfits. As yet there are few real consultancies in the space, though I did note earlier this week that Magnet has set itself up to focus on comms like this (they have a broader remit than blogs and wikis it should be said). I am keen to see how this venture does in the next six months. If they do well perhaps we'll see a rush to emulate this approach.

One observation I will make is that a year ago when agencies pitched for new clients blogs were mentioned but only in passing and then not in every case. Today 99% of pitches have a section devoted to blogs and how the prospective clients should deal with them. This is something of a silent revolution. I wonder how far this revolution will have taken us in another twelve months? Will we have blog budgets? Will we have blog tours be as common as press tours?

Agency rankings

I have been trying to do some research on other PR firms so I can better understand the market we all operate in. Currently such research is a thankless task. It used to be quite easy. Until a few years ago you could look at league tables produced by people like the Council of PR firms and PR Week and it was easy to tell which firms were growing, which geographies were doing well and also what different sectors of the industry were fairing best. Not anymore. Thanks to the moves of the larger PR holding groups such as WPP and Omnicom to consolidate their PR revenues under one line in their annual reports (they use Sarbanes Oxley as the reason) we no longer have any meaningful tables.

Am I the only one that thinks this is bad for our industry? I believe it would benefit the industry to make public the performance of all the significant PR businesses that operate in the industry. Clients and potential staff would benefit by seeing which firms really were growing. Agencies would benefit by being able to see how well they were performing relative to their competitors.

I'll be honest I don't really understand the reasons why WPP et al are withholding their numbers. They say it is because of Sarbanes Oxley but I'm not sure I follow that logic trail. Having trawled through the various key sections of the act such as sections 302, 404 and 409, I can't see any good reason why an agency's revenues should not be reported. Indeed the only real requirement I can see under SOX that is perhaps an issue is that agencies would need to have good internal controls to ensure revenues were accurately being applied to the various subsidiaries. In truth given all agencies I know of, base their bonus programs to some extent on the revenue each agency generates, then unless they have bogus bonus programs, the revenue recognition is very likely recorded with great accuracy.

I'm willing to have someone tell my why SOX really does require WPP et al to report agency fees as one big number instead of breaking them out by agency but until someone does, I'll continue to hold the view that SOX has provided a fig leaf for holding companies to hide behind.

I'm I the only one who'd like to see that fig leaf be removed?

Should we hide the CEO?

Earlier this year I attended a small VC event at which Jim Collins was giving his fantastic presentation on how to build great and enduring businesses. He did a marvelous job of both reminding the CEOs present of the management disciplines they need to adopt if they are to turn their businesses in to truly great companies. Several months have passed since I heard him speak but I was reminded of this speech when I noticed his 'Level 5 Leadership' article is being reprinted in the current HBR. What struck me is that if you look at the current leaders of the major tech players there is some correlation with his central thesis, that great companies have Level 5 leaders but not a complete correlation. Of course this could be a warning bell for the future of those that don't appear to have Level 5 leaders, or it could be that Jim's analysis doesn't really apply to them.

Jim's research suggests that Level 5 leaders have a common set of traits, namely their ability to build enduring greatness through a paradoxical combination of personal humility plus professional will. Now I can't profess to know the CEOs of the all the major tech firms to the extent where my judgment is 100% accurate but from what I've learned over the years and from the insight others have given, I'd say that using media exposure as a guide the following people meet the Level 5 standard:

Sam Palmisano - IBM. Sam does work with the media but it's clear that he'd rather talk about his company than himself.
Mark Hurd - HP. Has any business publication managed to profile him with his involvement?
Hector Ruiz - AMD. AMD has been slowly but surely gaining ground on Intel while Hector has stayed firmly below the radar
Bill Gates - Microsoft (I know he's not CEO anymore!). Bill has never loved media attention but accepts its role. As the world's richest man he can't escape being on the cover of magazines from time to time
Steve Ballmer - Microsoft. Steve may be gregarious but he's also not someone to blow his own trumpet.
Paul Otellini - Intel. Since taking over as CEO he has hardly sought out personal publicity

Some may take issue with these choices and I should add that not that all of these are clients. I should add that I've not included CEOs such as Steve Jobs, John Chambers, Larry Ellison and Scott McNealy. I don't know these people but the perception is that these people enjoy the media spotlight which goes against them being so called Level 5 leaders. If my perception is wrong then these guys all definitely count. It is interesting to note that Jim's Level 5 criteria if used when hiring CEOs would have ruled out hiring someone like Carly Fiorina for the HP role.

If you think about this you arrive at something of a paradox. At one level PR people want their CEOs to do their part to raise awareness of the company and its goals. This often means them sharing some of their personal life with the public to add some human interest to an otherwise dull business story. If they do this too much then they become celebrity CEOs and by Jim's definition, this would suggest they are falling short of being Level 5 leaders. So the logical conclusion you arrive at is that we can do all our clients a favor and make sure our CEOs stay out of the media.

Or should we? I'd love to see what other PR people think on this subject?

Second wave

Call it an after shock from the 2000 crash of the tech market if you like but I think we are starting to see another wave of challenges facing the tech PR market. Don't read in to this that my businesses are having problems, thankfully they are not. However, events of the last few months have pushed a few agencies perilously close to the edge and I fully expect to see one or maybe two firms crash out in the next few months. The firms won't be small fry, they'll be businesses that have been around a while and have taken steps to build up internationally. Their demise will be a result of two equal and opposite forces: a drive in one direction to go global while at the same time being driven in the other direction to be more local. These are tough pressures for medium sized businesses to take on at the best of times. The agencies I see being at risk are ones that became too dependent on one or two clients and equally a handful of their staff. If this mix changes even slightly in such businesses, the results are not pretty. Take a look at the big pieces of business in the tech PR market to move and then also at what staff moves have taken place and you might see what I mean. I won't name names right now as I'd actually prefer it if these businesses stay alive but let's put it this way, if they're still alive in six months I'll be shocked.

Good to be back....

Think Different? Think Again

Ask an Apple fan what they think of Intel and they’ll immediately start thinking of phrases that I wouldn’t want my kids to hear. Intel after all has been a part of the establishment in the PC World for decades now. Intel’s Inside program has been the marketing antithesis of Apple’s Think Different. So today’s news that Apple is to dump IBM in favor of Intel is something of a shock. I say ‘something’ rather than, ‘a massive,’ simply because the news was leaked well in advance in a bid to soften the blow to all concerned. That’s said, Apple fans are getting used to these moves after Jobs swallowed his pride an made friends with Microsoft.

A couple of things I do think that are worth noting about this news are firstly that Paul Otellini, Intel’s CEO was quoted by AP as saying “We are thrilled to have the world's most innovative personal computer company as a customer.” This quote will clearly annoy Dell and HP and I suspect his PR team are busily trying to reposition this statement. Second, the news seems to have taken the stock prices of Apple, Intel and IBM all lower on a day when stocks are essentially flat. Clearly the markets feel that at this stage the benefits of the switch are hard to see.

I guess the interesting question now is, what should Apple’s new tag line be when it has Intel Inside? “Think a little bit differently to the guy that bought a Dell?”

H1B Visas and Tech Graduates

In recent weeks I've picked up a couple of news items that have troubled me about the long term prospects for tech in the US. The first there was an article by a New York Times columnist that shared concerns about the sudden decline of US Universities in their production of top technology talent. Whereas in the late 90s US Universities were producing most of the valuable tech resources on the planet, today it appears that honor goes to Universities in China. If this news doesn't worry those wishing to see the US retain leadership in tech, then news that applications for H1B visas are well below current limits should create some concern. Combined these news items suggest that not only are other countries now producing the best talent but that talent is not being drawn to work in the US. In the short term that shouldn't be a problem. How about ten years from now?