Purchasing PR Firms Backfires for Advertising Industry
THE PUBLIC RELATIONS business could use a bit of PR help itself these days.</br></br>For years, the world's largest advertising-agency holding companies have raced to acquire PR firms as an insurance policy of sorts. With Wall Street clamoring for earnings that wouldn't be rocked by the loss of major ad accounts or cutbacks in ad spending, Omnicom Group Inc. snapped up Fleishman-Hillard Inc.; WPP Group PLC bought Hill & Knowlton Inc. and Interpublic Group of Cos. purchased Golin/Harris International, among other deals.</br></br>The ad holding companies and industry analysts said they believed that marketing-services companies such as PR agencies were resistant to economic downturns. Some even considered the sector countercyclical, since companies often need more PR help when they are financially troubled than when times are flush.</br></br>But as the advertising business suffers through the worst drought in media spending since the Depression, PR firms are struggling, too. Overall revenue for the $4.2 billion U.S. public-relations industry fell 10% to 15% last year, according to the Council of Public Relations Firms.</br></br>The biggest firms are laying off employees, slashing their prices for the first time in five years and chasing small accounts that they wouldn't have bothered with in the late 1990s boom.