Figgis:

Did you look at trends TWL, or just do a spot compare 2000 with 2007?

Also isn’t your argument a bit flawed as in 2000, there was an awful lot of venture capital cash being thrown around like confetti during dot com. Things have changed a lot since then. Would a comparison of 2002 or 2003 with 2007 not be a bit more realistic? I think you’ve been doing PR stories for too long TWL….you just can’t help yourself anymore…

Dooby:

Very interesting thoughts there. TWL - take your point that PRweak archives don’t go back any further (and often half the content isn’t even online), but I guess we also need to factor in that 2000 was probably the height of dotcom land, before it went pop? I wonder how it compares to pre-gold rush or say 2002 figures and whether it’s still a massive drop?

That said, it’s still a very fair point. That said, again, with a few exceptions every tech and telco PR agency I speak to at the moment seem to be saying how much new business they’ve just won. Maybe they’re hyping it up? Maybe inhouse PR peeps have got tighter with the purse strings?

Max:

An interesting post. I’m not sure how much we could read into your survey of PR fees. For it to be worthwhile, you should look at the equivalent table in the US, if Smithy’s theory holds, there should be an increase in US PR fees over the same period. But all you’re showing is that UK PR fees have declined: this might well be in line with a decline in fees across the globe.

I’m also not quite sure you explain the existence of IDG and ZD/CNET over here. If UK companies are going to decamp to the US, then US companies would scarcely be interested in setting up UK offices; yet IDG UK (and obviously I speak with a vested interest here) has set up three new titles in the last four years, scarcely a sign that the UK tech market is moribund.

PaulW:

Not sure I agree with this.

The reason why some UK tech publishing titles are struggling is simple; the channels that our clients’ customers are using to get information about products, services and companies has gone way beyond a bundle of pages dropped on desks once a week or month. It’s also gone way beyond subcription based content on-line.

With the greatest of respect to some of our stalwart IT titles, our clients just don’t see them as tier one anymore.

UK tech PR needs to adapt without question, but to assert that it’s moribund just because one publishing house gets a green card is pushing it.

If UK tech PR is dying, how come there’s a recruitment crisis with Account Managers and Directors naming their price? I’m no Economist but that doesn’t sound like an industry with issues to me.

Ben Roome:

I’d agree with Max.

I think there was a lot of dross around in tech in 2000 across companies, ventures, agencies and publishing. In addition, marketing tended to run PR and outsource all the PR expertise to agencies as tech PR had boomed in the 90s. Since then a lot of expert (ahem) external resource has migrated in-house, so companies now have internal resources that have a better understanding of PR to run their external agencies. They “know” how agencies work and what can be done in-house and directly with the media as opposed to farming out the complete function.

The other odd assumption in the initial piece is that all tech media and coverage is US led. I can think of journalists here in the UK, working for global publishing houses that are used by NA companies to gain coverage in NA. (More so than the other way round). In addition, a lot of UK and European tech firms start-up here. Admittedly, a far smaller number than the US.

Anyway, just musings. Ultimately: if you’re good, you’re valued, you’ll have a business.

theworldsleading:

Of course I’m not saying that my research is in any way rigorous. You’re right Figgis - it was a spot-check…mind you, the 2002 tech league table shows combined fee incomes for the Top 30 of £98m - and that was after the dotcom bust (I can’t find tables for 2003 and 2004 on the site). I don’t think that it can be denied that PR budgets have, by and large, shrunk over the past few years. I know of one monstrous tech company that is spending roughly half what it did on PR than it did a decade ago - despite year on year growth - and I don’t think it’s alone in that.

There could be lots of different reasons though - perhaps what used to be deemed ‘tech’ PR now gets listed as corporate or consumer as technology itself has become more pervasive? Could be.

A US/UK comparison would be a great idea - perhaps I’ll find the time - but if you look at the growth areas for the Next Fifteen Group, for instance, most is coming from North America and APAC rather than Europe. Maybe Dyson will pop over here with some perspective?

But generally I’m basing this on the feeling in my gut and experience (both of which are substantial and growing)…I just chuck it out there for discussion.

theworldsleading:

Interesting point Ben. Perhaps the overall technology PR pot of cash hasn’t shrunk at all, but more of it is used in-house which, of course, wouldn’t show up in the PRWeak tech league tables (and would result in shrinking budgets for tech PR agencies).

I’m an agency man - but in many ways I would see greater use of PR budget by a strong internal team as a positive thing over outsourcing to an agency.

Ged:

I think that you’re right about the sector from an overall perspective:
- If I think about my own personal media consumption, the vast majority of it comes from the US
- Technology coverage in the UK over the past decade has been more about the business of technology than technology itself
- Technologist in the UK of merit, are increasingly being hoovered into US companies either headhunted or as an acquisition (Yahoo! Technology Development/Flickr’s core development team and Last.fm are two examples from the recent past)

On agency health:
- There is a steadily declining pool of PRs who get technology, in fact when I worked with a certain senior PR practitioner who now works for a prominent VoIP provider, her ignorance was a matter of much personal pride
- Billable rates haven’t changed since I have been in the industry
- When I started, the minimum budgets clients had were 5K GBP and now its the same number a decade later, however I think that PR in general is suffering from the fee stagnation

Couple this with the changing media landscape where PR is getting gobbled by online agencies, media buying agencies and companies playing in the integrated space and it gets interesting.

The resulting environment is going to favour the global players.

Prem:

Perhaps the point is not that budgets have cut, but that the top 40 no longer hold such a large market share. Perhaps there are more small guys who, between them, earn a nice share of cash? Think of the stream of new agency launches we have seen even in the last 18 months…

I have to say, my recent experiences of US PR indicate that if we are all going to be out of a job as our US colleagues reach into our market then UK hacks had better prepare themselves. Something tells me US PR methods won’t go down well in the UK.

Daljit B:

I think what’s naive is the belief that just because some publishing house decamps to the US that tech professionals in the UK will suddenly revert back to the media consumption habits of a decade ago. In an age of Google news alerts, RSS feeds etc, I just don’t see it happening. It would be like going back to dial-up once you’ve had broadband, and when speed of information is ever more important, few professionals will want to give up that competitive advantage in a hurry. Existing or new UK sites/blogs will simply fill the inevitable information vacuum, get the eyeballs and rake in the advertising revenue. It’s simple economics.

As you mention above, it also comes down to how we define ‘Tech PR’ and the ‘Tech Press’. I ran a tech pr division where none of my clients gave a toss whether they were in Computing, IT Week et al or not. Our sector is more diverse and as a result more resilient than you give it credit.

As I mentioned in the rest of comment to Andrew’s post, any agency whose press targets don’t extend beyond the likes of ZDnet and the rest are in trouble and arguably deservedly so. If this debate has any merit at all it’s that it will perhaps encourage some agencies to look again at their tired media lists and bog standard tactics.

Anon:

Could also be as a result of multi-sourcing. I wonder how much of the revunue figures in 2002 and before are pass-through… as an in-house PR - for an IT services firm, where we’re practicing (some of) what we preach - I pay for services from various places; whereas I remember in my days agency-side back in 2000 that we’d sub-contract all sorts of stuff as a sole integrated PR & marketing services supplier to our clients. Just a thought.

I’ve seen my PR budget grow in the last couple of years. I’m just not spending it all with a tech PR agency.

Peter:

See — I TOLD you there was a downturn!

Yeelim:

Interesting entry. I recently moved to Hong Kong from the UK to continue my PR career and found that there is a severe lack of good tech journalists in Asia Pacific.

The few that we do have are indeed very good, but have to cover a much wider remit than counterparts in the UK. For example, one journalist for a key tech publication here covers security, storage, telecoms, enterprise software and channel activities. There is also a lack of publications covering these areas - and was surprised to find that there is only one vertical focussed tech mag in Hong Kong.

If the UK publication houses do debunk to the US, can we borrow some of your journalists please!

Monkey:

Any threatened downturn in tech PR doesn’t scare me. PR skills, after all, are transferrable.

Nick Booth:

Now it’s going to be really hard to get, ahem, ‘Face Time’.

Andrew Smith:

This is what it’s all about – a proper discussion about a serious issue with plenty of insightful views – and with the ever present possibility of some humour being thrown in.

Here’s a stab at summarising the issues:

1. UK tech PR top line revenues have declined – irrespective of whether we compare with 2000 or 2002, I think, at best, tech PR revenues are static or slightly down compared with 5 years ago.

However, the real issue is agency profitability. What is the point of generating more top line revenue if you don’t actually make any more money. When people talk about winning lots of new business, that may well look good for your topline, but if it doesn’t translate into real profit, what is the point?

The real comparison to be made would be of overall profitability of the tech PR business over the last 5 years. Back in the late 1990s, 7-figure net profits were common.

What is the situation now?

Have a look at Companies House data for some of the big tech agency names – yes, you may see growing top line figures, but bottom line profitability in many cases is paltry – 40K net profit on £4.5 million in fees? That’d doesn’t strike me as a very healthy business.

Of course, the directors of these firms may be paying themselves huge salaries (and the overall wage bill will be the single biggest cost to the business) – but directors would surely get a better return by taking the money as dividends (out of profit) – perhaps the reason they can’t is that there isn’t any money there to take.

2. Reasons for the decline in profitability:

- I don’t doubt that some client companies are spending more on PR. But I think the general trend is for companies to spend less. However, even though they are spending less, their expectations have risen – demand for better results, more reporting, etc. Agencies on the whole have only been able to do this by reducing their margin.

Then factor in the “skills shortage”. It is a truism that there is a lack of people at certain levels – post ‘dot bomb’, we all know that the industry lost people, cut back on training, etc – and that in turn exacerbates the problem in the item above ie clients are demanding more for less, but agencies are finding it hard to provide the expertise and experience to fulfil that need. And when do they find that talent, they have to pay a premium for it – which again contributes to reduced profitability – a kind of Catch 22.

3. Ben’s point about agency people moving in-house is a very interesting one – and something I hadn’t considered before. I look at the number of people I used to work with (including Ben) who now hold down senior in-house PR roles. This must apply to others who worked at big tech PR firms in the late 90s/early 00s. They know how agencies operate from the inside – and they know what value they can (and can’t) add. I think the simple truth is that in-house PR buyers view much of the tech PR market as a commodity – ie there isn’t really much difference between what most agencies are really offering ie press releases, case studies, etc – so they either use in-house resource to handle commodity services – or simply apply a commodity market procurement approach – ie lowest price wins – again, if you compete in a commodity market, your profit margin declines – you can only make this up by volume – but, if the overall market is static or declining, then, guess what, your profitability continues to decline – and lets face it, your staff don’t see doing commodity work as a long term career – hence staff churn, etc, etc.

All contributing to the Catch 22.

4. Where’s the exit for PR company founders?

Aside from the usual noble desire to build a business, most PR company founders would have an eye on the exit – ie being acquired – in the boom time dot com days, there was a healthy market for tech PR company sales – because a) there were buyers with money to spend b) tech PR companies made profits that went some way to justifying the price paid for them.

Today, there are very few potential acquirers – and why are they going to shell out millions for a firm that can only generate profit in the 10s of thousands?

So is tech PR and journalism dead?

Of course not.

There may be a smaller pool of titles that journalists write for (and that PR companies interact with), but there is still a need for it – just a smaller market – the problem for tech PR companies is relying on this as their main product – you aren’t going to make your millions for all the reasons cited above.

Tech PR firms are going to have to work out where they can genuinely add value - and at a profit – and all within the constraints cited above. Quite a challenge. However, being a professional optimist, I have no doubt that some bright sparks are already working on how to achieve this.

And after all that, I think I need to lie down.

Melanie Seasons:

Hell, not if I can help it

Andrew Smith:

Another point to bear in mind is the net worth of agencies - crudely speaking, the amount of cash they have in tbe bank or short term cash they have access to - many of the bigger agencies seem to have net worths in the 250K region - bearing in mind that their monthly wage bills are substantial, it only takes a couple of big fee earning clients to walk out the door to have a serious impact on cash flow - which certainly gives the big clients even more negoiating power ie give us more for less or we walk - again, with the knock on effect on margins.

I should say that there is one larger agency that appears to be bucking the trend with much greater pre-tax profits than their peers and far higher net worth - the fact that one of their owner/directors has a finance background might have something to do with it.

I’ll shut up now. Happy Bank Holiday weekend everybody!

Matt:

Tech PR isn’t dying, but tech is. I’m amazed that agencies still call themselves tech PR, because the task nowadays is to help someone sell something to someone else; businesses, consumers, blah blah - and it is far more about the needs of the business/consumer than it is about the product or service itself.

So the specialism has changed from an understanding of the technology, and the geeks who are geeky enough to read the manuals, to an understanding of how businesses work (small, medium, big - all becoming specialist areas), or what motivates consumers or communities of consumers.

If we think our dream client list is Apple, IBM, Dell, Sun, Oracle, HP … well I’m only just onto my second hand before I run out of ‘aspirational’ clients … and as TWL points out most of these budgets are in terminal decline. But to be honest that has been the case for at least five years, which is why I’m amazed people cling to ‘tech PR’ as a legitimate category. One only need look at how terribly, uninteresting and irrelevant (to the world) the tech page in PR Weak is … we are all becoming product generalists and audience specialists -or we ought to be.

The good news about this is there is no ‘one size fits all’ way of globalising businesses or consumers. They are weirdly, wonderfully, different here from the US, or Norway, or Malawi … so the Americans and their centralised campaigns can sod right off …

Fiona Blamey:

Matt: I thoroughly and completely disagree. Technology PR has *always* been about helping companies sell something to someone else. It’s *always* been about understanding the needs, desires and problems of organisations and individuals. It’s also *always* been about understanding how your client’s technology solves those problems, and it’s *always* been about communicating that clearly to journalists, influencers and end-users.

You can’t articulate clearly how a technology solves a problem without understanding what the technology does that’s so great. Understanding the problem is the easy part. But if you can’t - or won’t - understand why your client’s technology is the best solution to it, you’re doing your client a massive disservice and you probably shouldn’t be working for them.

In the world you describe, a big company has no need for IT people, because a CFO can make an informed technology buying decision based on something he or she read in the Times about how great some technology is, even though neither the buyer nor the PR that placed the story has any kind of appreciation of how the thing works, what it does, or - crucially - how it differs from other technologies that claim to do the same thing. And that doesn’t sound like a sure path to success to me.

Matt:

Fair play Fiona. But I would say the difference is it’s not about how the product works, it’s about what it does, and that takes us out of the technology and far more into the application - whether it’s a game or a business process.

And yes, of course corporates have IT Directors making multi-million pound decisions, and PR plays a role. But whereas there were ten or twenty IT companies involved in every big decision a few years ago, represented by hungry young tech PR agencies, the market has just contracted so much that it’s basically Microsoft vs. Oracle vs. IBM with a few hangers on.

Yes, that work still exists, but if an agency think that’s their livelihood, they will be in trouble.

My view anyway.

Andrew Smith:

Quick trawl of Companies House data for the top 40 tech PR agencies (PR Week 2007) revealed the following (note: could only find profit info on 14 agencies - and filings range from end of 2005 to end of 2006 - so take this all with a pinch of salt - but gives a feel for the market - and one agency’s very good results have skewed the average up).

Make of it what you will…..

Average tech agency net worth = £568,000
Average net worth per earner = £13,000
Average net pre-tax profit margin = 11pc
Average pre-tax profit per earner = £11,000
Average fees per earner = £89,000
Average number of employees = 34
Average annual pre-tax profit = £374,000

Mary Branscombe:

I’m sweet? Awwwwww ;-)I’m also late - I plead getting stuck in Berlin after IFA and then going straight to the US.

I think I may now know what the original UK to US move is: PTB at the Reg have decided David & Martin did such a good job of growing the developer section that it should go to a US editor to grow even further. As I hope to carry on writing - and with my tongue out of my cheek, as I think Gavin will do a great job - I wouldn’t call this a bad thing as will still have the UK writers and the UK POV. But if it is this it’s a little less significant than a whole publishing division.

And, back to the ‘getting it right for the readership’ view. Yes the readers are more interested in the content than the source (that’s why spam works - too many people ignore a lack of reputation if they think there’s something for free). But I don’t think the content will be right if it’s written by US journos - they do an excellent job for their own market but the angle and emphasis matter as well as the prices and whether the product actually ships to the UK…