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n the good old days of public relations, circa 1946, James S. Moran, a genius at snagging publicity, could sit for 19 days on an ostrich egg until it hatched to publicize the book The Egg and I. The result? Acres of ink in the national press—and the book became a best seller. Today, the media is too cynical to report such stunts, and an increasingly sophisticated public knows a PR gimmick when it sees one. Instead, a revolution in mass communications is transforming the PR industry, the clients it serves and the audience that receives its messages.Since the 1920s, when Edward L. Bernays began inventing the public relations business, consumers have experienced the impact of radio, television and the Internet.The Web has changed our buying habits, entertainment choices, the way we search for and obtain information, even the way we may look for a mate. Most significant, it has provided a vehicle for global reach that previously didn't exist.Such is the landscape in which PR firms—large and small—now operate. It has allowed them to flourish, offer new services and make greater impacts on audiences and client CEOs—who are turning to PR firms more than ever before."There's no question that PR has gone through an enormous expansion period," says Daniel J. Edelman, founder of Edelman Public Relations Worldwide. "We've done very well ourselves, doubling our revenue in the past four years. I think the business is going to continue expanding. It isn't a question any more of needing to prove to companies that they need public relations. Companies are pre-sold."So are advertising agencies. A recent spate of mergers and acquisitions has seen major shops acquire large public relations firms. (See related story on page 74.)Jack Bergen, president of the Council of Public Relations Firms and an analyst of industry trends, believes consolidation will continue. PR executives, who attribute the trend to the increased importanceof public relations firms to clients, agree."I'm astounded by the stratospheric growth of public relations," says Thomas L. Harris, former president of Golin/Harris Communications, one of the world's largest PR firms. "We [Golin/Harris] were one of the first PR firms to sell ourselves to a big advertising agency—Foote, Cone & Belding. Frankly, we were astonished that someone would want to buy a PR firm in those days, about 15 years ago. Now we see in the trade press that [Citigate] Cunningham, a high-tech PR firm, gets sold for three times annual billings. That was unheard of. The standard a dozen or so years ago was one time annual revenue."Harris currently runs a public relations consultancy in Highland Park, Ill., which last month issued the results of its eighth annual PR client survey. They reveal the average total public relations/public affairs budget of companies was almost $6 million, up about 20 percent over last year. Of 4,200 client executives who received the questionnaire, 46 percent responded.A second revelation was the quality of staffer. Harris cites the greater sophistication of the business and a new diversity in hires. "When I went into the business, your typical PR person had a background as a newspaper reporter, was in broadcast news or worked for a trade publication," he says. "They all had media orientation. Today, you have people like that, but you also have attorneys, former government officials, people with Ph.Ds in psychology or the social sciences, and of course, the techies."At Hill & Knowlton, special classes have been set up to teach PR to its many nontraditional hires, says Tom Hoog, shop president and CEO, U.S. "We're looking now for psychology majors, authorities on demographic studies, people to help us understand the audience segmentation we're seeing," he says. H&K also wants people who can help reach technologically savvy consumers. Clients realize that this once, small esoteric market segment is now part of the mainstream."More companies are seeing PR firms as a strategic partner because they're more conscious of their reputations and how that impacts the willingness of consumers to support them," says Robert Druckenmiller, CEO of Porter Novelli International. "Consumers make their buying decisions based on their belief in the company and its credibility. A lot of that is determined by how the company handles crises and how it supports the community in which it lives and works."PR does a lot for the credibility of a client's product—more so than advertising, argues Druckenmiller. It also helps reach the financial community, which is critical in shaping the stock-buying public's perception of a firm's market value."PR agencies are now doing things that were once done almost exclusively by ad agencies. We're doing integrated marketing, branding, media buying," Druckenmiller says. "So PR professionals must have a broader understanding of the full range of services they can bring to a client. They must also understand every way a product can be impacted—from a story in The Wall Street Journal to a client's' sponsorship of a sports team. And clients want it all at one location."Another factor in the healthy growth and increasing strategic importance of PR firms is globalization, says David R. Drobis, chairman and CEO at Ketchum. "PR has finally come of age from the [ad] agency standpoint," Drobis says. "It's an indication of the maturity of our business that it's taken seriously in the boardrooms. Globalization and the Internet have changed everything. It's a much smaller world now. Messages delivered in New York are instantly received in Paris, London and Tokyo. Someone's got to manage those messages, and that's basically what public relations does."With globalization also comes more complexity, Drobis points out. "Corporate issues have become vast," he says. "You've got to figure out how to manage them, and not just the brand, but the company behind the brand. People nowadays aren't just buying dishwashing detergent; they want to know about the company's environmental policies, social policies, what their employees think."On the strategic level, PR firms are taking on a bigger role, says Drobis. "We're continuing to grow in that area because of our knowledge of communications," he says. "We have an overview of all audiences. Advertising just focuses on the consumer. Public relations focuses on all the audiences that influence a target audience. So we're responsible for what government looks at, what the community looks at, what consumers, employees, analysts, venture capitalists look at. Our knowledge has earned us a stronger strategic role."This shift from a tactical to strategic role was also cited as a major recent industry change by Pam Talbot, COO of Edelman Public Relations, U.S. "We find ourselves sitting down with people at the very beginning when they're concepting a new product," she says. "What should it be like, how should it be positioned in the market, what about branding? "PR has always been strategic, but now it's a strategy that contributes to the overall marketing and positioning of a product. What we're seeing is the greater integration of public relations with other marketing disciplines because [with consolidation] they're all living under the same roof," adds Talbot.Many firms, especially technology companies, are using public relations as their lead [marketing] tool, Talbot points out. "When Apple introduced the iMac, they did a lot of advertising, but they led with PR," she says. Apple's example demonstrates one of the biggest changes in the ad agency and client perception of PR over the past few years, argues Talbot. "There's a greater understanding and respect for the potential impact of PR," she says. "Historically, there's always been a close link between advertising agencies and their clients. Now as advertising agencies begin to see the importance of PR, it also boosts the value of PR in their clients' eyes." Paradoxically, as PR firms become bigger through mergers with or acquisitions by ad agencies, markets become increasingly segmented, including ethnic and sexual preference segmentation. Hill & Knowlton addresses those challenges with what it calls its diversity group. As industry consolidation among the advertising and PR giants continues, many independent niche and boutique shops also prosper and new specialty firms are launched. Typical of the PR niche firm is Gallagher Lazarus & Co., a partnership founded in 1995 by Barbara F. Lazarus and Anne Gallagher and based in Chicago. Lazarus, a lawyer and former assistant U.S. attorney in the northern district of Illinois, prosecuted and convicted numerous organized crime figures before starting her firm. Originally conceived as a PR firm exclusively for lawyers, the company has expanded its client roster while also expanding its services."We started the company because we believed law firms needed a PR firm to deal with the media and to develop name recognition and visibility," says Lazarus. "There's so much more information flowing to reporters and broadcast producers on any given day, and the Internet is a big part of that glut. The competition for exposure is greater than ever, and that's one of our biggest challenges. Law firms must also stand out from the clutter, to distinguish themselves from the competition."Media glut, coupled with competition, means PR will change. "It's about more targeted and personalized communications," predicts Talbot. "PR will also get involved in creating content, not just delivering messages. Interactive will also become more important. People using the Internet want to dialogue with companies rather than listen to monologues, and PR people understand that more than ad agencies."Drobis agrees. "We're finding it increasingly difficult to get our messages to people, and we're going at it from as many different angles as we can," he says. "Most of that is Internet connected. So for pharmaceutical products, for example, we're reaching patient groups through the Internet. They're much more receptive to our message that way."Soon PR will attain a full partnership role in strategic planning for the marketing of goods and services, company and product launches, say industry experts. Industry growth parallels globalization; the emerging economies of Asia and Latin America are becoming consumers of public relations services. "Clients want us to understand their business as well as they do," says Hoog. "You'll see more of the visual in addition to the written word in PR. You'll also see a better understanding of the consumer of the future."Marc Davis is a Chicago-based freelance reporter. He has written about marketing and business for Arthur Andersen,The Chicago Tribune and numerous trade magazines.Chris Casaburi

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