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Through mergers and acquisitions, local public relations agencies are taking on foreign rivals, Lyu Chang reports
For decades, Chinese public relations agencies have been struggling to challenge international PR firms that have been practicing their trade longer and have deeper pockets and global connections in a market, that is the third-largest market for the business after the United States and United Kingdom.
But Oscar Zhao, 44, chief executive officer of BlueFocus Communications Group LLC, one of China's biggest marketing services companies headquartered in Beijing, said he believes that the situation has changed and his company has everything it takes to thrive on the global stage.
"Many multinationals that preferred to work with international companies are now turning to local companies for their marketing services because local companies deliver better results and business outcomes," he said, adding that BlueFocus gets at least half of its commissions from foreign companies.
"Foreign and local companies have different strengths and advantages in different respects. International PR firms usually rely on an experienced operating and management system, focusing on standardized routines and processes," he said. "But, as local companies, we are more flexible and have local knowledge and connections with local media and government. That's where we have an edge over foreign companies."
BlueFocus, the first Chinese PR company listed on the Shenzhen Stock Exchange in 2010, raked in 2.17 billion yuan ($358 million) in 2012 and has experienced growth of almost 100 percent for the past three years. Its biggest client is IT giant Lenovo Group Ltd.
The latest example that highlights the growing firepower of BlueFocus is a deal with the London-based social media agency We Are Social.
BlueFocus has aquired an 82.8 percent stake in the British company for an initial 186 million yuan, with additional performance-based payments to be made over a three-year period.
"It is our first major acquisition outside China. There will be more takeovers in the coming years," said Zhao, who, over the last couple of years, has been flying all over the world evaluating companies in terms of potential acquisitions.
"The globalization of local PR companies through overseas expansion is a trend that many local PR companies will follow," he said. "Because mergers have created the world's biggest advertising and PR groups such as the big four - WPP (Plc), Omnicom (Group Inc), Publicis (Groupe) and IPG (The Interpublic Group of Companies Inc)."
Through a series of domestic acquisitions, BlueFocus has branched out from its core PR business into other areas, including media buying, digital advertising, events and sales promotions and has more than 2,500 employees. It has now set its sights on international expansion.
In April, BlueFocus bought a 19.8 percent stake in London-listed public relations and healthcare communication group Huntsworth Plc for 36.5 million pounds ($60 million). The Chinese group also acquired a minority stake in Financial PR, a Singapore-based agency with offices in Hong Kong, Taipei and Beijing.
We Are Social, a British company specializing in marketing through social network platforms such as Twitter, Facebook and Weibo, has enabled BlueFocus to gain access to expertise in social media and its 400 employees in eight operations in cities, including New York, Paris, Milan, Singapore and Sydney, with key clients ranging from sportswear giant Adidas AG to Heineken International.
Chen Yong, vice-president of BlueFocus, said that through the purchase, the company is now shifting into becoming a fully digital PR company, a provider of a range of professional marketing services and social media strategy.
"In China, we are seeing clients dedicating more of their budgets to digital media and tend to use a lot of smaller, purely digital public relations firms rather than the giant international agencies because they already consider the giant players are lagging behind," he said.
With the rapid rise of social media such as the micro-blogging platform Weibo and mobile social networking site WeChat, the domestic media landscape has largely changed.
"In the Internet and digital age, anyone can be a 'media outlet'. We need to become fully digital if we are to compete," Chen said.
But the main reason for the merger with We Are Social was that "it was the right strategic fit with a very good team", Chen said, noting that BlueFocus will keep the existing management team after the merger, not only for the sake of continuity but also for its local knowledge and professional expertise in the field.
"In the PR industry, people are the most valuable asset," he added.
In 2012, the London-based company reached a total turnover of about 400 million yuan with a growth rate of more than 100 percent for the past three years.
Although BlueFocus is still up against foreign PR giants such as Burson-Marsteller LLC and Hill & Knowlton Strategies, which came to China in the mid-1980s, Zhao is ambitious enough to reach what he called a "10-year 10-time" plan.
With a market capitalization of $3.7 billion, he plans to increase the company revenue tenfold to 20 billion yuan over the next decade. "We can get there, backed by continued economic growth along with the overseas expansion of Chinese corporations," he said. "We can now attempt to build a credible offering for many Chinese firms that are looking to go global."
Many of the world's largest marketing services groups are expanding rapidly in China, which some analysts forecast will overtake Japan as the second-largest advertising market next year.
Data from the China International Public Relations Association showed that the Chinese PR industry in 2012 was valued at 30 billion yuan, showing an annual growth rate of 28 percent thanks to sectors such as automobiles, healthcare and IT that are expected to continue to take the lead.
Still, in plain black and white terms, the fact that a Chinese PR group has taken over key Western companies is fairly momentous, but whether the strategy will be successful depends a lot on how the company can overcome a variety of challenges, according to Guo Huimin, vice-president of the University of International Relations and deputy secretary-general of the China International PR Association.
"The impact of social media is a top concern for many PR firms so the takeover of a good foreign company looks like a good way to address the issue," she said. "But the strength of local companies still lies in the domestic market. Once they get out of the door, adapting to the local culture, financial problems and finding the right people to manage all of that will still be a huge obstacle for the companies."
Contact the writer at lvchang@chinadaily.com.cn
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 The first Chinese PR company listed on the Shenzhen Stock Exchange in 2010, BlueFocus Communications Group LLC raked in 2.17 billion yuan ($358 million) in 2012 and has seen a growth of almost 100 percent for the past three years. Provided to China Daily |
