Considering that 1998 was a pretty mediocre year for L.A.’s ad agencies, you would think that local public relations firms would have suffered from the same stagnation.
But you would be wrong.
Actually, anecdotal evidence suggests that 1998 was a terrific year for the local P.R. business, perhaps the best of the decade. There aren’t any surveys or statistics on the local industry except for the Business Journal’s list of P.R. agencies and that won’t be out until June. But calls to industry observers and insiders suggest that most agencies in town enjoyed healthy revenue increases over 1997, and several saw dramatic growth well into the double digits.
“I think 1998 was one of the best years in recent memory for agency growth,” said Dan Durazo, executive vice president at Durazo Communications and president of the L.A. branch of the Public Relations Society of America. “I saw so much new business activity among our members and the agencies we work with.”
Indeed, many agencies, especially those specializing in hot fields like health care and technology, saw revenue growth from 20 percent to 40 percent last year, and increased their staffs accordingly.
Which begs the question: If the advertising industry is flat, why are P.R. agencies doing so well?
“I think it’s just a good time right now to be in our business,” said Michael Nyman, president of Beverly Hills-based Bragman Nyman Cafarelli which grew by more than 40 percent last year. “Marketers are finding that they’re going to get more bang for their buck by diversifying their marketing tools, by not having it all tied up in advertising.”
For a variety of reasons, there is a perception that the power of advertising may be waning. It has become much harder to reach the end user particularly young people through traditional media, Nyman points out. Kids don’t read newspapers and the TV networks no longer control the kind of audience share that they used to.
In addition, people have just grown more cynical about advertising.
“Thirty years ago, someone saw an advertisement and in many ways it became the truth,” Nyman said. “Today, people are more excited by reading a third-party review of a product. They realize they’re being sold to (by advertisements).”
Chris Aarons, vice president of technology P.R. firm Miller/Shandwick Technologies in Marina del Rey, posits another explanation for the fast growth: because L.A. contains so many small and mid-sized companies (especially in the tech field), few can afford the high media costs associated with advertising. So they turn to P.R. agencies to suit their marketing needs.
“They’re looking for more cost-effective ways of getting their message out,” said Aarons, whose agency grew by more than 20 percent last year.
In fact, there weren’t a lot of giant account wins in the P.R. business last year. Rogers & Associates in Century City picked up a pair of million-dollar-plus accounts from American Honda Motor Co. and the White House Office of National Drug Control Policy. But it also lost a multimillion-dollar account from the Public Utilities Commission when funding for all but a smaller assignment expired.
Other than that, nearly all the accounts won last year were from medium-sized local companies, or they were specific, limited assignments from large companies based elsewhere. For example, much of Bragman Nyman Cafarelli’s growth came from entertainment-related assignments for companies like Levi Strauss & Co. and Maidenform Worldwide Inc.
Sue Bohle, president of Century City-based technology specialist the Bohle Co., said that while most of her clients are still located in the Silicon Valley, she’s finding business from a growing number of L.A.-based companies. Especially hot last year were telecommunications companies; Bohle’s business increased by 25 percent in 1998, largely on the strength of these new L.A. clients.
Another hot area is health care. Fischer & Partners in Marina del Rey, a health care specialist, grew by 35 percent last year, adding 10 employees to boost its staff to 30.
“Those agencies that are solely focused on technology and health care are the ones that are experiencing the lion’s share of the growth,” said Roger Fischer, the firm’s president. That’s because both those fields are extremely complicated, and many clients believe they’ll be better served by an agency that specializes in them than by a general-market agency.
Fischer says health care P.R. is growing quickly because of changes in the marketplace. With the advent of managed care, consumers have a good deal more control over health care decisions than ever before which means that health care providers and payers, who formerly concentrated on business-to-business communications within their own industry, are now trying harder to reach the consumer market.
Fischer picked up three blue-chip clients last year: Woodland Hills-based health maintenance organization Wellpoint Health Networks, Santa Barbara-based hospital owner Tenet Health Corp. and accounting firm Ernst & Young’s national health care practice.
News Editor Dan Turner writes a weekly column on marketing for the Los Angeles Business Journal.
