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Gini Dietrich

PR Agencies: What the Visa Shakeup Could Mean for the Industry

By: Gini Dietrich | November 18, 2013 | 
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PR Agencies- What the Visa Shakeup Could Mean for the IndustryBy Gini Dietrich

In 2001, I made the big move to Chicago (from Kansas City) to work for an advertising agency.

My directive?

To help build a PR department within the organization.

It was like shooting fish in a barrel. All we had to do was go to the agency’s existing clients and offer our services.

We generated $6 million and hired 20 people in less than two years. It was, by far, one of the easiest jobs I’ve ever had (from that perspective).

It was an interesting trend: Organizations wanted to integrate their marketing disciplines under one roof and it was working.

A couple of years later, Dell launched their Da Vinci project, which was to bring nearly 1,000 agencies under one roof, to be overseen by WPP.

It was an exciting time to be in the business. A very exciting time.

But then, of course, the 9/11 tragedy enveloped our country, the United States had the worst economic crisis since the Great Depression, and people scurried back to their prospective corners to protect their fiefdoms.

The Big Visa News

Now, of course, we’re all becoming accustomed to the “new normal,” the financial guys have decided to stop hoarding so much cash, and business leaders are taking some risk again.

This is all very, very good for the industry.

After all, right or wrong, PR is always one of the first things to go in a down economy.

But Visa just made a pretty big move that is going to shake the confidence of agencies, big and small.

In the November 8 issue of PRWeek, Steve Barrett describes the radical shift.

The 90-strong department of the Foster City, CA-based company will now have to cover all the work in-house that was previously handled by its agencies, which included FleishmanHillard, Edelman, and Brunswick, with little or no extra resource.

That’s a blow to the agencies, especially FH, which will take a multi-million dollar hit in fee earnings from the diminution of a nine-year relationship, but also the internal folks who have suddenly seen their workload rise exponentially.

The possible implications you can draw from this development are many and various: Visa is in serious cost-cutting mode; the work of PR agencies has become superfluous; the in-house team is under-worked; or Visa is tearing up the playbook and is going to do things completely differently.

If it’s the latter, the industry should watch for other large companies to consider the same…and agencies will have to reinvent themselves…again.

Trend for PR Agencies

This case study is micro in a larger macro trend, which sees the large companies merge their marketing and communications departments into one.

Organizations such as FedEx, Allstate, and SAP have already done this. IBM, Nissan, and Cisco did many years ago, but have communications in the top role, rather than marketing.

This is good: It means better integration, more effectiveness, and more efficiencies.

But Visa is the first to draw a line in the sand and have their internal workforce add the work of three agencies to their assumedly already packed to-do lists, choosing not to outsource at all.

Of course, I have no idea if that’s what they’re doing, nor do I know if others will follow suit. But as an entrepreneur building a PR agency, it’s certainly a trend I’m keeping a very careful eye on.

About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, a Chicago-based integrated marketing communications firm. She is the lead blogger here at Spin Sucks and is the founder of Spin Sucks Pro. She is the co-author of Marketing in the Round and co-host of Inside PR. Her second book, Spin Sucks, is available now.

50 comments
cparente
cparente

Good post, would be great to know more. We have no idea of course if the firms were doing good work to justify their no doubt very hefty fees. Part of the problem is that every big firm claims they are experts in every piece of the PESO (new acronym for me, useful) pie. 

My focus is B2B/G content marketing, and I've seen how incredibly difficult it is for internal staff to create really excellent stuff. They are too busy, and too close to the KoolAid to be objective. 

Firms have to connect their work directly to the sales automation and funnel process of a client to protect budget today. 


Howie Goldfarb
Howie Goldfarb

I guess my comment at PR Weekly didn't get approved I wanted to share it here but it seems to have gone poof.


I see no risk for Visa they have the money to do this in house. They aren't heavy players on social (meaning activity) so they can probably get away with just a good solid listening program. And while I could not find number of employees even if they doubled their staff they are at low risk should they decide to go back to agencies. Normally that means the Agency will hire the employees.

It also aligns the goals of the work with the business. Often Agencies make more money billing more and look for ways to expand this with clients. We all do this. In house they could change that to be more focused on less work. Meaning if I am paid X dollars and can do something that takes less time to free up more time that is win win...doesn't affect my salary and maybe I get a bonus.

But I think for the PR industry this means Agencies have to prove they are so much better they are needed vs the big company hiring some PR Pros.

JRHalloran
JRHalloran

But doesn't it mean there will be more loyalty to the company? (Or, at least I guess that's what Visa is trying to generate.) I understand three different agencies did three different kinds of work, but perhaps Visa wants a PR force that isn't distracted by other clients? 

I don't think this will be a common trend for most companies, though, mostly because they don't have the revenue Visa has. Visa is a money powerhouse, but companies that invest in a lot of various projects will still resort to PR agencies.

danielleserrano
danielleserrano

I found this interesting because I haven't seen anything else about this besides this post (and then of course the article that I looked at after).  After working in advertising agency this summer, I can not image that one sole company will be able to ALL of the work that three agencies were doing.  Projects are tedious, timelines are serious and there is going to have to be a lot of people from Visa that get together to get the work done.  Which makes me wonder... are they hiring more people to do this task or think that they have enough internal resources to compensate for three agencies?

bdorman264
bdorman264

Who keeps moving that damn cheese?........

Digital eMspace
Digital eMspace

This was a very interesting read. Please keep us posted. Is always great to see the history in making. One door closes, another stays ajar ...

DickCarlson
DickCarlson

This sort of stuff happens in the content development world as well.  Microsoft used to go through cycles of developing in-house and then paying external vendors (ad agencies, PR folk) for those services.  And it often DID amazingly seem to sync with a new SVP arriving on site.

You can make good arguments for both models.  As an external, I really LOVE to work with a client just coming off having to do everything themselves.  They're much more appreciative, considerate, and understanding. <g>

hackmanj
hackmanj

I think Visa's effort will fail, but the good news is it will create opportunities for many of you down the road. :)

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Word Ninja
Word Ninja

Can't wait to see how this unfolds. Thanks for always keeping us in the know, Gini.

ClayMorgan
ClayMorgan

What makes pondering on something like this so difficult is we just don't know. What deliverables were promised by the agency? Were they met? Is there someone at Visa who just prefers doing things in-house? Is there a larger play at work here? 

Maybe I'm just nosey, but I really want to know why

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MattLaCasse
MattLaCasse

There's several interesting pieces to this puzzle that others have touched on. I'll add another. I'm wondering if their content becomes more conservative. Visa isn't really a brand built on pushing the envelope, but it'll be interesting to see if it takes a different route without an outside force willing to push back against any directives.

That's less a shot at Visa employees and more of a ponderance of whether or not they'll be able to really give that solid feedback agencies can provide without fear of reprisal. 

This all sounded much more coherent in my head.

jasonkonopinski
jasonkonopinski

Ostensibly, they've just freed up a whole pile of cash by bringing those PR and communications functions in-house, but will those internal teams grow out of necessity to handle the additional work or crumble under the weight? This will be interesting to watch.  

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livwhit
livwhit

I wonder how Visa will handle all of the work that the agencies were responsible for. It could back fire or like @belllindsay mentioned, they could use the money that would have went to the agencies to hire more people. 

belllindsay
belllindsay

Very interesting. I've experienced the other way around - when I was at the Canadian Broadcasting Corporation, they killed the PR department, gave everyone healthy packages to walk, and they promptly all got re-hired by the outside agency who won the bid. Win-win. I'm sure a few mortgages were paid off that year. ;) But doing the opposite - pulling it in-house - that's very odd. The numbers just don't add up. I am curious to know if they are going to pour those agency dollars into their internal teams, through hiring, etc., of is they are squeezing the belt and expecting their people to simply do more work. 

susancellura
susancellura

Interesting. Somewhat scary. Although I've been a part of both scenarios - bringing in the work and outsourcing the work - even with one company. I do think that it ebbs and flows. And as @BillSmith3 mentioned, I do wonder about any leadership changes. Of course, I'm not excited about hearing this as I try to ramp up, but I'll just work as hard as I have to!

BillSmith3
BillSmith3

Interesting piece,  I think the first question is, was there a change in the SVP of marketing/Communications at Visa recently? Usually when there is a change in senior executives, an agency review follows, not taking it all in house. 

That's a lot of work coming in-house from three agencies and not beefing up resources in that department is just a recipe for burnout for the in house communications professionals. I highly doubt the Visa communications department was country club before this turn of events, how long will this situation last before turnover starts to appear is the real big question. 

JohnMTrader
JohnMTrader

It would be a major coup to hear directly from someone inside of Visa and get the inside scoop on the philosophy behind the decision.

One thing I keep thinking of is the great depth of knowledge of a company, it's nuances, and the community it serves by inside employees vs. outside agencies and the fact that more companies are looking to get a leg up on competitors by striking chords that otherwise may not be hit if they leave these services at an agency level.

BillSmith3
BillSmith3

@JRHalloran I doubt it it. Just wildly speculating this decision it could be the new SVP's idea to perhaps cut costs by taking all the agency work in house and looking like a hero to the CFO. Also bear in mind in the article mentioned Visa's communications department would not be receiving much in the way of new resources for handing the additional workload done by three different agency teams. That's not going to foster more loyalty with it's current communicators, more likely it will lead to turnover. 


KensViews
KensViews

@JRHalloran Smart agencies are very loyal to their clients, because without them, the agency fails to exist. Clients/accounts are generally served by dedicated or semi-dedicated groups. So distractions from other clients shouldn't be a major issue. Unless VISA plans on expanding their internal teams, and that hasn't been announced, those internal teams can also be distracted and overwhelmed. The other part of the puzzle is that agencies can expand, when needed, by tapping other agency personnel and/or qualified freelancers. How will VISA's internal team do that?  Biggest issue from my perspective, is the lack of external vision/objective counsel that any agency worth its salt provides. And said objective is, in my view, a critical need, one that the internal team, by its very definition, cannot provide.

ginidietrich
ginidietrich moderator

@danielleserrano There hasn't been any indication they are expanding their internal teams to take on more work. They already have a 90 person team, but they also spent $10MM with FH, which means a good 40 people were working on that business  on the agency side (not to mention the other two agencies). That's A LOT of work to put on a team who already has their own work to do.

danielleserrano
danielleserrano

@hackmanj I definitely agree! I do not think Visa will succeed with this but I do feel that there will be more opportunities down the road now.

livwhit
livwhit

@KensViews Great point! They lose the outside perspective and the ability to be guided by some of the best PR agencies. It will be interesting to see how this one plays out. 

ginidietrich
ginidietrich moderator

@MattLaCasse LOL!! Your last sentence...

I agree with you (and totally know what you're saying). Agencies are typically hired because they have experience with other organizations that add to their creativity and counsel. They aren't in it every day so they can see the forest for the trees. It'll be interesting to see what happens.

BillSmith3
BillSmith3

@livwhit @belllindsay  From reading the PR Week article, it sounds like Visa was not planning to beef up staff in the communications department. It was more like, here's the work used to be done at agency, here are the deadlines, make it work with the resources you have. 

As JohnMTrader  said it would be really interesting to get an inside perspective on the thought process behind this decision. 

JRHalloran
JRHalloran

@BillSmith3 @JRHalloran @KensViews Ah, good points, guys. I understand why everyone's a little more confused about the move now. If this results in high turnover, they actually did themselves a great disservice (and maybe they deserve it).

DickCarlson
DickCarlson

@ginidietrichWell, it depends on what the meaning of "better" is.  We'd get pitched by the Agency's "A-Team" and they were great.  But the folks who actually did the work were much further down the totem pole.  They rarely understood what we were doing, our market, or even how to do their own job.  So it wasn't "better" for us -- we ended up going through round after round of revisions.

But -- as others have said in these comments -- when the functions are brought in-house, staffing is rarely increased to a level to cover all the work that needs to be done.  So that's not "better", either.

Best model I've seen is creating a "fake" internal agency, so at least you get the commissions and can use them to hire people to do the work.  Shhhhhhhhh.


KensViews
KensViews

@JRHalloran @BillSmith3   Does anyone else find it odd that VISA hasn't indicated their goals in doing what they did, and to point in today's @SpinSucks, the strategic thinking behind it?

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