Thursday, January 4, 2007

PR Firms - You're Next


Happy New Year and Welcome Back!

In keeping with the New Year tradition, I'd like to make a prediction for the year...PR firms are going to feel the pain that the big agencies have felt over the last few years.

Last year, big agencies continued to take a beating...shrinking profitability as spending continues to shift to online and away from TV and other profitable media, massive loss of talent to clients and/or new start-ups, and finally, clients dissatifaction with the traditional agency model, etc.

Big Agency Model

Dissatifaction with the Big Agency business model you say – but why? Here's one man's cynical view of how the "game" works.

Big agency wins account using outsourced, incredibly talented "pitch team", really innovative creative, and a promise of a global platform which promise to improve the "message", create synergies, improve spend, etc. The client drinks the "kool aid" but then quickly comes to realize that it was a sham. The account manager is not the person who pitched them and starts to do a very good impression of the "invisible man". The once huge and skilled account team is also disappearing, being replaced by a staff that contains mostly fresh faced kids just out of school.

The account relationships sputters along with marginal performance. The client BU’s and Regions get fed up with the "Global Platform" (never getting the attention and team promised) and start going outside using smaller, smarter and more valued agencies (who happened to have the talent who have recently left a big agency…after being purchased). And the innovative "Creative" they showed to win the account turns out to be the only creative thing they've produced in the last few years (oh, and it was created by a smaller specialize agency).

Big agency realizes the account is at risk and begins acquiring the small agencies that are serving the client to secure the account. If the client is willing to commit to retaining the agency after all this...they promise to win them an award and get them really good concert tickets.

PR's Turn
Ok, now it's PR turn in the barrel. But I think the thing that is going to most threaten the PR firms is new PR software vendors/tools like Vocus. They threatened to disintermediate them because in the past PR firms traded on the tact that they knew who to contact, about what and when. Tools like Vocus are taking a little mystery out of the PR magic.

They contain a database of key media contacts, contact tracking, links into channels like PR Newswire, etc. Everything you need to "do it yourself". But Scott, what about the relationship that PR firms have at the media outlets that you're targeting? Forget about it. Here's the bottom line...relationships don't matter.

The Media "establishment" has no loylaties...they take want they need to meet a deadline. If you make it easy for them, give them something of value (something that meets the 3 "C's" critirea) and/or help them out in a pinch...you have as good a relationship as anyone else.

So what is the threat? I think the smart companies are going to start bringing more and more of the PR activities back in-house. Most likely, it will start in small and mid-tier sized companies and will work its way up the ranks. Combine this with the framentation of media, smaller niche players targeting specific market segments, Web 2.0 technologies and you have a situation where companies will be able to get their message to their target audience better then ever and at a much lower cost.

I'm not a betting man, but this one looks like a sure thing.

Here's to a successful and profitable 2007