Tag Archives: PR Industry

PRWeek Top 150 2009 Podcast

PRWeek were kind enough to invite me to do this week’s podcast on the newly announced Top 150 2009. Not sure if Wadds previous kind words influenced this and a big thanks to Peter Hay and Cathy Wallace who trusted me with the figures pre publication so I could do my analysis. Fortunately I managed to avoid doing a Blears/Quick at PRDebate on Tuesday :-)

Podcast can be found here and the Top 150 2009 can be downloaded by subscribers here.

I will be publishing my analysis behind some of my comments in the next couple of days for anyone who is interested in more detail.

Update: Embed code now available so view podcast below.

What the world needs now…

Stephen Waddington MD of the newly born (from the merger of Loewy’s PR firms) Speed Communications, posted yesterday about the recession and as he so clearly put it “bollocks to denial and despair”. I started writing a comment and then realised it was getting rather lengthy, so hence this post. I strongly advise you to read it first.

Firstly, and very importantly, I would strongly suspect that everyone so far in this conversation sympathises greatly with those who are suffering the “human” cost of the recession pointed out by Linda in the comments.

I also I agree with the point raised by Stephen Davies – we have got fat. The West has consumed and consumed, fed through a diet of credit financed by the East to feed its own desire for economic growth and facilitated by bankers’ personal greed. My personal favourite observation of this is the massive growth in storage centres. We have all bought so much “stuff” that we have to hire somewhere to store it! We are therefore going to have to have some degree of “pain” while we lose the weight.

It seems to me the key point of the post though is not whether the recession is causing/will cause suffering – unfortunately that is a given – but whether an attitude of despair or denial is likely to improve the situation?

In this regard I find myself agreeing with the quote that Bill highlights “we can have a depression if we really want one”. The problem is we haven’t had a recession with 24/7/365, always on, accessible from everywhere, fighting tooth and nail for attention, media coverage. The internet was literally in its infancy and mobile telephony and 100+ channel broadcasting were not widespread in 1990-92 so it was arguably easier to try and remain positive. In the face of such relentless negativity it is easy to see how people despair.

What we need is leadership. Leadership of the kind Barack Obama showed in his Inaugural address – things will be tough, hard work will be needed, but if we believe in ourselves we can achieve great things. For me the key distinction highlighted in the piece Linda links to is action. Making decisions, taking opportunities, changing, responding, not just accepting. This is what leadership is all about. We might make mistakes, but at least we tried to ride the wave of change, not let it wash over us.

Unfortunately Mr Obama is a bit of a one off. However in our own industry it seems to me that posts like these from Stephen are trying to show leadership by asking us all to focus on the positive. As an accountant, and therefore a bit of an outsider, I am inclined to think that the PR industry, as communications experts, has an opportunity to lead the way in trying to get a more positive conversation started.

If Freakonomics covered the pitching issue

The provision of pitches by the PR Industry to the receivers of news would appear to suffer from a significant level of inefficiency in the allocation of resources. This is due to PR suppliers charging too high a price for a given level of demand. Over supply to the most in demand journalists leads to frustration for them, and a lack of productivity and efficiency on the part of the PRs, causing reduced profitability.

To improve this situation the industry needs to invest, either internally or via external suppliers, in ways of reducing the price and/or correctly segmenting the news market such that each pitch can achieve the maximum return for the time invested.

The Price of a pitch

Price in this equation is the Price a receiver of PR pitches pays per story they subsequently produce. Before I expand on this a bit of background. Andrew Smith posted last Friday on the topic of pitching and the frustration journalists experience with activities such as phone calls asking “did you receive my email”, the latest being Charles Arthur at the Guardian.

As well as being a chartered accountant I am also an economics graduate (sad I know) so I thought I would try to provide a Freakonomics like perspective on this issue – hence the equation. (By the way if anyone is as sad as me and wants some more detailed graphs etc relating to this analysis then please just let me know :-) )

Getting your story covered is an issue of supply and demand

Supply – the stories pitched by PRs.

Demand – the journalists, bloggers, editors, publishers and broadcasters need for interesting stories for their readers/audience to help fill column inches, web pages, airtime.

The receivers of news choose to write, talk about or publish- the story and therefore it is they who are making the “purchase”.

The Law of Supply and Demand

In a market supply and demand are brought into equilibrium by the price mechanism.

Suppliers want to supply more product as the price rises. Consumers demand more product as the price falls.

At the equilibrium price (PE), the equilibrium quantity (QE) is produced and consumed ensuring an efficient allocation of resources.

The “Price” of a story is a function of the time invested and interest level

From a receiver of news perspective i.e. editor, journalist etc I would suggest that the Price that the receiver of news is prepared to pay to “purchase” a story is the time I have to spend per story that I talk about or publish i.e. the equation at the start:

 

Investment of time includes the time it takes to review emails I receive, telephone calls made to me – chasing, pitch or otherwise – and meetings, interviews etc.

News market segmentation

The news market though is not a homogenous one. Not all receivers of pitches have the same level of demand.

(It is also worth noting that demand for PR pitches probably shifts on an almost minute by minute basis depending on the availability of other material for articles, blog posts etc but I think I should leave the concept of elasticity of demand and substitutes for another day!)

In demand journalist (Charles Arthur) scenario

The most in demand journalists are highly likely to be generating articles on their own without needing to rely on PR pitches as much for their material. Consequently their demand for pitches is low and consequently the price they are prepared to pay is low – see graph above.

The PR community on the other hand wants the most in demand journalists to talk about their pitches the most and so these journalists probably get sent the most emails, receive the most calls and yet will use the least stories because their demand is low. The effect being that the PR suppliers are expecting this market segment of consumers to consumer a high quantity of product at a high price.

The result – excess supply of pitches in this market segment.

Market implications

In reality there are multiple demand curves as there are many different types of receivers of news.

The best performing suppliers will either be the ones that are able to lower their prices across the board for all receivers and/or ones who segment the market such that they charge the right price and supply the right quantity in each.

For example a publisher of a niche market website publication who has limited in house resources to produce content may see pitches as a good source of material and therefore be prepared to pay a higher price.

Implications for the PR Industry

So how should PRs (and RealWire) seek to improve the situation for Charles and all the other receivers of releases?

Based on my formula above the Price can be reduced by

– Decreasing the investment required of the receiver
– Increasing the proportion of interesting stories they receive

Decrease investment:

To achieve this you need to do things like:

– Make sure they are as relevant as you can make them
– Ensure that the title tells the story effectively, reducing time to establish interest
– That they are in a format that makes receiving easy e.g. no attachments.
– Give them options for how to receive the pitch e.g. RSS

If you have taken the time to do these things well it is more likely that the recipient will invest the time at least reading the subject header of your email. It is then also a question of tracking usage to see if the recipients of your pitches cover any of your stories and trusting that if you have done these things well you don’t need to call everytime.

Effect? Reduced investment on the part of the recipient through reduced emails, less time to establish interest in the story and reduced phone calls.

Increase proportion of interesting stories:

This is clearly a trickier area as a lot is about message, creativity and having compelling stories to tell. I won’t get into what makes for a newsworthy story here as others could cover that far better than I.

However there are other ways of increasing the interest in your story such as using multimedia content – images, audio, video – including links to relevant websites for further information, and including background documents such as technical specifications.

Conclusion

The provision of pitches by the PR Industry to the receivers of news would appear to suffer from a significant level of inefficiency in the allocation of resources. This is due to PR suppliers charging too high a price for a given level of demand. Over supply to the most in demand journalists leads to frustration for them, and a lack of productivity and efficiency on the part of the PRs, causing reduced profitability.

To improve this situation the industry needs to invest, either internally or via external suppliers, in ways of reducing the price and/or correctly segmenting the news market such that each pitch can achieve the maximum return for the time invested.

Profitability of the PRWeek Top150: Scope for improvement?

I thought it was about time I turned my attention back to some good old analysis of numbers. With all the talk about the prospects for 2009 and following on from my analysis of the PRWeek Top 150 I thought I would try and have a look into profitability. But then I thought, why stop there? Why not use my financial skills to come up with some practical suggestions for improving profitability in these challenging times and being an accountant I have even created a spreadsheet so you can test the veracity of my conclusions :-)

As I have already commented, profitability is much harder to get figures on than income. However if one uses income per staff member as a proxy you can start to build a model of the underlying picture.

The table below summarises the income per staff member of the 120 agencies within the 2008 Top150 that are based in London or the Home Counties. I have selected these on the basis that they should have relatively comparative cost bases – all things being equal – a simplifying assumption I accept.

PRWeek Top 150 Income Per Head

PRWeek Top 150 Income Per Head

The combined fees of these 120 agencies – £721m – represents 92 percent of the whole of the Top 150.

So what do these figures tell us about profitability? An MD of an agency – name withheld :) – told me recently that £100,000 per staff member was a target figure to achieve circa 20% profitability. It also happens to be the overall average for these 120 agencies – coincidence? Anyway having reviewed the staff costs and margins disclosed in a few of the larger agencies’ accounts I suspect these figures may be a bit on the aggressive side. My guess is nearer 10 – 15 percent at £100,000.

Now obviously different agencies will have different cost structures e.g. premises costs could vary significantly depending on location, but they would suggest a cost base per head of around £80,000-£90,000.

Fight the recession; increase efficiency

From the table we can see that this means that as many as 66 out of 120 agencies might have been struggling to do much more than break even in 2007, the year these figures would have related to (i.e. ones with per head fees of below £90,000). These agencies have a combined income of £206m and employ approx 2,800 people i.e. one in three of the staff in these 120 agencies.

Others have already asked how the recession will affect the PR industry. The above analysis would suggest the first question to ask in return might be how does the industry become more efficient and increase its fee income per head at the same time?

Now I am not naive. I realise that unfortunately these numbers may suggest that there could be some pain on the way, in terms of potential job cuts, for some amongst these firms. However I prefer to drink from a half full glass and see this challenging time as potentially an opportunity for the industry to try and improve this situation in a positive way.

Outsource process work; focus on better audience engagement

I would suggest that there are two areas that could be focused on. Firstly **disclosure here I have a vested interest in this** the industry could benefit from making better use of outsourcing solutions and technology to fulfil more process driven requirements – administration, database building and maintenance, distribution, tracking, reporting, project management/collaboration etc.

This would increase the flexibility of its cost base in these times of uncertain demand and benefit from the potential for these organisations to have better economies of scale and potentially lower overheads and people costs, particularly if they aren’t located in the South East.

The second is to focus on the areas where PR can achieve the most value for the time spent. IMHO (and apologies here to anyone who thinks who is this accountant to tell us PR professionals how good PR works!) I would suggest there is greater value to be secured, for client and agency, by spending more time on:

– identification of the dialogue/s organisations should be having;
– better targeting of the relevant communities they should be conversing with;
– using their creativity to engage with these communities in a more effective and influential way; and
– listening to and learning from these conversations and to the extent that one can, measuring them.

Perhaps this seems like stating the obvious, but I do wonder what proportion of a lot of PRs’ time is actually spent on these activities compared to process tasks as a survey in PRWeek found last year.

A high proportion of this process based work is carried out by more junior staff. A great opportunity exists for instance to employ this capacity in these higher value areas in helping clients engage in the online world, as it is these very staff that are often most comfortable engaging and conversing in online communities.

Greater value; increased profitability  

The effect of these two things would be to increase the potential value per head on the one hand and free up the capacity to do more of this higher value work at the same time. It would also have the added benefit of potentially more motivated staff that are doing more creative work. The top three causes of job dissatisfaction in the Aurum survey being repetition of the same tasks, length of working hours and volume of administration.

My detailed analysis – worked example can be downloaded here, spreadsheet tool here – would suggest that the following could be achieved:

1. More value for the client due to time being spent on added value activities.
2. Improved margins for the agency.
3. Increased motivation and productivity from staff due to reduced hours and more interesting and rewarding work.

What do those who have first hand experience of this think? Am I living on a cloud with the proverbial cuckoo?

2009 – Client charity offer and webitpr becomes RealWire!

Time for that Christmas blog post. Some have analysed the PR industry’s prospects, others have considered trends in social media and some have produced excellent video cards, twitter page or facebook spoofs.

At webitpr we have been so busy with service and other developments that we haven’t had time to do anything quite as lengthy or creative. We have though made a commitment to send up to 10 releases for free each month next year for charities that our clients are involved in. As a treasurer of a local charity myself I think 2009 will be particularly challenging for these organisations and so we thought if people can’t help as easily with cash then perhaps we can give some time. Any client of ours who would like to take advantage of this offer just let us know.

Our other news for 2009 is that we will no longer be called webitpr. From the 2nd January 2009 we are changing the company name to Realwire Limited. Our service has gone by this name for nearly a year now and the company name change is being done in response to feedback from our clients to better reflect who we are and what we do – a real group of people helping them to get value from a wire service.

Nothing else is changing just our name – same owners, same team and same service.

I may find time to sneak away and write a few posts during the break, but in the meantime have a great festive period one and all.

Best Christmas song ever IMHO!