…over 50% agencies report revenues below N5m – Report
By AYOOLA OLAOLUWA
The nation’s Public Relations industry, which had hitherto been fragile, has been badly hit by the impact of the economic downturn resulting from the effects of the coronavirus pandemic. Business Hallmark reports that the outbreak of the coronavirus pandemic has caused serious damage to the nation’s economy.
Particularly affected is the PR industry which has had its fair share of the downturn that has negatively affected their margins and currently threatening their existence.
A recent report by BlackHouse Media (BHM), a public relations firm, which chronicled data on trends, perceptions, challenges, and prospects within the industry, looked at the impact of the Covid-19 pandemic on the earnings and profitability of Nigerian businesses, which are major sources of income for public relation firms.
According to the report titled: The Nigeria PR Report 202p, 56 per cent PR agencies in Nigeria reported revenues of less than N5 million yearly and are finding it difficult to retain their prized accounts.
“The COVID-19 pandemic has ravaged the world, and now more than ever, PR agencies have to prove their worth to their clients, leaving consultancies with unanswered questions as to how to make sure that their businesses are providing the right services, and the 2020 Nigeria PR Report helps to shape thoughts in this direction,” noted Adun Okupe, the Lead Researcher, Compass Insights.
A check by our Correspondent confirmed that there are about 200 PR agencies in Nigeria registered either with the Nigerian Institute of Public Relations (NIPR) or Public Relations Consultants Association of Nigeria (PRCAN).
According to the report most of the PR agencies fall within the SME band, with 64 percent of respondents qualifying as micro-enterprises based on the number of their employees as defined by the Small and Medium Enterprises Agency of Nigeria (SMEDAN).
The report further showed that only 9 percent of Nigerian PR agencies have been in operation for over 20 years, 19 percent have been in operations for more than five years and 12 percent of have been in operation for five years.
In essence, what the report suggests is that most of the 200 registered PR agencies did not make enough revenue to sustain their operations, unlike in 2019 when 71 percent of agencies indicated growth in revenue and only 10 per cent reported a decrease in revenue.
Sixty eight percent of the agencies noted that their revenue plateaued in 2015, with 15 percent reporting a decline in revenue blamed on the economic recession of that period.
The report stated that 64 per cent of the agencies have fewer than 10 employees, 14 per cent are small enterprises with 11 to 20 employees, and 22 per cent with more than 21 employees posted poor revenue earnings.
Apart from the effects of coronavirus and dwindling economic fortunes of clients, the report also mentioned the challenge of attracting and retaining the right talent, with about 70 per cent of those working in the industry having less than five years of work experience.
Speaking on Nigeria PR Report 2020, the founder and CEO, BHM, Ayeni Adekunle, captured the volatile nature of the year for the PR industry.
“When we planned for the 2020 Nigeria PR Report, we had no idea of how the year would turn out. These are very unique and interesting times, as our choice to have the report focus on sustainable growth has now come into focus with the adverse effects of Coronavirus.
“The importance of the report to the Public Relations industry in Nigeria cannot be overemphasized. By modeling well-founded world reports such as the Holmes Report, World Development Report, Relevance Report, the Nigerian PR Report team continues to hope to create a standard global report that can easily be used for referencing details, instances and facts about the industry,” he said.
Meanwhile, BH findings revealed that the PR sector have been witnessing declining fortunes since the economic depression of 2016. Available data suggests that there were drops in the numbers of agencies whose annual revenue bands were between N11 million and N20 million (9%); N21 million to N50 million (16%) and between N100 million and N150 million (42%) between the years 2015 and 2017. Also in 2018, the industry recorded 20% drop in profitability as a result of continued loss of revenue.
The already dire situation is now made worse by economic downturn with major brands who are becoming more frugal with how they channel their PR/ad spends, resorting to budget cuts.
A concerned PR executive with a major agency based in Lagos, Bukola Ninalowo, said companies now demand concrete commitments on return on investment (ROI) as they increasingly want to tie PR spend increase to improved revenues.
According to her, major companies in the alcoholic/beverages, airline, tourism/hospitality, education, real estate, banking, manufacturing industries and many others have cut down on their PR/advertisement budgets.
“The state of affairs has been driven largely by macro-economic shocks with big spenders like banks and fast moving consumer goods companies slashing their ad/PR budgets, with consequent squeeze on the local PR industry”, declared Ninalowo.
According to a stakeholder in the industry, Adebayo Williams, the situation reaffirmed the fact that PR is usually the first casualty when companies initiate a cost-cutting exercise.
“As a result, agencies must think outside the box to mitigate the current challenges”, Williams advised.
Also, another PR practitioner, Sanya Biobaku, said that though the PR sector witnessed a period of turbulence between 2016 and 2018, 2019 is a year the industry pray to never witness again.
“In 2019, big brands spent N114 billion on Advertising, Branding, Marketing and Promotion (ABMP), N116.394 billion in 2018 and N101.8 billion in 2017.
“For example, the brewery industry made up of Nigeria Breweries Plc, Guinness and International Breweries spent about N41.6 billion in 2018 compared to N36.4 billion in 2017. ABMP data in the first 9 months of 2019 suggests they have spent about N39 billion. Guinness’s financial year-end is June 30th as such its ABMP spend for 2018 was between July 2018 and June 2019.
“However, available data suggests that the major brands have only spent less than N45bn on ABMPs in 2020. Assuming the trend continues in the last quarter of 2020, we are going to witness the injection of only N15bn, making it N60bn in spending in 2020. This is a far cry from the N114 recorded in 2019”, Biobaku lamented.
Apart from the brewery sector, another sector that spent heavily on advertising, branding and public relations in 2010 is the banking sector, with about N59.9 billion spent in 2019, N52.9 billion in 2018 and about N50.4 billion in 2017.
However, BH observed that ABMP spending on branded events like musical shows, fashion shows, food fairs, SME fairs, market place and hackathons has dried up due to stringent social distancing laws put in place by the government.
“Since the outbreak of the pandemic in Nigeria, no major outdoor event has taken place. Apart from the organisers of the events, the PR industry is also a victim.
“One of such events was the UBA Marketplace that held at the Transcorp Hilton Hotel in Abuja last year. It was a massive PR event which featured several side events including fashion shows and a music jam. Hundreds of millions of naira was spent on publicity alone. This is just the UBA event alone.
Not to talk of big media events such as hackathons, SME fairs, and quiz competitions like the Cowbell-paedia Mathematics Contest. They have all been put on hold due to Coronavirus. The accounts for the events have also been frozen, at least for now. You can see the impact on the PR indudry alone”, said an industry insider.
Another factor that has contributed to the fall in revenue been experienced by PR agencies operating in the country is the allegation that international PR firms shortchange their locally affiliated partners.
“Multinationals doing business in Nigeria often prefer to key into global PR contracts with their U.S. or European or headquarters, cutting off the services of local PR agencies
“Even when they decide to work with local PR agencies, the fees are relatively smaller compared to when they directly invoice brands”, said the chief executive officer of a top Nigerian agency based in Lagos.