A new report has thrown some light on the state of the Australian PR consultancy industry. It suggests the once-dominant players are no longer quite so dominant.
The report, produced by Glen Frost’s The PR Report and available at www.theprreport.com, lists the top 25 PR agencies by size and the top 25 fastest-growing PR agencies.
Data on the Australian consultancy industry has always been a little light on. In the US, league rankings are a commonplace with revenues being disclosed. There, the O’Dwyer rankings have traditionally been one of the best guides to just how much revenue PR agencies are generating, and provide lists of range of PR consultancies including specialist agencies in healthcare, IT, consumer and so on. In Australia the PRIA Registered Consultancies Group regularly undertook a confidential industry benchmarking study that provided some data on revenue but focused more on margins and other performance indicators.
The PR Report finds that the combined 2011 revenue for the top 100 PR agencies in Australia was $280 million and that they employ 1700 people. Growth rates in the top 25 fastest-growing agencies range from 20% to 335%. To put that in perspective, in 2011 O’Dwyers rankings showed that the top-ranked US-based worldwide independent PR agency (not owned by an advertising agency or some other entity) was Edelman with worldwide billings of just on $US522 million.
Some provisos are needed on the new Australian numbers. Obviously some PR companies didn’t participate; the revenue figures are total top-line revenue rather than the net fees measure standard used in the US; fastest growing is a bit like world rankings of developing nations — it doesn’t take much to be double the size you were; and individual firms’ revenues are not disclosed.
The biggest Australian agency is Ogilvy PR followed by PPR, Rowland, Hausmann, FTI (formerly FD Third Person), Haystac, Edelman, Hill+Knowlton, Kreab Gavin Anderson and Porter Novelli rounding out the top 10. Burson-Marsteller and Weber Shandwick are in the second 10 with Weber Shandwick at 20th place. BM was among the top five agencies for many years and Weber Shandwick (previously IPR) was Australia’s biggest agency for about two decades. IPR’s successor as biggest, Porter Novelli, has slipped to 10th place.
The No.1 fastest-growing agency was GSG Counsel, a corporate/investor relations shop, and the only top 25 agencies by size to make it into the fastest-growing list were Edelman (16th), Sefiani (18th), FTI (21st) and Rowland (25th).
The PR Report, as part of its confidentiality agreement with people submitting data, won’t disclose a median figure for top 100 agency revenues nor does it provide any categorisation that might make it possible to work out how much each firm is generating. The average of the top 100 is easy — $2.8 million — but one suspects the top 100 is a classic long-tail situation and the smaller agencies are billing not much at all.
To put those numbers in perspective, the 2003 PRIA benchmarking study surveyed 49 consultancies reporting $55 million in fee revenues. A 2006 survey, by WHK Greenwoods for the PRIA Registered Consultancies Group, said that 43 companies reported gross revenues of $65 million with 10% of the sample billing more than $2 million. Seventy five per cent of the sample reported billings between $500,000 and $2 million.
Whether the industry is bigger or smaller is impossible to determine as the samples are so different. But it is probably fair to suspect there are fewer agencies billing more than $10 million than there were 15 years ago and it would be surprising if there were many, or any, billing more than $20 million. This is probably a function of changes in the structure of the industry although demand for services may also have played a role.
Profitability is also difficult to gauge. A rough rule of thumb used in consultancy is that each consultant ought to generate three times their salary in fee income to achieve an EBIT profit of 30%. The $280 million figure and the 1700 employees suggest the agencies are generating $165,000 revenue per full-time employee. If the old rule of thumb applied average salaries would be about $53,000 and, although obviously the 1700 employees are not all consultants, there is something odd about the number. Either profit margins are lower than historic levels or the employment figures are distinctly odd. It may be a combination.
A constraint on Australian agencies, compared with the US, is that most need to be full service to survive. In a market of Australia’s size, compared to that in the US, the opportunity to focus on a specialisation such as IT or healthcare is much less. However, agencies such as Ogilvy PR, Edelman, Rowland, BM and H+K have always organised their agencies around practice area specialisations so that they aim to be full service and specialist at the same time. Ogilvy PR even brands the practices differently to emphasise the specialisation.
And one other change: once upon a time in Australian PR consultancy just about everyone came through either Eric White Associates or IPR (the author was an EWA person) a reflection of the founding of the modern consultancy industry by Eric White and Laurie Kerr. These days the catchment area is much broader although it was pleasing, if outrageously immodest, to note that about a quarter of the top 25 agencies had principals or senior managers who had once been part of the Turnbull Fox Phillips or Turnbull Porter Novelli groups.
*Declaration of interest: the author was CEO of Turnbull Porter Novelli and is chair of Ogilvy PR’s social marketing advisory panel