To get on L.A.’s most hair-raising roller coaster, you don’t need to visit Magic Mountain or Universal Studios Hollywood. Just climb up to the executive suite of a big P.R. agency that specializes in multimedia and watch your clients wink in and out of existence like Bayou moths in love with a bug zapper.
“It’s such a wild and woolly ride. You just have to have a very strong constitution,” Jill Farwell, managing director of Manning, Selvage & Lee’s L.A. office, said about multimedia marketing.
The high-tech boom that has turned Silicon Valley into an oasis for Wall Street cash has also deeply impacted Los Angeles over the last few years, although lately it’s become hard to tell whether the industry is still growing forward or just sideways with the road to the Next Big Thing seemingly littered with as many failures as successes.
In 1995, it seemed the market for computer games was exploding exponentially. Then, all of a sudden, a glut of product and a refusal by consumers to invest in the hardware needed to play these ever-more-complex games left retail shelves flooded with product and led to a raft of business failures in Los Angeles.
Last year, it seemed that Internet serials storytelling Web sites in which content is changed on a daily or weekly basis were about to become all the rage, transforming the Internet into an interactive form of television. But too few users accessed the sites to make them worthwhile to advertisers, and the production companies crashed (there are still plenty of Web serials out there, but no one has yet figured out a way to make them profitable).
And so on. The consumer high technology industry is characterized by entrepreneurs with good ideas, ample financing from eager investors hoping to find the next Netscape Communications Corp., and astonishingly rapid changes in the marketplace that often lead to extinction.
That means P.R. agencies have to be as adaptable as the high-tech clients they serve.
Many of the large agencies in L.A. handle consumer technology clients, and there are at least four that specialize in technology. All of them put on the best face when asked about their business over the past couple of years (these are P.R. agencies after all), but for many, the signs of strain are evident.
“It has been one of the most difficult years of my career, because of the churn of clients,” said Sue Bohle, president of Century City-based Bohle Co. the biggest agency in L.A. County specializing only in technology.
In 1996, Bohle lost $1 million in fee income from clients in the CD-ROM business, and not a single one of them defected to another agency, she said. That the agency was nonetheless able to pull in $3.3 million in fee income that year, only about $100,000 less than it made in 1995, is a tribute to its ability to adapt.
What does a high-tech P.R. agency do when the CD-ROM business crashes? It switches to the Internet.
“The Internet explosion right now is making the CD-ROM explosion look like nothing,” said Rolland Going, executive vice president at the Marina del Rey-based Terpin Group.
Most high-tech marketers now have more Internet clients than they did a year ago, and less video game developers. But even within the Internet category, there are constant shifts; Bohle says companies developing software for chat functions or firms that concentrate on selling products over the Internet are currently struggling, while those that make software tools for authoring Web sites or search functions are going well.
That will change in about a minute.
“Well, it depends on which month you ask,” said Rachel McCallister, partner at Killer App Communications, when asked what’s hot and what’s not.
This rapid change is very hard on a P.R. agency. As soon as an account representative learns the client’s line of business, that client is gone, replaced by another in an entirely different line of work.
It’s not necessary to cry for the high-tech P.R. specialists, however. Despite the incredible churn of clients, the multimedia industry in L.A. is extremely robust and supports a large number of P.R. firms some of which are even growing.
Century City-based Miller/Shandwick Technologies, which previously focused only on hardware and business-to-business technology, entered the consumer technology business last year and quickly added $1 million in fee revenue over the previous year. With 14 employees in 1995, it now has 22.
Killer App, meanwhile, has grown from nothing to 25 employees in three offices around the U.S. in less than four years. Going says the Terpin Group increased its fee income in 1996 over the previous year, although he declines to provide numbers.
Certainly, the growing number of high-tech clients is creating a growing demand for P.R. executives who specialize in that field; Bohle says hardly a day goes by when one of her staffers isn’t contacted by a headhunter.
But if there is one thing high-tech marketers agree upon, it is the necessity to protect oneself from here-today, gone-tomorrow clients.
“Believe me, we all have accounts receivable problems,” said Bohle. “You have to work on collections all the time. You really just have to operate on the assumption that you will have two or three uncollectable accounts a year, and set your rate structure accordingly.”
Bohle says it’s often impossible to perform due diligence research on a prospective high-tech client to determine whether it will be able to pay its P.R. bill, because many are so new they have no history to research. As a result, she has begun demanding up-front payments from startups for the first time in her career.
Frank Pollare, general manager of Miller/Shandwick’s local office, agrees that it’s important to perform all the research possible on prospective clients and if they don’t pass muster, he won’t accept them.
“If I don’t think a company has a technology that is viable, I’m not going to be successful on their behalf, and they’re going to be with me for a short time anyway,” Pollare said.
New Editor Dan Turner writes a weekly marketing column for the Los Angeles Business Journal.