Hello and welcome to my blog! My name is Patrick Di Chiro, and I am the founder and CEO of THUNDER FACTORY, an integrated marketing firm headquartered in San Francisco. In this blog, I examine the convergence of marketing with technology, culture, politics and the global economy. If you like what you see, please spread the word and leave a comment. I look forward to your feedback!

Ad Age editor Jonah Bloom delivered some excellent remarks to the recent meeting of the Council of PR Firms (made up mainly of larger PR agencies). The theme of the Council’s meeting was “The Most Dangerous Ideas About the Future of Public Relations.” Mr. Bloom talked eloquently about how PR people should be a lot more concerned about the precipitous decline in journalism because of the symbiotic (my word, not his) relationship between reporters and PR professionals.

First, I totally agree with Mr. Bloom. I started my career as a journalist and then quickly moved into PR and then marketing, so I know a bit about the critical relationship between the media and the public relations function. The primary reason for being for PR people is to work effectively with journalists and the media they represent. Sure, PR people do other things, but media relations is still the core of the PR practice.

Mr. Bloom makes the interesting point that PR people frequently persist in acting in a very adversarial fashion with journalists when they should realize that they truly need each other. He argues that PR people need to find ways to work much more harmoniously together with their journalist brethren. I couldn’t agree more. With each reporter who loses her/his job, and every time a magazine or newspaper goes belly up, PR practitioners lose vital distribution options for their companies’ or clients’ messages.

I know, I know, PR people will argue that the parallel growth in social media will make up for this growing loss in traditional media. However, that is not entirely true (more on that later). The reality is that PR agencies and professionals will have to fight hard to get and/or retain the business of social media relations, as there are many new and nimble competitors who were born in that digital world and frankly know it better than most traditional PR types.

So, what does all of this mean for PR people? With the accelerating decline in traditional media, and the equally rapid fragmentation of the sources which people use to access information, news, entertainment, etc., the PR profession is under assault like never before. The PR function is both declining (related to the slow death of traditional media) and being seriously challenged (with respect to emerging, social media).

I would thus suggest to the good folks at the Council of PR Firms that the most “dangerous thing” about the future of PR is that there may actually not be much of one.

Unless, that is, the PR industry moves quickly to re-engineer both its business and operating model. Incremental changes will not suffice. This has to be a change of the magnitude of Bill Gates’ famous Dot Com era call to action that Microsoft would now be totally focused on the web (of course, it did not totally work out that way for Microsoft, giving Google the strategic opening it needed to emerge and ultimately rule).

I have been thinking a lot about this subject, and have commented on it several times on this blog. While I still believe PR practitioners and agencies can and should play a big role in the emerging digital/social media environment, that role is by no means assured.

This was made abundantly clearly in the recently announced quarterly earnings of the Omnicom Group, the largest of the big diversified agency holding companies. Omnicom reported that their earnings were up a reasonable 6.9 percent for the group’s ad agencies (presumably including the company’s major holdings in interactive firms) and up a strong 12 percent for its CRM business. But, Omnicom’s usually strong stable of PR agencies (i.e., my old firm Ketchum, as well as Fleishman, Porter Novelli, Brodeur, Gavin Anderson, etc.) saw their collective earnings fall about 1 percent. That, to me, was a major shot across the bow for the PR industry.

Just as I noted in a recent post that large ad agencies would have difficulty transitioning to the new digital media environment because their business models were built during a very different time, PR agencies are facing the same challenge. Large and even mid-sized agencies grew rapidly during the past 50 years, closely paralleling the explosive growth in media. The stock in trade of these larger PR agencies was (and largely still is) major media tours, events and media relations programs for consumer brands and especially pharmaceutical products. These programs typically generate retainer revenues of $50K to $100K a month and more. This world of expensive satellite media tours, massive product roll out campaigns, press junkets (common in the travel, automotive and entertainment industries), and spokesperson tours has been a huge boon to PR agencies.

Oh the good old days! Today’s new reality is that those rich PR retainer programs are rapidly vanishing, just as ad agencies are grappling with a diminished market for their big budget TV and print campaigns. The problem with the hope/dream that social media will replace these lost revenues is that there is not a 1:1 corresponding relationship between what clients have spent on the traditional media activities and what they will now be investing in the emerging digital channels.

The true power of digital social media is that it can go viral all of a sudden, and it is driven by consumers, who create the content and have no time for editor gatekeepers. This social media channel is largely uncontrolled by media organizations, who heretofore have charged a lot of money to access the audiences they reached. The old marketing agency business models crumble quickly in the face of the fact that so many of the social media opportunities are essentially free, or certainly a lot less expensive compared to high priced TV and print space.

Bottom-line, social media campaigns cost a lot less than the big PR and ad industry campaigns. That is great for marketers, not so good for the big agencies who are seeing their traditional revenue drivers fall away literally by the day.

In addition, those PR and ad agencies are not just competing with their own ilk as they move into the digital media space. There are a myriad of social and digital media experts who truly know the space, and who don’t have the same crushing overheads that a Ketchum or BBDO have to contend with as they compete in a very different environment.

Again, given all of these tectonic shifts in the industry, I was not even a little bit surprised to see Omnicom’s recent lower PR numbers. BTW, those results were from business booked prior to the global financial and economic crisis that is now gripping the world. I would expect that the next quarter will be even worse for Omnicom and the other major holding groups.

I wish I could be more optimistic for the agency executives attending the Council of PR Firms’ recent meeting. I do think that PR agencies and practitioners continue to play an important role, and that they are well positioned to pick up more of the social media work. But, the media and business worlds have changed too much for the larger PR and ad agencies to assume that they will just continue to grow as they always have done. If they have not already done so, they will also come to the realization that social media will not be the panacea they might hope it would be. To be sure, it presents opportunities for PR firms (and ad agencies), but the game is very different, and the corresponding revenue opportunities not nearly as robust (at least so far).

That is indeed dangerous territory for PR firms, especially the large agencies. But, the bold innovators who are willing to blow up the old business models and assumptions have a great opportunity to lead and thrive in this exciting new age of digital and social media.

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