The AOR Gravy Train Has Run out of Fuel

Digital Equipment Corporation — aka DEC or Digital — had close to 80 public relations agencies working on its behalf around the world by the mid 1990′s.  The tech giant’s global PR budget was extensive, but I don’t think anyone really knew how extensive because the company operated as decentralized as possible.  Accountability and measurement was non-existent.  Country general managers and PR managers re-upped with their pet PR agencies, unchecked, year after year after year.

Then, circa 1995, Digital started to bring in communications executives from inside and outside the tech  industry.  Public relations and marketing communications executives from HP, IBM, Sun Microsystems, and AT&T, among others, such as a Travelers Insurance, joined the struggling giant that was on life support and immediately saw that 80 PR agencies, and the resulting siloed approach to PR, was one of the many elements bringing the company to its knees. Too many disparate messages, too many untrained and unauthorized employees talking to the media, too many PR managers spending money like students on Spring break.

But in 1995 all this began to change. The Digital gravy train enjoyed by so many PR agencies over the years was coming to a close as the new PR guard conducted a massive agency review designed to consolidate under a single global agency — an Agency of Record, or AOR.  Golin Harris got the win and the rest is history.  In retrospect, perhaps it was too little too late and about two years later Digital was history too.

Now we’re hearing that the AOR is pretty much history as well.

Just 10 years ago, about half of the public companies in the US had an AOR for their public relations activities.  Today, that number stands at about 15 percent, according to a new report by The Strategic Communications and Public Relations Center, part of the University of Southern California’s Annenberg’s Public Relations Studies unit.  At the same time, PR budgets are going up, with about 25 percent of the 620 PR executives who participated in the study reporting increased PR spending.

So what’s going on?

Well I’m not saying that maybe DEC was right by employing so many agencies.  The problem there was most of Digital’s agencies were “traditional” agencies, and redundant by definition.  Today it’s different. Companies are moving away from having a single PR agency in their employ, an AOR, and moving to a model where specialized agencies are augmenting core PR programs — agencies who specialize in a PR-related discipline or region.

“We found that the trend away from the single AOR continues, and that’s a finding we’ve now seen very consistently over the last 10 years,” said Burghardt Tenderich, associate professor and associate director of the strategic communication and PR center (SCPRC).

As the report points out, the eventual demise of the AOR presents a formidable challenge, especially for the big global agencies who try to be all things to all companies. Their AOR status has meant relationship durability and predictable profitability.

At the same time, smaller specialist firms are licking their chops and poised to take advantage of a window of opportunity not seen in a decade.