PR kingpins still bullish on sector's future
When U.S.-based public relations (PR) company Burson-Marsteller set up its Warsaw branch 10 years ago, Poland's market economy was beginning to pick up rapidly and the future looked bright for most young companies. But that was then. Now, Burson-Marsteller is shutting down its office and preparing to leave Poland by April 30.
The company, which also announced it will close its Moscow operations, justified the move saying that despite the high quality of work produced in a decade of business, the Polish office had not grown enough.
"Burson said there isn't a (growing) market here, but in my opinion Poland's market has huge potential in terms of PR," said Piotr Czarnowski, the president of First PR, which he started in 1990. "The market has (finally) started to verify (the quality of) PR agencies, which is a very good phenomenon."
Agata Tyszkiewicz, the general manager of the Rowland Company, part of U.S.-based Rowland Communications Worldwide, also disagrees with Burson's assessment that the market has little potential for growth. "Clients are even withdrawing from advertising, (and investing in) PR campaigns at the moment," Tyszkiewicz said. "In a sense, PR (firms) are advertising parasites."
After Burson's departure, only a few foreign PR companies remain in Poland, such as Rowland, GGK Public Relations, GCI Warszawa, Feedback/Hill and Knowlton and Mmd Agencja Media Design.
Tyszkiewicz added that Burson's withdrawal could be attributed to the trend to globalize strategies, which sometimes fails to take into account local market conditions.
One market observer, who asked not to be named, said that Burson's fees were higher than other firms' and it may have priced itself out of the market.
However, while some companies are withdrawing from the market, others are just arriving.
Leszek Podstawski and Jaroslaw Betlej set up Estimage Public Relations last October. Despite heavy competition, Podstawski, who has 10 years of PR experience, sees great opportunity for developing his business.
"The PR market hasn't developed properly yet," Podstawski said, citing as evidence the small number of PR companies compared to ad agencies.
"The (PR) market needs to develop as Polish, and especially foreign companies, understand the need for communication strategies."
When Piotr Czarnowski set up First PR, the market for PR services was practically non-existent. "Just to establish a company wasn't difficult, but the real difficulty was to register the company and explain what PR was all about," he said. Czarnowski added that the sector began to emerge in about 1992, and two years later he and Alma Kadragic, the head of PR agency Alcat Communications, started the Association of PR companies with about 11 companies.
Since then, the number of PR firms has tripled.
"There are about 30-50 PR companies (registered) on the market," said Tadeusz Jacewicz, the president of Sigma International, the biggest PR company in the country. "But there are only about 20 (that are visible on the market)."
Jacewicz owns 100% of Sigma, which is affiliated with the world's No. 1 PR company, U.S.-based Weber Shandwick Worldwide.
While the majority of PR customers are foreign companies, Polish clients often belong to the new-technology sector, said Malgorzata Wejtko, the president of ComPress, which started in 1990.
She added that last year the number of IT firms mushroomed in Poland, leading to an increase in the need for PR services as start-ups searched for investors.
"And then the investors forced their newly purchased companies to invest in PR activities to increase the value of the company," Wejtko said, citing the examples of venture capital firm MCI Management, which holds stakes in portals poland.com and Bankier.pl, and BRE Bank, which invested in local cable TV company Vectra. It (Vectra) became the No. 3 cable broadcaster in Poland last year.
While there are PR companies that offer professional services to increase the value of their clients, there are a lot of companies that claim to be PR firms but offer nothing of the sort, Czarnowski said. "There are quite a large number of agencies that claim to offer full service for $500 a month," he said.
Wejtko said that escalating costs are limiting the development of PR agencies more than anything else today. Jacewicz agreed, saying that when the advertising market faced a dramatic reduction in ad spending last year, the PR market also slowed down. Sigma generated zl. 15.2 million ($3.5 million) in revenue from PR activities last year, 7% higher than the previous year.
"The companies want to have PR services, but they want to pay less and less for them," Jacewicz said.
The right fee for monthly (full) service should be about $4,000 (to guarantee proper quality), Wejtko said. "I think that for less than this amount, there is nothing to do," Czarnowski said. Wejtko added that most clients find PR fees too expensive. "There is a trend to reduce that amount," Wejtko said. Czarnowski said the "fair rate should be in the range of $8,000-$10,000."
