WPP will still be No.1 in UK PR market post Publicis Omnicom merger implies PRWeek Top 150 2013

As pretty much anyone in the Marcoms world must know by now, yesterday Omnicom and Publicis, the 2nd and 3rd largest groups, announced they are seeking to merge. The merger will create a combined group that will overtake WPP to become the world’s largest with revenues of $22.7bn in 2012.

Based on the Holmes Report’s recent Global PR Rankings the combined group will have PR income of $1.8bn, which it estimates will make it the largest PR holding company in the world.

But what about the implications for the UK PR market?

As many of the key agencies and their parent groups don’t disclose UK PR figures the data is rather sketchy – see caveats below. However based on a combination of the PRWeek Top 150 estimates for Brunswick and WPP, Omnicom, Publicis and Interpublic‘s UK agencies, as well as Huntsworth’s accounts, we can have a decent stab at what the top 5 players will look like if the merger goes ahead.

The table below shows revenue in £m for the key PR agencies within WPP, Omnicom, Publicis and Interpublic from PRWeek’s 2013 Top 150 analysis.

Agency

WPP

Omnicom

Interpublic

Publicis

Weber Shandwick

35.5

Hill and Knowlton

26.5

RLM Finsbury

25.5

MSL Group

25.0

Ketchum Pleon

22.0

Oglivy PR

21.5

Golin Harris

17.0

Fishburn Hedges

14.0

Cohn & Wolfe

13.0

Fleishman Hillard

13.0

Burson Marsteller

10.5

Portland

10.0

Porter Novelli

8.0

Buchanan

6.5

Clarion 3.5

Total

107.0

67.0

52.5

25.0

According to the PRWeek 150 estimate, Brunswick’s 2012 income was £53.2m.

According to Huntsworth’s 2012 annual report its UK revenues were £64.3m. This includes revenues relating to healthcare (Huntsworth Health) whereas for most of the groups above health work is often classified within a different division. The UK healthcare headcount is 23% of the total according to the report. Adjusting for this suggests a public relations UK income figure of around £50m.

On the basis of these estimates the top 5 will look as follows post merger.

1. WPP £107.0m

2. Publicis Omnicom* £92.0m

3. Brunswick – £53.2m

4. Interpublic – £52.5m

5. Huntsworth – £50.0m

Their combined fee income of c. £355m gives these five c. 18-20% of the UK market based on previous estimates from 2011 of c. £1.8bn-£2bn.

*Update – Kreab Gavin Anderson has been excluded from the analysis on the basis that Omnicom only holds a minority stake.

Caveats

All the caveats relating to the PRWeek Top 150 figures apply here, the key one being they are estimates of course!

Also bear in mind that it could well be the case that some of the estimates above include revenues relating to the UK arm of a multinational agency that were derived from work outside the UK. Equally there could be agencies within each Marcoms group that are based outside the UK that do work with UK clients.

There is also the issue of agencies that aren’t labeled “PR” and so aren’t included in this analysis that will be doing some PR based work.

These are just the ones I can think of, there are bound to be a few more.

Are brands going to need Twitter Search SEO now?

Twitter announced yesterday that it’s going to start including selected tweets over a week old in search results. The following is from their post:

“As we roll this out over the coming days, the Tweets that you’ll see in search results represent a fairly small percentage of total Tweets ever sent. We look at a variety of types of engagement, like favorites, retweets and clicks, to determine which Tweets to show. We’ll be steadily increasing this percentage over time, and ultimately, aim to surface the best content for your query. For now, enjoy your trip down memory lane!”

If I understand this right it means that when someone searches for a term in Twitter the “Top” results will include tweets that could go back months, even years.

Now I may be jumping the gun here, but doesn’t this have potentially significant implications for reputation management?

When Google was indexing tweets a couple of years ago there was discussion about the SEO implications of real time results from Twitter, that ended when Google stopped indexing the Twitter firehose in the summer of 2011. But that was never about old tweets appearing, just current ones.

At the moment if you’re a brand and someone tweets something negative about you then your worst case in Twitter search terms is it appears in the results for a few days.  It’s the impact of the conversation itself that you have to deal with, both online and off, and any resulting posts and articles that might rank highly in Google searches in the future.

But with this change to the Twitter search approach, a brand could find that the top search result is a particularly negative tweet that received a significant response at the time. This tweet may or may not have been part of a wider conversation that appeared elsewhere in the online and offline worlds, but one things for sure, replaying it back months later to new people again and again isn’t something you are going to want.

But then how do you respond to this? With SEO if you have a negative blog post or article ranking highly you might seek to produce content and engage in PR that results in other pages pushing this awkward one down the SERPs hierarchy.

How do you achieve this with a highly ranked tweet? Twitter’s post indicates the factors that they are taking account of in ranking older tweets – RTs, favorites and clicks etc. Does that mean a brand will need to try and generate competing tweets that rank higher by these measures? If so here are a few questions:

Will Twitter rank tweets by a brand about that brand highly, or will it filter these out automatically, wishing to show the wider community’s view?

Where will promoted tweets appear in search results? Can I buy my way above the offending tweet ala Google Adwords?

Will this mean that a paid tweet by a celebrity that potentially receives significant levels of RTs and @mentions starts to accrue more value than the generally “here today gone tomorrow” nature of one now?

This is all top of the head stuff, and we obviously need to see what these new results look like, what happens to the levels of Twitter search activity and how users respond.

But could this be the start of Twitter Search SEO?

Apple’s iPhone 5 pre order sales record is only an “as expected”

iphone 5

“Apple today announced pre-orders of its iPhone 5 topped two million in just 24 hours, more than double the previous record of one million held by iPhone 4S”

That’s a quote from Apple’s announcement yesterday about how excited they were with customers’ reaction to the launch of the iPhone 5 following a mixed reaction from the media (something we analysed with our new Lissted application last week).

2m in 24 hours sounds very impressive, and it is in absolute terms.

But all things are relative and when you put this number in context it loses its shine a little. To do this we need some data and a couple of assumptions.

Data

The table at the bottom of this post shows quarterly sales volumes of iPhones since the product was launched. These have been extracted from Apple’s quarterly results from Q/E 30/6/2007 – Q/E 30/6/2012 (hat-tip to @latestgadgetsuk for pointing me in the right direction). These show that total iPhone sales in this 5 year period have been 244.16m.

Assumptions

1. That on average iPhone owners upgrade their phones every 18 months. In reality it will probably be a mix of die hards changing every new model and less ardent fans perhaps changing every two models, with some in-between.

2. That it is only existing iPhone owners who have pre-ordered the iPhone 5. This won’t be the case, there’s bound to be some new converts in there, but if so this would only make my conclusion stronger.

iPhone 5 pre order analysis

On this basis then on average people who bought their iPhone 18 months ago would be looking to upgrade about now. Looking at the table below that means the Q/E 26/3/2011. Apple sold 18.65m phones in this quarter. That’s approx. 200,000 per day.

Given Apple effectively announced the iPhone 5 on the 4th September by their invite I seriously doubt many people went out and upgraded their iPhone 4 to a 4S in this period. In which case by the time pre orders opened on 14th September there would be (on average) 10 days of pent up demand for upgrades. 10 days @ 200,000 per day = 2m.

In other words the number of pre orders is equal to the number of upgrades you would have expected given the number of iPhone owners, likely upgrade cycle and the 10 day fallow sales period that the invite probably caused.

iPhone 4S pre order analysis

And what about the comparison to the iPhone 4S previous record of 1m that it “shattered”. In this case we need to look at the Q/E 27/3/2010 to find the likely upgraders.

Apple sold 8.75m phones in that quarter. That’s approx. 100,000 per day. Invites to the launch went out on the 27th September 2011 and pre orders started on 7th October 2011 – 10 days again. 10 x 100,000 is……you guessed it 1m.

So the level and growth in pre orders arguably represents nothing more than existing customers upgrading at expected levels and the growth in the iPhone ownership base since the 4S was launched.

So watch out whenever the iPhone 6 comes out. If Apple wants to “shatter” the pre-order record again you might just see those invites going out a week earlier!

Apple iPhone unit sales (millions)
Quarter Sales
Q/E 30/6/2007 0.27
Q/E 29/9/2007 1.12
Q/E 29/12/2007 2.32
Q/E 29/3/2008 1.70
Q/E 28/6/2008 0.72
Q/E 27/9/2008 6.89
Q/E 27/12/2008 4.36
Q/E 28/3/2009 3.79
Q/E 27/6/2009 5.20
Q/E 26/9/2009 7.40
Q/E 26/12/2009 8.70
Q/E 27/3/2010 8.75
Q/E 26/6/2010 8.40
Q/E 25/9/2010 14.10
Q/E 25/12/2010 16.24
Q/E 26/3/2011 18.65
Q/E 25/6/2011 20.34
Q/E 24/9/2011 17.07
Q/E 31/12/2011 37.04
Q/E 31/3/2012 35.10
Q/E 30/6/2012 26.00
244.16

Next Fifteen outperforming the market

Click on image for larger version of graph

Next Fifteen SharePriceThere’s been a lot of talk in the last couple of weeks about PR finding it tough. Chime Communications and Huntsworth have both announced that their 2011 results are likely to be affected by the apparent slowdown in economic activity.

It isn’t just PR that’s finding things tough. Huntsworth is a PR group, but its worth remembering that only approx 50% of Chime’s revenues (though 60% of its profits) come from PR, the remainder from other marketing services and the share prices of the major multinational Marcoms groups have also taken a bit of a battering over the last few months.

As of 28/11/11 (16.50) some examples of these reductions from their 52 weeks highs are – WPP (-25.3%), Omnicom (-19.2%), Interpublic (-33.5%), Havas (-32.0%), Aegis (-29.6%) and Publicis (-19.8%).

This contrasts with the FTSE100 which was down around 13% against its 52 week high the same time this afternoon. Not that surprising as Marcoms usually underperforms in falling markets and overperforms in rising ones.

But as the graph above shows one quoted PR company has been bucking the trend. Next Fifteen is actually trading at a higher level than it was at the start of 2007 something none of the others can claim except for Publicis.

Next Fifteen is also the only one of these PR or Marcoms groups whose share price is up in calendar year 2011 (15%). Now obviously Next Fifteen is significantly smaller (market capitalisation £49m) than even Huntsworth (£90m) and Chime (£148m), nevermind the multinational groups but that doesn’t mean that outperforming the market is therefore easier.

In the Evening Standard a couple of weeks ago Tim Dyson, Next Fifteen’s CEO, put their success down to investment in digital and social media. In the analysis of the PR industry for 2010 that I helped the Holmes Report put together earlier this year the biggest success story was Edelman, (arguably) the first of the major PR brands to embrace digital, which climbed to the No.1 spot in the Holmes Report Global Rankings.

So perhaps this evidence demonstrates that though we can almost certainly expect another challenging year in 2012, there is still success to be found and particularly for those elements of the PR industry that are making digital core to their business.

UK PR Agency/Freelance market £2bn according to PRWeek/PRCA Census

PRWeek and the PRCA announced the results of their PR Census a few weeks ago now. One of the key headline numbers was their estimated turnover of the UK PR Industry – £7.5bn.

I wanted to clarify how this number was reached and Cathy Bussey at PRWeek was kind enough to put me in touch with the senior researcher at Harris Interactive who put together the analysis.

He was most helpful and from our discussions I established that the £7.5bn represents the estimate of the total amount spent on PR both in house and with external agencies and freelancers.

UK PR Industry PR Census split

The split between in house and advisory is:

In House – £5.5bn
Agency/Freelancers – £2.0bn

The estimates were reached through the use of a combination of data including census returns, Office of National Statistics Data and the PRWeek Top150. With regards to the Agency/freelancer market figure of £2bn my view is that it is probably at the higher end of the likely range of estimates (as I will indicate below), but from my discussions the methodology behind it seems reasonable.

On the face of it two immediate implications are apparent. The vast majority of PR is delivered from in house resources (73 per cent of the total) and the agency/freelance market is highly fragmented.

The “highly fragmented” implication being due to the PRWeek Top 150 agencies with a combined income of £839m accounting for 42 per cent of the total UK agency/freelance market with no one agency in the Top 150 accounting for more than 3.3 per cent of the total market – Bell Pottinger – and even they are arguably a collection of agencies under one umbrella.

However these conclusions would represent an over simplification of the market.

Many Markets

When people talk about “the housing market” I often sigh because such a thing doesn’t really exist. In reality there are a lot of micro markets dependent on type of property and geography, even down to street level in some cases. In a similar way, as any agency MD/owner would tell you, the PR advisory market isn’t one homogenous beast.

At a very basic level it breaks into two main areas:

1. The small number of larger agencies almost exclusively based in the London Metro area competing for the accounts of large, often multinational, companies in the main where breadth of service areas, international capability and established brand can often be hygiene factors. These large companies will almost always have significant in house PR capability compared to SME’s meaning that external PR spend as a proportion of in house spend in this large company market will probably be quite a bit lower than the overall 27 per cent figure. Competition is therefore still very high despite the small number of participants as clients in house capability means they still hold the majority of the cards.

2. The remainder of the market where a very high volume of participants compete in individual micro markets driven by geography, sector and/or service area. In these markets the purchasers of external support will generally have much lower levels of in house PR capability (potentially none) and so the spend on PR will almost certainly represent a much higher proportion of total spend than the 27 per cent average. This can lead to these clients relying more heavily on their PR advisers, though this is very dependent on the particular micro market and how differentiated an individual agency/freelancer is in that market.

The £2bn overall estimate gives us a basis to estimate the potential split between these two broad market areas and equally these definitions provide a framework to test the reasonableness of the £2bn estimate itself.

Large Company Market

Firstly on the large company side we can look to establish a likely cut off point in agency size terms based on market share.

A bit of additional analysis on the PRWeek Top150 relating to the holding companies of agencies establishes the following list of 16 groups or individual agencies who would have market share of 0.5 per cent or more if the total UK agency/freelance PR market is £2bn. (Note many of these numbers are estimated by PRWeek within the Top 150 as the agencies don’t provide specific numbers – full details here)

Revised position Company Income £’000 UK Market %
1 WPP agencies¹ 91,600 4.6%
2 Bell Pottinger Group 67,818 3.4%
3 Omnicom agencies² 57,500 2.9%
4 Huntsworth agencies³ 55,663 2.8%
5 Brunswick 53,200 2.7%
6 Interpublic agencies4 37,500 1.9%
7 FD 31,000 1.6%
8 Edelman 28,777 1.4%
9 Freud Communications 23,800 1.2%
10 Engine Group 22,252 1.1%
11 MS&L Group 20,000 1.0%
12 College Hill 16,730 0.8%
13 Havas agencies5 14,500 0.7%
14 Photon agencies6 13,330 0.7%
15 Next Fifteen agencies7 11,858 0.6%
16 Chandler Chicco Companies 10,602 0.5%
Total 556,130 27.8%

See Notes below for agencies within each group.

This analysis makes WPP the single largest player in the UK PR market with 4.6 per cent of the market.

Obviously agencies (and freelancers) that are smaller than the £10m (0.5 per cent) cut off I have used above can still often win work with large companies, particularly if they have an area of clear differentiation either around sector or service specialism. If you include agencies with income of greater than £3m (0.15 per cent of the total market) from the PRWeek 150 table these would add an additional £144m between them giving £700m in total.

Two other factors need to be taken account of to reach our estimate of the large company market. Firstly not all sizeable agencies are in the Top 150 (though the vast majority are) and in addition there will be some PR services being provided to large companies by teams within agencies of other types e.g. digital marketing, SEO and social media. (Equally it is worth bearing in mind that some of the PR agencies concerned could be providing some marketing and SEO services within their own figures). As a complete finger in the air estimate to compensate for this if we make an allowance of £100m this would imply that the large company market is approx £800m in total.

For information if we now restate the table above based on an estimate of £800m for the large company market you get the following market share figures for the largest groups/agencies in this market:

Revised position Company Income £’000 UK Large Co. Market %
1 WPP agencies 91,600 11.5%
2 Bell Pottinger Group 67,818 8.5%
3 Omnicom agencies 57,500 7.2%
4 Huntsworth agencies 55,663 7.0%
5 Brunswick 53,200 6.7%
6 Interpublic agencies 37,500 4.7%
7 FD 31,000 3.9%
8 Edelman 28,777 3.6%
9 Freud Communications 23,800 3.0%
10 Engine Group 22,252 2.8%
11 MS&L Group 20,000 2.5%
12 College Hill 16,730 2.1%
13 Havas agencies 14,500 1.8%
14 Photon agencies 13,330 1.7%
15 Next Fifteen agencies 11,858 1.5%
16 Chandler Chicco Companies 10,602 1.3%
556,130 69.5%

These figures suggest that this large company market is actually quite concentrated when you take account of holding company groups with the top 10 accounting for almost 60 per cent.

Micro markets

The large company estimate of £800m would leave approx £1.2bn of the £2bn overall which would then relate to the second category of micro markets.

Ignoring sector or service specialism and just focussing on geography within these micro markets then the largest of them unsurprisingly is the London Metro area with the remaining PRWeek Top 150 entrants with income of less than £3m predominantly still based here – £109m out of £139m or 79%.

The unknown factor here is what proportion of the London Metro area market do these agencies account for? If for arguments sake we said it was half then this would give an estimate for this micro market of approx £200m+.

This would mean the large company market (mainly serviced from within London Metro) and the smaller company London Metro markets would be approximately £1bn combined. In turn implying the remaining micro markets for the rest of the UK would then account for approx £1bn.

(Interesting to note that the London Metro region accounts for an estimated 30 per cent of UK GDP and yet apparently at least 50 per cent of UK PR activity)

It is this implied figure for the regions of £1bn that leads me to think that the overall £2bn estimate may be on the high side. Evidence for this comes from the PRWeek Regional agencies rankings.

Regional element

Manchester based agencies have the largest combined income in the PR Week regional list with £12.2m and no other city represented on the list has more than £10m. There are 17 cities in the UK outside of the London Metro area with populations of more than 250,000 the average of which is 427,000. The following table shows their population and the combined income total of PR agencies in the Top 40 Regional List that are based there.

City

Population

Combined Regional Top 40 value £’m
Birmingham

992000

 4.4
Leeds

720000

 3.5
Glasgow

560000

 7.3
Sheffield

512000
Bradford

467000
Edinburgh

450000

 4.4
Liverpool

440000

 0.8
Manchester

420000

 12.1
Bristol

380000

 1.7
Wakefield

316000
Cardiff

310000

 9.0
Coventry

305000

 0.8
Nottingham

285000
Leicester

280000
Sunderland

280000
Belfast

280000
Newcastle upon Tyne

259000

 0.9

These regional markets may be highly fragmented and freelancers may account for a much higher proportion of PR services in these areas. It also seems likely that a lot more PR services may be provided by agencies/freelancers who would have a broader marketing remit and so wouldn’t fall under the definition of “PR agency”. Consequenty these ranked agencies may only account for a relatively small proportion of the PR services provided in their area. However given the regional rankings it still seems unlikely that even the largest of these regional markets is measured in more than tens of millions. For the purpose of this exercise if we therefore assume the market size for the average of these cities is £25m you would get a total estimate for these larger regional markets of £425m.

This would give a total for large companies, London Metro and the main regional centres of approx £1.4bn. With the remainder of the country being likely to be fairly limited in market size terms it does seem that the £2bn overall figure looks a bit of a stretch. This analysis suggests an overall estimate of £1.6bn might be nearer.

On the other hand the analysis could be understating the large company market (is £100m enough for missing entrants in the PRWeek 150 and other types of agency?), the smaller company London Metro market could be substantially more than £200m (do the PRWeek entrants count for less than 50 per cent?) and perhaps the regional agencies really do only account for a very small proportion of their local markets.

Without detailed returns from everyone this is always going to be a difficult task and the research for the PRWeek/PRCA Census was certainly thorough so perhaps we can agree that a figure of £1.8bn +/- 10% is a fair range.

Notes

Agency groups

1. Finsbury, Hill and Knowlton, Ogilvy Health, Cohn & Wolfe, Burston Marsteller, Buchanan, Ogilvy, Clarion Comms
2. Ketchum Pleon, Fleishman Hillard, Fishburn Hedges, Porter Novelli, Kreab Gavin Anderson
3. Grayling, Citigate, Red, Tonic Life
4. Weber Shandwick, Golin Harris
5. EuroRSCG and Maitland
6. Frank, Hotwire
7. Lexis, Bite