The debate continues on the future of large, global PR agencies
Following PRmoment founder Ben Smith’s prediction of the resurgence of international PR firms in his alternative PR Trends for 2022, Tyto PR’s Brendon Craigie felt compelled to give four reasons why he believes these giant firms may have had their day…
In December, following the economic pressure of the pandemic, Airbus announced that its last ever A380 super jumbo jet had left the factory just 14 years after the aircraft’s maiden flight. The retirement of the world’s most expensive aircraft followed a shift in travel behaviour that meant airlines needed smaller, more agile and efficient aircraft.
Revenues are down
The pandemic has also placed a spotlight on the jumbos of the public relations industry, a small but concentrated group of global agencies that are closer to their centenary year than their date of birth. Various agency league table rankings using financial data from 2020 suggest that the global revenues at the world’s five largest agencies collectively declined. (Editor's note: 2020 was the first year of the pandemic. In the interests of clarity the global PR revenues of Interpublic, WPP and Omnicom returned to growth in 2021, according to their own quarterly financial announcements.)
There are four reasons why I believe the large global agencies are reaching the end of the runway.
The hyper growth of tech businesses
First, the next generation of multinationals that need international support are not large traditional banks or petroleum companies, they are hyper-growth tech businesses. These tech firms are born with propositions and ambitions that are global from day one. They have global needs, but they don’t have traditional multinational budgets. Traditional global agencies with their bloated and hierarchical structures cannot provide the quality of service these companies require at a price point they can justify.
Remote working effect
Second, the boom in distributed remote working has demystified international collaboration and the ease with which you can build global agency teams. Historically, global agencies have benefited from a perception that they are able to offer clients an unrivalled interconnected experience. Today, thanks to the open and universal reach of collaboration tools, collaboration is entirely open source. Teams of consultants and agencies regardless of their location and their employer can plug in and connect through a myriad of open technology tools making it less important you share the same employer or brand. What is more, these technologies are inexpensive and highly scalable, lowering the barriers to entry even further.
PR buyers are shopping around
Third, empowered by the ease of global collaboration and the transparency of the internet age, entrepreneurial PR buyers are increasingly looking to build their own best-of-breed global networks from an array of local and regional agency offerings. Historically, global agencies have benefited from a Starbucks effect whereby a reassuring and familiar name provides PR buyers with a safe option in the absence of local knowledge. Today we know Starbucks doesn’t make the best coffee and it’s incredibly easy to find the best coffee shop wherever you are in the world thanks to Google. Similarly, for PR buyers, it has never been easier to seek out best-of-breed partners to build your own global agency network. Most PR buyers now realise value and quality of service outweigh the cosmetic symmetry of working with one agency brand.
An expensive model
Fourth, although the hollowing out of the global agency advantage has removed their competitive edges, it has not removed the financial burden of sustaining a global brand and agency infrastructure. Global agencies spend an eye-watering amount on sustaining their global brands. They also subsidise less profitable operations around the world to maintain a global footprint. Not only is this model inherently wasteful and unsustainable, it also comes at a price as clients pay inflated fees and the scope to reward employees is constrained. Conversely, the competitive set can offer clients 25% more value for the same investment, as well as offer greater financial rewards to staff.
A new wave of global technology businesses is creating a wave of opportunity for the agency world.
Written by Brendon Craigie, chief executive officer of agency Tyto PR
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