Paul Holmes 21 Feb 2009 // 12:00AM GMT
The global public relations industry is worth at least $8 billion, employs close to 50,000 people, and grew by at least 12 percent in 2007.
Last year, The Holmes Report set out to produce the first global ranking of public relations firms, and to gather data on the size and composition of the global public relations agency business. The experience was rewarding, and yielded interesting and important data about the industry, so we set out to continue our rankings project again this year.
It remains a daunting undertaking, in part because of the fragmented nature of the industry—rankings forms were sent this year to more than 2,400 public relations firms from around the world, of which more than 300 responded—and in part because the vast majority of the world’s largest firms remain either unwilling or unable to participate.
As a result, the rankings, which can be found beginning on page 5 of this newsletter, are not perfect. The way in which the majority of large communications holding companies have chosen to interpret Sarbanes-Oxley regulations makes it almost impossible to secure accurate and verifiable information about the size and performance of their individual operating units. So what we have here is a best guess, informed by both publicly-available data and our own industry knowledge and insight.
But the data gathered this year provides a foundation for the understanding and analysis of future trends, including growth patterns by country and region, by practice area, and by sector. We hope it will be valuable to clients as they seek to make sense of the fast-changing agency landscape, and to agency leaders who wish to benchmark their successes against those of their competitors.
Defining Public Relations Broadly
One critical decision we made when the ranking project began was to define public relations broadly. This decision was grounded in the philosophical approach of The Holmes Report, which believes that public relations includes all of the activities in which an organization engages in order to strengthen its relationship with any public or stakeholder group.
Thus, public relations fee income includes not only fees derived from traditional activities (media relations, community relations, employee communications, investor relations, public affairs) but also fees (but only fees) related to activities such as research, design, advertising and social media relations—as long as those activities were carried out by a firm whose primary activity is public relations.
We have always considered advertising, for example, to be a perfectly legitimate tool of public relations management. Indeed, many in-house public relations departments have responsibility for serious advertising budgets, particularly when the advertising is designed to meet corporate or public affairs objectives rather than marketing or sales objectives.
The precise wording on the rankings form provided to participating agencies was as follows:
“The Holmes Report defines public relations broadly as any activity designed to help corporations and other institutions build mutually-beneficial relationships with their key stakeholders, including but not limited to customers, employees, shareholders, legislators and regulators, communities, and the media.
“The primary business of a public relations firm for the purposes of this document should involve either strategic, media-neutral counsel or earned media, but a public relations firm may engage in a wide range of activities including but not limited to media relations, sponsorship, advertising, corporate identity, web design, and research. However, firms may include only the fees for this work, not payments related to media buys, production, etc.
“The Holmes Report reserves the right to make its own judgment about whether a firm qualifies as a public relations firm for the purposes of these rankings, and to exclude firms it considers not properly qualified.”
This is a broader definition than the one used by many other organizations providing local market rankings of public relations firms, which means that several of the firms providing numbers to The Holmes Report will receive credit for income not included in other rankings. The numbers for Edelman, for example, include fees from its StrategyOne research division and its Blue advertising unit, adding between $7 million to the more tightly defined fee income reported to O’Dwyer’s newsletter.
Obstacles to Accuracy
There were several obstacles to complete accuracy, the most obvious of which is the decision of the largest publicly-traded holding companies to interpret the Sarbanes-Oxley regulations in the United States in such a way that they preclude the release of information about specific operating units.
In truth, there is nothing in Sarbanes-Oxley that prevents the release of information. Indeed, some publicly-traded communications companies—Huntsworth and Next Fifteen are just two examples—do continue to provide information about specific public relations brands. For the very largest companies, such as WPP, Omnicom, and Interpublic, the issue appears to be one of cost—the expense associated with ensuring the accuracy of published numbers—rather than legal prohibition.
Needless to say, none of the Sarbanes-Oxley restricted holding companies or their PR firms co-operated in the creation of this ranking, and so The Holmes Report was compelled to rely on several sources to compile a ranking that it believes to be broadly accurate. Among the information sources on which we drew:
· Publicly-available information (including the last official ranking to pre-date Sarbanes-Oxley, for 2001 fee income, and some information available from the firms themselves related to headcount);
· Information that has entered the public domain despite the best efforts of the companies (specifically, information from former employees relating to headcount in specific offices, supplemented in some cases by directories of agency employees, as well as widely known revenue-per-employee targets); and
· The judgment of The Holmes Report, which covers the field in both the U.S. and Europe and can draw on information about clients moves, office openings and new hires to form a broad picture of the industry.
Another obstacle involved data from firms in emerging markets, where definitions of public relations are sometimes imprecise and where firms were not always willing or able to secure verification from a trusted third party (equivalent to a certified public accountant in America). In several instances, The Holmes Report made its own efforts to verify the broad accuracy of information provided, and where it could do so with confidence, the firms involved are included in this report.
Notes on SOX Agencies
In the first year of the rankings, one of the biggest challenges was at the very top of the global ranking, where Fleishman-Hillard and Weber Shandwick were—and remain—very close together and where the existence of numerous subsidiary operations (in Fleishman’s case, GMMB, Mercury Public Affairs and [email protected] are among the strong operating units; in Weber Shandwick’s case, Powell Tate and Rogers & Cowan both make a significant contribution) complicate the picture considerably.
When audited numbers for these firms were last available (for 2001 fees), Weber Shandwick was number one by a considerable margin ($426 million to $345 million, according to the Council of Public Relations Firms). But Fleishman is believed to have closed the gap considerably during the dot-com bust of the next 18 months, when the newly-merged Weber Shandwick suffered a steeper decline in revenues. Since then, both firms have grown at a healthy pace, although Fleishman has made several acquisitions (and integrated the operations of several other Omnicom units, including GMMB and Mercury) while Weber Shandwick has grown organically.
Moreover, Fleishman’s numbers today are somewhat easier to calculate with confidence because its parent company breaks out public relations income ($1.15 billion in 2006), whereas Weber Shandwick’s parent Interpublic provides revenue for its Constituency Management Group ($960 million) which includes not only public relations but also meeting and event production company Jack Morton and corporate identity and design firm Futurebrand. While PR is believed to account for about half of CMG revenues, that number includes GolinHarris, MWW Group and some smaller units.
Our best estimate is that when all fees from subsidiaries are included, Fleishman-Hillard and its various subsidiary companies are slightly larger than Weber Shandwick—although Weber Shandwick may be slightly larger as a single brand.
It was equally difficult to calculate the standing of the three leading European-based public relations networks (EuroRSCG, Pleon—which is included as part of Brodeur Pleon—and Publicis Consultants) relative to their U.S. counterparts, especially since Euro RSCG and Publicis practice a distinctly French model of public relations, which provides a holistic range of services—corporate advertising, corporate identity, annual reports, employee publications and collateral—all driven by communications consultants.
Some Significant Absentees
It is worth noting that the published list is not as comprehensive as we would like it to be.
Among the notable firms missing from the rankings are some of the largest and most powerful financial communications consultancies in the world, including Brunswick Group of the U.K. and Kekst & Company of the U.S., both of which would almost certainly rank in the top 30 in global fee income; smaller and more specialized units of the giant holding companies, such as WPP’s Finsbury and Robinson Lerer & Montgomery, Omnicom’s Fishburn Hedges and Gavin Anderson & Company, Interpublic’s DeVries Public Relations; Publicis Groupe’s Freud Communications in the U.K.; some large corporate and public affairs firm such as Glover Park Group of the U.S.; and some of the large Japanese public relations firms, at least a couple of which would certainly rank in the top 50.
Finally, while the Bell Pottinger Group has published and verified fee income of close to £52.5 million (or approximately $104 million), the company does not break down revenue by individual agency—a list that includes Bell Pottinger Public Affairs, Bell Pottinger Corporate & Financial, Bell Pottinger Consumer, Good Relations and Harvard Communications) and it was impossible to calculate with any accuracy where these firms would fall within these rankings.
Global Industry Calculations
The most important conclusion of all of this research is that public relations is a substantial global industry, generating at least $8 billion in fee income for consulting firms around the world in 2007, employing close to 50,000 people, growing at about 12 percent per annum and generating approximately $160,000 in fee income per employee.
The independent public relations firms that provided fee income numbers for this report generated a combined $3.26 billion in public relations fee income in 2006.
Meanwhile, the major holding companies whose operations declined to provide numbers due to their interpretation of Sarbanes-Oxley regulations—WPP Group, Omnicom, Interpublic, Publicis Groupe, Havas and Chime—generated an additional $4.1 billion in public relations fee income in 2006.
In other words, we have identified more than $7.3 billion in worldwide public relations fee income. The missing firms identified (Brunswick, Kekst, Glover Park, Kreab, and firms listed in various other league tables but not in The Holmes Report 250) between them generate at least another $400 million in fees. And there are literally hundreds smaller firms, most of them generating less than $1 million in fees (but some of them generating considerably more), listed in directories in the U.S. and U.K. or in the membership ranks of public relations associations around the world.
Based on these numbers, a conservative estimate would suggest that the global public relations industry generated at least $8 billion in public relations fee income in 2006.
The 236 firms in the Holmes Report 250 providing both fee income and employee information, meanwhile, generate fee income of $3.24 billion employ a total of 19,961 people around the world, generating slightly more than $162,000 in fee income per employee. If one assumes that the same level of fee income per employee holds across the rest of the industry, than an $8 billion industry employs more than 49,000 people around the world.
Industry Growth of 12 Percent
It is also clear that the public relations industry globally continued to enjoy robust growth in 2007. The 232 firms in The Holmes Report 250 for whom we had fee income information for both 2007 and 2006 generated fee income of slightly more than $3.18 billion in 2007, up from $2.71 billion in 2005—an average increase of 17.3 percent in fees over the course of the year. (That number includes some acquisitions, but not enough to inflate the growth figure significantly.)
It seems clear, however, that the public relations operations of publicly-traded holding companies not providing information are growing more slowly. Public relations fee income at WPP (parent to Burson-Marsteller, Hill & Knowlton, Ogilvy Public Relations Worldwide, GCI Group and Cohn & Wolfe) increased by about 10 percent in 2006. At Omnicom, which owns Fleishman-Hillard, Ketchum, Brodeur Pleon and Porter Novelli, fee income was up by around 10.4 percent. Finally, the somewhat smaller Bell Pottinger group of PR firms saw revenues rise by 11.8 percent.
Adding all of the revenue represented by these companies together, we have average growth among known and verified companies of approximately 13 percent. It seems likely that this number is slightly higher than the growth percentage of the industry as a whole, however. For one thing, it is unlikely that the public relations holdings of the two large French holding companies, Publicis and Havas, grew significantly faster than those of their Anglo-Saxon peers; for another, it is likely—due to self-selection—that the independent firms reporting fees to The Holmes Report grew slightly faster than those declining to provide such information.
Therefore, we conservatively estimate that the global public relations consultancy business grew by at least 12 percent in 2007.