 |
 |
May 24, 2002 |
Hope Amid the FalloutBy Jo Bowman and Olivia Toth In a year when ad revenues plummeted and comms budgets shrank, PRWeek charts the changing fortunes of Asia-Pacific’s PR fraternity Last year was the year that Asia-Pacific’s PR industry had to fight hard to prove its resilience and maintain its profile. ‘Leaner and meaner’ emerged as the emergency gameplan for 2001, as large and small consultancies alike worked harder, with relatively little gain, as the world’s economic machinery slowed. The pain was felt across the region, making staff cutbacks de rigueur across industry sectors, and expansion the realm of only a chosen few. Communications was only one tear in the fabric that saw the region’s media industry fighting for survival and advertising revenues shrink dramatically. Unpredictable market By early summer, however, the cracks were already beginning to show, and September 11 was the definitive nail in the proverbial industry coffin. Technology-based clients took a battering in the bumpy economic conditions, and PR budgets were shaved across the board. In banking and finance, IPOs slowed to a halt, and travel and tourism were particularly hard hit. According to Fleishman-Hillard regional director, executive VP and senior partner, Lynne Anne Stevenson, the unforeseen events and economic fallout “tested the mettle of management in every company in every industry”. “PR consultancies were tasked with counseling clients through very tough decisions and communications in addition to navigating their own businesses through the downturn,” she says. Recession-weary clients pushing for lower fees became commonplace-and is arguably still a bone of contention for the industry. And with hungrier players willing to accept reduced fees for the sake of client retention, the entire sector was under pressure to do more for less, with fewer resources. Staff cuts of 20 per cent were not unusual, and among the top 10 consultancies, only the year’s biggest success stories, Golin/Harris Forrest and Ogilvy PR – which boasted income gains of 112 per cent and 32 per cent respectively – swelled their ranks significantly. Burson-Marsteller trimmed its 216 staff down to 187, but managed to snare an extra 63 clients over the year. Similarly, Weber Shandwick gained close to 100 new clients with 26 fewer staff, while Edelman PR Worldwide’s headcount fell from 245 to227 as the number of clients shrank from 420 to 340. When networks did hire, new recruits tended to be senior names brought in to shore up specialty practices or soothe the nerves of edgy big-name clients. Encouraging revenues Luckily these were largely the exceptions to the rule, and consultancies such as Ogilvy PR bucked the trend, sporting revenues that surged from US$14.8 million to US$19.5 million over the year. At Golin/Harris Forrest, the clients list tripled, from 84 in 2000 to 249 for 2001. Income more than doubled, to US$8.7 billion, and staff numbers rose from 47 to 89. Encouragingly, consultancies such as healthcare specialist Ruder Finn, which fell outside the top ten in thirteenth place, posted 41 per cent growth for the year. And as struggling brands and crisis-struck companies needed help, players with finely-tuned crisis capabilities came into their own. According to Ogilvy PR president, Matthew Anderson, 2001 was a year of surprises: “Agility was the key, as clients needed quality work in areas that only a couple of months before they didn’t know they would need. The more generalist firms suffered, and those that were hurt the most were the ones who had a juiced-up NASDAQ clients who were just dipping their toes into Asia,” he said. Arguably, while adspend budgets shrunk, in addition to shrinking comms budgets for many of the global multi-nationals, the value of reputation management in a downmarket gained prominence. “What was clear was that there was a growing recognition of the need for PR in the boardroom and particularly as a driver in the marketing mix, rather than a ‘nice-to-have’ add-on,” recalls PPR’s Sydney MD, Richard Lazar. Despite the dour economic mood that engulfed the region, consultancy heads such as Golin/Harris Forrest MD, Asia, Anne Forrest, believe that the growth exhibited sends out hopeful recovery signals. “I think this is a really positive sign,” she adds. Small is nimble Grayling Singapore, which with just seven staff last year came in at 26, generated US$100,000 of fee income per head (not far off top-placed B-M which earned US$117,000 per head) – well above others such as Weber Shandwick (almost US$56,000 per head) and Bentley Porter Novelli, which registered just under US$70,000 per head. “Don’t they say recessions are the natural selection process? Maybe there’s some truth in that,” says Grayling MD James Acheson-Gray. “A lot of businesses that were perfectly good were hard hit because they were too strongly exposed to tech,” he adds. Acheson-Gray credits in parts a fortunate client mix – which is light on tech companies and includes consumer strongholds such as the Singapore Zoo and several Mars brands – for the consultancy’s success. While 2001 was a year of expansion and success around the region for only a fortunate few, the modest growth achieved across the PR industry was quite an achievement, given that 2000’s results - buoyed by s then-flourishing tech sector – were so strong. Specialisation Technology is clawing its way back too, but with the emphasis on diversification and focuses such as B2B and localized capabilities for global clients. Healthcare is already emerging as a specialty area to watch over the coming year, with Weber Shandwick boosting local investment in an area that has, up until now, enjoyed global rather than local prevalence, according to Asia-Pacific co-president, Emma Smith. “We’ve made a very big investment globally and I’m extending this with a lot of investments into healthcare locally,” she said, highlighting China, Australia, Japan and Hong Kong as market to lead the initiative. At Golin/Harris Forrest’s Hong Kong operations, public affairs have seen a significant uptick – growing from one dedicated practitioner in September 2001 to four specialist staffers by year-end. The year ahead “The effects of September 11 and the war on terrorism continue but certainly the immediate, severe effects have faded away,” says Jim Macnamara, CEO of CARMA International. “I don’t think we’re going to see a bounding back but a gradual improvement. It’s probably good that we don’t get big booms, because these are always followed by big crashes,” Macnamara says. PPR’s Lazar believes the PR profession has been strengthened by the past year’s ordeal, and is now more able to meet the challenges that no doubt lie ahead. “As an industry, as we become more capable of delivering solutions in a way that businesses require it, our relevance is growing. If PR companies can embrace the opportunities that are out there, we’ve got a very relevant place in the next two years.” With many looking to find answers in what remains to be an unstable economic environment globally and in Asia-Pacific, Bill Rylance is happy to play a waiting game. “Anyone can appear smart using hindsight. The fact is that it’s extremely difficult to accurately predict how business will look a year ahead,” he concludes. Highest Fee Income per head in the Top 25 Rankings
Fastest Growing Consultancies in the Top 25 Rankings
All figures relate to the calendar year ending December 2001 and are reported in US dollars. Fee income reported = PR fees plus mark-up for ‘the Asia-Pacific region’ excluding India, Japan and New Zealand (including Australia, China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand) PRWeek Asia-Pacific Top 25 Rankings
* Unaudited
Fee Income means PR fees defined as the amount a consultancy is paid for a project or the time its consultants are charged out to clients – plus mark-up on disbursements only. It does not include income from advertising, design or direct marketing. Total owned PR income refers to independent consultancies or holding companies with subsidiaries of which the company owns 51 per cent or more of the equity/shareholdings. Pro Rata PR income relates to income from associate companies where the named PR consultancy owns less than 51 per cent. Income is pro rata to the shareholding, i.e. if a company holds 35 per cent of an associate, the figures will include 35 per cent of that associate’s income.
Several other consultancies that did not make it into the Top 25, despite significant gains during 2001, are reported below. Full-service consultancy, Grayling Asia, made it into the Top 5 table of highest Fee Income per head. The wholly-owned PR-arm of advertising parent Havas Advertising, Grayling’s audited revenues saw a remarkable 41 per cent leap from US$441,137 in 2000, to US$700,572 for 2001. Grayling Asia operates solely out of Singapore. Sydney-based independent, Horizon PR, reported unaudited revenues of US$467,711 for the end of its 2001 calendar year, in June. Increasing staff numbers from six to eight, the firm also boasted four new client wins for the year. Media Link Marketing, a Brisbane-based consultancy, claimed unaudited fee income of US$421,000 for 2001, and saw an 11 per cent dip in revenue compared to the previous year. It retained all 40 of its clients throughout, but had 25 per cent less staff handling these accounts in 2001. Sydney-based consultancy, ICON International Communications reported audited fee income of US$336,000 for 2001. Top 10 holds its own
Holding onto the top spot again, Burson-Marsteller Asia managed a, “relatively solid year”, despite a two per cent decrease in revenues and “extraordinary market challenges”, according to Asia-Pacific president and CEO, Bill Rylance. At a time when many in the industry experienced a fall away in business and had to cling to existing clients, Rylance cited B-M’s ‘strike-rate’ on new business as “excellent”. Despite clients cutting their PR budgets across the board, the consultancy grew through long-standing, existing client relationships. While the reduction in headcount by 29 speaks for itself, Rylance is circumspect about the year’s vagaries when armed with what he terms “a great team of talented motivated people in Asia”. “There will always be a degree of cyclical volatility in this industry, so absolute linear performance against this forecast is a pipedream, the critical issue is to ensure individual performance and values are consistent with collective goals – it’s a team deal.” The departure of 16-year B-M veteran and Singapore MD, Jacqueline Koh, was a minor blip, and Rylance admits that Australia, Hong Kong and Singapore all had “rough rides” in the first quarter; while China and Korea exceeded expectations. Perhaps the biggest danger to come as a result for the downturn, was price slashing: “The regional market will continue to be increasingly price sensitive and this will put tremendous pressure on costs and deliverables,” says Rylance. While he admits B-M can’t be “all things to all people’, focal points for 2002 will include differentiation, such as the recent establishment of the B-M travel and tourism practise, and increasing value to clients. Extensive investment into training is also an ongoing effort, and Rylance believes rankings leadership for 2002 will be a “tangible outcome” if committed recruitment of senior-level talent is sustained. “It’s been said many times because it’s true; this is a people business,” he concludes.
Expansion into Australia and strategic hirings were part of Ogilvy PR’s strategic game plan in 2001, a year that saw the firm grow more rapidly than any other in the Top Five. Asia-Pacific president, Matthew Anderson, says this confidence to expand at a time when many were making cutbacks has carried over into 2002. “Our biggest success last year was in bringing more senior people with specialist experience into the network,” he says. “We’re continuing with our strategy of building up specialist local PR talent with really strong regional and worldwide links. Typically in Asia, clients have had to choose between one thing or the other.” Ogilvy’s head count rose 20 per cent last year, while the client list grew almost 25 per cent, and income was up 32 per cent. Practitioners hired to boost the ranks included Chris Savage in Australia, and Michael Law, brought in from Washington to oversee some of Ogilvy’s biggest regional client relationships. “The clients really responded to this because they wanted a lot of counsel, a lot of insight, and not just another press conference,” says Anderson. Ogilvy PR’s foray into Australia, by acquiring five specialist consultancies including PA stronghold Parker & Partners, corporate and financial shop Savage & Horrigan, Howorth Communications, and taking what industry insiders saw as a gamble by investing in niche consultancies Ethnic Communications and Impact Employee Communications, provided much of the momentum for 2001’s growth. The consultancy took another gamble by launching in Vietnam. Anderson, however, is unwavering in his vision, and the likes of 20 per cent growth in Taiwan thanks to more crisis and issues-management projects, and gaining the Taiwanese national lottery business have paid off. Other regional new clients included Jones Day law firm, UPS and Intelsat.
If the success of a consultancy were dependent on change, then by 2001 standards Weber Shandwick Worldwide broke records. As it was, the state of flux characterized by 2001 saw the consultancy adapt, despite severe market squeezes and the merger with BSMG Worldwide in October. Australia was a temporary low point, as the decision to close down its Melbourne operations to ramp up investment in its Sydney operations was compounded by its New Zealand offices returning to affilate status after 15 years. “Everything was going well up to Q4 – but last year was hard because most markets are linked with the US economy,” says Greater China president, Emma Smith. According to Smith, taking the Australia business apart and “putting it back together again” was a move that has strengthened WS regional capabilities. In the rest of the region, the prognosis was good for technology and M&A and financial work such as the Cnooc IPO in Hong Kong and China, and banking and restructuring work in Singapore. Adulent was another key win, and Smith professes to be “really proud” that even in a downmarket, the consultancy’s financial practise made headway. “One of the strengths
of our regional network is that we’ve been in the majority
of our markets longer than our competitors,” she says. The one to watch for 2002? Without a doubt healthcare, says Smith, and as the “IPO desert” already shows signs of a fertile return, the year ahead looks promising. While the recent regional restructure culminated in the redundancy of former Asia-Pacific CEO, Alison Clarke, the creation of two new roles for former Singapore MD, Andrew Pirie and Smith – who now oversee the Southeast Asia and Greater China China regions as respective presidents – has set clear goals for 2002. “We [want to] increase marketshare, grow our revenue, and be better known for what we do,” Smith says.
Long hours in the office and a dedication to strengthening ties with existing clients last year helped Bentley Porter Novelli maintain its position at number four in the rankings. “It was probably one of the most difficult years in terms of the business environment and it wasn’t just 911 – even by mid-year it was clear it was going to be a difficult year fir a host of reasons,” says Bentley Porter Novelli chairman, Annie Liang Bentley. “It’s not a secret that most clients didn’t expand their PR budgets last year, and the financial sector suffered a huge blow after 911,” she states frankly. Across Asia-Pacific, including Australia, income rose by 5 per cent in 2001. This was, she says, despite there being no new big names on the client list. “Last year was spent working ever so hard with existing clients, giving them a more multi-faceted product based on our knowledge of their business. While staffs lost through natural attrition were not replaced last year, Bentley says recruitment has started again in 2002, as the consultancy works to further establish its healthcare PR arm in Asia and make a greater investment in post-WTO China. The IT practise is also earmarked for investment, although without the same “exuberance” as in 2000, she notes. As for the year ahead, the strategy is very much a ‘back to basics’ one: “We’ve been very hardworking for the interests of our clients, but we also need to nurture the staff conscientiously so that morale is maintained.”
The turmoil of 2001 took its toll on Hill & Knowlton’s Asia-Pacific operations, but chief operating officer and head of corporate and financial practice, Vivian Lines, says the firm emerged from the shake-up more streamlined, and better able to move with the constantly evolving pressure of the market. “It was a challenging year with some bright elements to it,” he says, “Australia and China were down, but Hong Kong and Singapore were up. The economy in Australia was hurting, and in China we didn’t have a market leader for most of the year. Now we have somebody in there and it’s growing.” Encouragingly, despite being an entry market for H&K, Lines earmarked Thailand as “a profitable operation from day one.” He says 2001 saw a need for specialists in Internet communications and crisis management training, while also keeping up demand for areas that H&K has traditionally been strong in, such as corporate finance and marcomms. “It was a year where we said it was ‘back to the basics’, and that’s in terms of both people and [service] offering. You’ve got to have the right people with the right skills, in the right place at the right time and be ready to adjust that mix as the market changes.” The firm’s head count in the region fell 18 per cent last year on 2001, losses Lines says are this year being compensated for as hiring starts again. “That’s part of managing an operation and it’s part of adjusting to the market demands. We’ve added staff in Hong Kong and Singapore and in all cases it’s been an upgrading of people with new skills.” While the spate of downsizing cut into the PR industry as a whole, he sees an upside amid the fallout – namely more skilled PROs available in the market fir hiring. H&K’s client list shrank, but the news was not all bad: “We expanded work with clients such as Coca-Cola, and we also had some one-off project work with Caltex, supporting the Caltex brand in the merger of Chevron and Texaco.”
When a consultancy’s
senior management structure is in flux, it is often a sign of deeper
internal maladies. This was the case for Edelman PR at the start
of 2001, when Taiwan MD, John Van Fleet left after just three months.
Further restructuring led to senior staff losses from its Singapore
office in August, when MD John Mullins and VP Hester Chan-Waters
broke ranks. Injecting new blood into the firm, namely financial practise head Mike Geczi, and this year’s appointment of former B-M golden child, Alan Vandermolen, as Asia-Pacific president; Canning’s savvy appears to be paying off. “From Edelman’s point of view you only have to look to our two regional headquarters – Hong Kong and Sydney – and as those bell-weather market went, so did everything else,” says Vandermolen. For the cross-practise player, 2001 meant less new business wins, the boosting of its P&G business in China and winning the Budweiser account, also on the mainland. “Although we saw our P&G account numbers down overall, they held steady in China,” says Vandermolen. Other strong markets were Australia, where the consultancy saw top-line growth in Government affairs and healthcare. In Malaysia, MD Al Yap drove boardroom services forward, a strategy that Vandermolen is emulating across the region in 2002. Vandermolen claims the shake-out provided a valuable opportunity to nurture longstanding client ties: “The saying ‘when times are good if you stick by your client (then) when times are bad they’ll stick by you’ has never been truer,” he says. While the first half of 2002 has been slow, “signs of life” in terms of an increase in pitches driven by WTO entry for Taiwan and China, the World Cup and the Asian Games are evident. The accent for 2002 is on MNC clients, corporate and stakeholder relations, and healthcare, Vandermolen concludes.
Brodeur’s climb into the top 10 has not been painless, but Asia-Pacific managing director, Terresa Christenson, says that overcoming the difficulties of the past year has helped make the business stronger and more focused. “Like most other regions, last year was bumpy, particularly in the geographies that have a heavy telco presence as we’re tech-focused and our clients were going through hard times,” she says. With fee income down
11 per cent for the year culminating with the closure of its Singapore
headquarters in October 2001, Christenson maintains that while jobs
were cut, staff training programmes were stepped up to make the
firm more cost-efficient when clients showed reluctance to commit
to big budgets. “The retrenching was really about getting the business together – we’re using people more wisely than we have in the past [and] we’re trying to use all our resources more wisely. ‘Build it once and use it many times’ is our mantra.” Korea was one of the hardest-hit Asian markets for Brodeur in late 2001, but Christenson says it has also been one of the quickest to recover from the economic turmoil. Asia-wide, she believes the first quarter of 2002 has seen a rebound. Optimistic that this year will bring greater rewards, Christenson is encouraged by global client wins for Brodeur that require significant Asia-Pacific input, such as the WRQ software company account, run from London, and Azvet, which is being led by the US office. “We’re expecting that things will pick up at the end of the year. Everybody seems to be feeling things out, getting quotes and proposals for things and waiting before they decide to sign on the dotted line, but we’ve got a lot more regional and global leads coming through,” she says.
‘Strength in numbers’ would seem to be Golin/Harris Forrest’s recipe for success during 2001, and it has been a lucrative one. Outgunning its rivals in its unprecedented 112 per cent revenue increase, the merger of Golin/Harris Forrest with Scotch-brook BSMG by parent Interpublic Group yielded significant results. The merger added an extra 17 account staff onto its Hong Kong operation alone. “Last year was a good year for us,” notes Golin/Harris Forrest’s Asia MD, Anne Forrest. “Our Singapore operations were very successful in 2001 when you think that Golin/Harris only entered the region in mid-2000.” Forrest has flagged Taiwan and Singapore as market that displayed the lion’s share of the network’s increase in revenue and profitability, although she is quick to point out that the BSMG merger did not account for the whole growth percentage: “Hong Kong, Singapore and Taiwan displayed growth that was both organic and acquisition-led,” she says. Client wins such as the IPO of Indonesia’s largest national bank, Bank Mandiri, upped the credibility of Golin/Harris Forrest’s client portfolio and provided a strong platform for the year ahead. Boosting corporate work for other large regional clients such as Mirant (formerly Southern Energy), and winning the Sun Life Insurance account at the end of 2001 were other significant milestones for the network. Other changes have included the increase in its public affairs practise in Hong Kong – growing from only one dedicated practitioner in September 2001 to four specialist staffers by year-end. Its Taiwan operations also boasted “purely organic growth” in staff numbers from 11 practitioners to 16. “Having the network has really helped and we operate much like one office,” Forrest says.
PPR chose 2001 as the year it would take the plunge from its Australasian base into the broader Asian market-chalking up growth in income of more than 30 per cent in the process. “I sense our success is because we know our products and where we can add value to a business,” says Richard Lazar, MD, PPR Sydney. “Growing in a tough corporative environment has required us to have a dedication to the value we stand for, knowing we have a product that can meet the demands of business in a difficult economy.” Lazar is bullish that the success of being “number one” in Australia was a contributing factor to the promising start to PPR’s Asian footprint. PPR launched its Hong Kong practise in June 2001, and quickly picked up clients such as the HKSAR Government’s Efficiency Unit and the pharmacy chain Watson’s. Among the new business won in Australia, meanwhile, was the airline Emirates, Avis Rental Cars, Allianz Insurance and Nestle Food Services. “In Hong Kong we’ve gone from a standing start to being a really substantial player in the market. That kind of growth doesn’t come without bringing something fairly unique to the market,” Lazar says. His self-confessed “model for success” is based heavily on training up people in local markets to be part of the PPR team. Despite this helping to ensure PPR thrives in 2002, Lazar is less bullish about the fortunes of its competitors. “I don’t sense it’s going to be an easier market over the next 12 months. I predicted that we’ll comfortably do double-digit growth, but for the industry sector [at large] I sense it’s going to be tough.”
For Fleishman-Hillard, despite a rough start to 2001, the consultancy boasted a four per cent increase in revenues. Its Asia-Pacific operations were also hit by US client cutbacks, and the loss of senior VP, Weena Tan, and other senior redundancies marked a bid to safeguard operations. Despite the setbacks, the departure of former Asia head Pam Miracle heralded positive change, as former Hong Kong MD and senior VP, Lynne Anne Stevenson overtook heading the region with gusto. The shift also saw Hong Kong head of technology and F-H stalwart, Beth Boswell, promoted to the role of MD for its HKSAR operations. Boosting specialty practise areas such as healthcare has also paid off, and while Stevenson earmarked the US and Europe as traditional strongholds for F-H’s healthcare and biotech practices, Asia-Pacific added Beaufour-Ipsen, Merck Sharpe Dohme, Pharmacia, Bayer, Abbott and CK Life Sciences to its healthcare client roster. “The challenges [of 2001] brought us closer together as a regional network and helped make us stronger,” she says. Ramping up its regional network with the acquisition of Australian affiliate Stratcom Communiqué in the same month was, she adds, “a milestone that gave F-H a strong presence in Melbourne and Sydney, and significantly enhanced our public affairs and corporate communications practices”. With the maturity of the Australian PR market affording it a resilience other regional markets could have done with, the acquisition continues to be “a bright spot” in the network’s operations, and she has earmarked healthcare and marcomms as focus areas for its Australia operations in 2002. For Stevenson, the consultancy’s bench-strength lies in its management team across the region – and the imminent announcement of a new China MD, following the departure of former China GM Bill Laws in January 2002. “Our predictions
include expansion in China and further rowth of our healthcare and
PA practices,” she concludes.
|
