After two years of impressive growth, with a year-over-year increase of 15% and 19%, the U.S. PR sector expanded by just 3% YOY in 2023, slightly below the 3.4% inflation rate, according to PRWeek, writes Kim Sample, president, PR Council. While agencies hoped for stronger growth return this year, the reality has been mixed with some agencies achieving strong double-digit growth and others remaining flat.
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Despite the slower growth year, these are exciting times for the U.S. PR market. Although economic uncertainty has had an impact across almost every sector, resulting in cutbacks, short-term and slow approvals and shifting client priorities, the sophistication of and appreciation for communications has never been higher. The industry’s resilience in navigating these challenges underscores PR’s importance and sets the stage for continued growth.
New roles, new complexity
According to Craig Carroll, founder, OCR Network, “The role of Chief Communications Officers (CCOs) is undergoing a significant transformation, especially within Fortune 1000 and Forbes Global 2000 companies. The emergence of ‘CCO+’ (CCO-plus) roles—where traditional communications responsibilities are combined with strategic functions like HR, Marketing, Social Impact, and Corporate Affairs—is becoming increasingly common.”
This expansion requires agencies to bring in experienced counselors with cross-functional expertise to navigate not only these expanded responsibilities, but also the increased complexities driven by geopolitical tensions and U.S. polarization.
Managing these issues successfully is critical because missteps in today’s environment can significantly affect employee, customer and community sentiment and actions, which ultimately damages the bottom-line. To help communicators make smart decisions and assess outcomes, agencies are investing in their tech stacks like never before. The ’24 PR Council Tech Stack Study revealed that the number of tech platforms used across their membership nearly doubled in just three years, from 500 to almost 1000.
Technology and the promise of AI
Technology is integral to modern PR, from social media monitoring to SEO and project management. Many platforms now include AI capabilities, and agencies are actively experimenting and integrating AI across their operations.
Some of the bullishness regarding generative AI has cooled across the U.S. communications industry but the technology is commonly being deployed across every area of the business. Agencies report using AI to create briefing materials, conduct audience research, validate creative executions and much, much more.
Nevertheless, our agencies are quickly learning that AI generated content alone cannot achieve visibility, relevance, amplification or engagement without the guidance of a human with deep PR expertise.
In regulated industries, the use of AI is more restricted, while other organizations are cautiously experimenting under strict guidelines. Agencies are crafting policies to protect confidentiality and avoid copyright issues, encouraging employee experimentation to harness AI’s potential effectively.
Despite speculation that AI might eliminate jobs in the communications industry, this remains largely unfounded. Instead, AI is reducing mundane tasks, particularly those handled by entry-level staff. However, it has yet to bring the significant cost savings some clients anticipated, as agencies are investing heavily in tools and training.
Escalating costs
Technology investments are straining agency profitability, but talent remains the most significant expense. According to our data, payroll and payroll-related expenses account for an average of 69.4% of an agency’s P&L. While the talent wars cooled over the past 18 months, attracting and retaining high-performing, and diverse talent with the experience to counsel clients in this environment and deliver fully integrated strategies is an increasingly important and expensive endeavor.
Inexplicably, agency fees have not increased at the same rate as costs and a correction is needed. Clients should anticipate a 3-5% fee increase in 2025.
Communicating the value of integrated PR
Modern communications strategies excel when earned media is amplified through social, paid and owned media channels, creating a cohesive and far-reaching impact. Even smaller agencies are adopting these integrated approaches to drive measurable business results and foster stronger client relationships. As PR continues to evolve, digital, social, content and influencer relations are the fastest-growing areas in the industry.
Sales remain the ultimate success metric, but today’s PR efforts require a broader, data-driven approach. Integrated PR allows agencies to leverage multiple channels, offering more comprehensive insights into audience behavior and campaign performance. Our member firms are working toward standardizing measurement practices to provide clients with consistent metrics across all levels of programming. This alignment addresses client concerns about effectively measuring the success of their internal and external teams.
A critical challenge is ensuring that budgets for measurement and evaluation are prioritized rather than being cut in favor of program execution. By treating measurement as an integral part of the strategy, agencies can demonstrate the full impact of PR.
Reconfirming the importance of DEI
Diversity, Equity and Inclusion (DEI) communications and multicultural marketing are under increased scrutiny following the June 2023 Supreme Court decision ending race-based affirmative action in higher education. This ruling has sparked legal challenges against workplace DEI efforts, causing some companies to scale back their initiatives. However, many organizations remain committed to DEI, recognizing that an increasingly diverse U.S. population makes inclusive strategies essential and inevitable.
As Supreme Court Justice Sotomayor wrote in her dissent in the landmark case, Students for Fair Admissions, “Diversity is now a fundamental American value, housed in our varied and multicultural community that only continues to grow.” Too many people in too many major institutions, including leaders of corporations, government, academia and the military, are committed to DEI for it to disappear.
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