They say AO, do we say goodbye..?

If you read the Q&A with Tim Dyson, Next Fifteen CEO, that we posted not so long ago you’d be well within your rights to assume that the group of PR companies Dyson runs is doing pretty well. Growing revenues, increasing profits, new offices and the odd seemingly successful acquisition. And you’d be right…even the share price seems to have picked, jumping around 50% over the last six months.

Here at TWL, however, there’s always been one little piece of the group’s jigsaw that sticks out like a sore thumb (if we’re not mixing our metaphors too much…): August One (AO to its acquaintances).

August One. A company named after the date it started operating in 1999…something that in itself shows such a dearth of creative thinking that it perhaps should’ve been a clearer portent for the performance of the company over the following years. A business which has steadily appeared to lose quality people and clients; shrinking until…well…until we think that there’s a very good chance that it won’t make its next namesake.

It’s difficult to understand how the various CEO’s of August One have managed to drive the company into the ground. After all, for a “start-up” the company had a pretty healthy birth. Formed when Text 100’s UK operation was split in two, AO took with it the Microsoft UK PR account…at the time one of the biggest PR accounts in the country. In any sector. And when the performance of AO’s consumer sister agency Joe Public Relations stumbled, it was quickly decided that JPR should be absorbed into AO. You don’t have to speak to many ex-JPR employees to hear how poorly that process was managed… Very quickly pretty much all the JPR crew had jumped ship, along with the majority of the ex-JPR client base. Exit stage left one decent consumer PR brand.

Of course, we’re not privy to details of the company’s finances. Not in any detail at least. However, what we can do is review the fee income declared by AO’s in the PRWeak Top 150 league tables since the company started. They paint a clear picture of a business that has never managed year-on-year growth; a business that started with a declared fee income of £6.2m in the PRWeak Top 150 league table of 2001; a figure which has been eroded year after year.

Here’s the sequence:

2001 table - £6.2m fee income, 85 staff
2002 - £4.9m, 67 staff
2003 - £4.6m, 60 staff
2004 - £4.6m, 67 staff
2005 - £3.9m, 49 staff
2006 - £2.3m, 23 staff.

To paraphrase a Formula One team owner’s onetime gag (and perhaps one for Dyson at the next AGM): “How do you make a small fortune in PR? Start with a large one and give it to August One…”

OK, so that last figure takes into account the moving of the Microsoft business into sister agency Inferno but equally, the 2004 numbers reflect the absorption of Joe Public’s clients and people into AO (and it still only managed flat fee income). Over those years AO had opened (and closed) offices in Sydney, Auckland, Hong Kong, Paris and Edinburgh. Its current staff (estimated at about 15) are housed, ironically, in the old JPR offices in Hammersmith. OK, so the turn of the century was a tough time for many agencies, but August One has never got over it, unlike its stablemates in the Next Fifteen group.

Speaking to those that have worked at AO – and indeed some that still do – common themes seem to appear. The company was top heavy, loaded up with expensive, senior staff and in an effort to justify that structure, over-complicated its proposition. Its pitches were full of strategic (and pricey) services which scared the crap out of prospects; for a long time AO had a risible record of winning new business. Then, in a reaction, the company apparently started over-promising; selling itself cheaply just to win clients and, inevitably, seeing its margins squeezed to vanishing point.

Clearly, responsibility for a company’s performance ultimately falls on the management team’s shoulders. AO has had a number of CEOs –all of them long-term Next Fifteen group employees. Tariq Khwaja, Stuart Handley, Sophie Brooks…all have had their moment in the big chair and moved on. Sarah Howe’s now at the helm, with Sally Hetherington a deputy MD. Few people that have been involved with AO feel that the company has ever had any truly inspirational leadership.

The only surprising thing is that Dyson and the Next Fifteen board have allowed AO to lurch on for so long. Indeed, when the Microsoft business was shipped over to sister agency Inferno, that might’ve been the sensible time to call it a day. Though, of course, the Microsoft income staying within the group probably supported a stay of execution and AO was allowed to try and re-positioning itself as a generalist agency. It hasn’t been a success. More than that, now that Next Fifteen owns the majority of Lexis PR – surely the agency that AO would have aspired to replicate – there seems little point in stringing it out any further. Surely absorbing any clients of worth (and willingness) and people of value into Lexis would now be the most viable option?

We do hear that there are changes afoot. Watch this space. Could it be the end of the rAOd..?