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  • March 7, 2017
  • Roger Darashah

Beware the Pull of Paid

Beware the Pull of Paid

While the integrated PR agency model remains unequivocal from an agency perspective,
the client proposition remains unproven

In a month when the world’s largest PR firm recorded growth of just 1.7%1 and – in a break from tradition – declined to provide a geographical breakup of its results, and when the world’s eighth largest PR firm dissolved its US PR brand altogether2, it seems timely – urgent even – to address the issue of the PR model altogether. An issue rendered more timely with last week’s announcement of the consolidation of three of the world’s largest PR networks into a single entity in Europe3.

Traditionally, the latter was distinct through its commitment to earned influence, whether through media relationships, the ability to generate engagement through compelling and relevant content, or through a deep understanding of structure and process in the case of public and regulatory affairs, for instance.

In the face of declining economic growth, and sustained crisis in some markets such as continental Europe (beyond Germany), for instance, the global received wisdom to maintain revenues and growth has been to invade the paid space; the so-called ‘integrated PR model’. The client-facing logic revolves around integration and consistency; but it’s the internal, agency rationale that is most revealing; a shift to the paid model will address multiple pain points simultaneously.

First, paid assures at least three distinct revenue streams: advertising commission (on the space booked), creative assets (from art work to events), as well as the PR firm’s traditional consultancy fees. When we realise that the ad commission alone can represent more than a year’s annual consultancy fees – with a fraction of the senior readership required, on a daily basis, to deliver it – the seduction, or compunction – becomes clear. Particularly for listed firms.

Secondly, scale; paid is vastly more scalable than the earned model which depends on individual intellect and relationships to be replicated across each market. Paid addresses this shortcoming perfectly; let the central team research and develop a strategy, while the network focuses on implementation. In the case of paid, the latter is reduced to a transaction…. in effect, a payment.

Finally, integration offers agencies the opportunity to sell multiple additional services, from digital and experientials, to research and creative content. From a revenue perspective, the local is irrefutable.

Unfortunately, from a client perspective, the logic is slightly less compelling. Earned, public relations remains distinct from other areas of the marketing mix; it is based on persuasion (not a transaction), it is real-time and flexible (crisis response will never be led by an advertising agency), and it is genuinely bi-directional (today, the best PR campaigns are conservational, creating value for all parties concerned).

Experience confirms that — despite the best intentions — the shift to paid systematically undermines these fundamentals. As a PR agency director, if the out-of-pocket expenses (OOPs) on a creative concept are higher than my monthly PR consultancy fees, where am I going to direct my resources? If I can extend my campaign to a dozen new markets simply by negotiating favourable advertising rates, why am I going to spend energy nurturing media relationships in each market? The latter requires far more commitment, and intellect, but – in agency remuneration terms – there is no comparison. Such intellectual effort will never generate the ROI (i.e. ad commission) that a big ATL campaign will.

So the principles of earned public relations are slowly being undermined by the pull of paid. And this process is as prejudicial as it is inevitable; why devote time to media rounds when a paid campaign can be deployed and scaled in a fraction of the time for 10 times the same revenue?

But the agency logic remains irrefutable. According to a rough estimate (based on public announcements), last year around 40% of senior appointments within the world’s top eight PR firms were made from advertising world. Integration makes sense – even from a client perspective – but not at the expense of real earned media expertise.

The current ‘integrated PR firm’ model has become a contradiction; as agencies increasingly resemble their advertising counterparts, a key client requisite — ‘earned’ — risks being compromised. Whether a PR firm can secure the best, specialist paid talent without systematically paying a premium is open to question – Madison Avenue has been around for a while (the first advertising agency set up there in 18614), so we can assume that they are pretty good at what they do.

This month’s industry news raises the question of how sustainable and credible a PR-driven integrated advertising model would be; especially one which seems to be abandoning the essence of PR altogether.

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[1] http://www.holmesreport.com/latest/article/edelman-growth-slows-to-1.7-in-2016
[2] http://www.holmesreport.com/latest/article/new-roles-for-michele-anderson-and-jennifer-scott-as-ogilvy-dissolves-us-pr-brand
[3] http://www.holmesreport.com/latest/article/omnicom-merges-fleishmanhillard-ketchum-porter-novelli-in-four-euro-markets
[4] https://en.wikipedia.org/wiki/Madison_Avenue

Published by Roger Darashah

Roger Darashah brings close to 23 years of international communications experience with stints in the UK, France, Spain, India and Brazil. He is part of the senior management team at Adfactors PR, working in the capacity of Chief Operating Officer.

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