11 February 2007

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..?


Anonymous said...

Mostly on-target stuff TWL, even if it does sound a little bitter. Ex-employee are you?

I would disagree with your description of Joe Public though. It was a failing brand before it was forced on AO and it continued to fail until, well, it failed. You can argue that AO failed to turn it round but not that it was strong until it went to AO and then it was somehow weakened.

....the world's leading.... said...

Yeah, see your point. Again, not being close to JPR's finances when the decision was made, it's difficult to say how bad a shape it was in. Having said that, I'd still argue that Joe Public Relations was a good brand, even if the business wasn't in great shape.

Any bitterness here doesn't come from me though, rest assured..!

Anonymous said...

Hmmm - a good brand but a failing business. Not sure they really should go together. If the "brand" really is that good, then it will probably be a strong business unless its management screws it up. Hmm, yes, it does sound like JPR now you mention it....

Anonymous said...

Some have been waiting for a good year for the Lexis merger announcement. Isn't it in the next couple of months that the N15 Group aquires the final or majority share in the consumer brand?

....the world's leading.... said...

I think this announcement from April last year relates to Next Fifteen increasing its shareholding in Lexis to 51% - with the intention to own the lot by 2010.

....the world's leading.... said...

Sorry, this announcement: http://txg.l.client.shareholder.com/news/20060406-192221.cfm

Anonymous said...

Joe Public was always a very profitable business, including its final year before the merger recording a respectable profit margin. Single discipline PR agencies always experience turbulence sometimes, but with a heap of cash in the bank, the brand and people were certainly strong enough to grow the business again from the dip caused by the dot com crash - a dip that many agencies felt. Some well-known consumer agencies lost money during those times and have come back stronger using their cash to re-build. Joe Public would have done the same had it not been merged into AO and experienced massive cultural unrest.

....the world's leading.... said...

"experienced massive cultural unrest"

Sounds like something moree out of Iraq than west London...no exaggeration though, I'm sure.

Anonymous said...

As someone who was at the coal face of the JPR merger, while there was some issues with the brand pre-AO, it was destroyed through amazingly bad management on the AO side coupled with some brillant personality clashes. A lot of good people and clients where lost within the first six months and from that point it was beyond help.

From a personal point of view, it is a shame to see the end of AO, but like a piece of road kill, someone needs to get the spade out of the boot and put it out of its misery, its not going anywhere from here...

Anonymous said...

Well, we don't actually know if it is the end yet. They may fight it out.

Anonymous said...

Hey Pinny, nice blog!

....the world's leading.... said...

What a simply brilliant comment. I love it because, though anonymous, I reckon it's come from someone at AO who thinks they know who TWL is ("Pinny" being, we understand, the nickname of Mark Pinsent, one of the people often acused of being TWL).

I can even imagine the conversation..."If they don't publish the comment, then we'll know it's him...if they do, well, ummm...not sure what. But let's send it in anyway..."

But where does it get us?

What I can confirm is that TWL is not the work of one man; it's not even the work of a group of people. It's the work of the whole industry. Take the AO post as an example...that's not one person's insight; it's what most people anywhere near the company are saying.

Anonymous said...

And everyone with a clue seems to have left Inferno now as well... ah, that Microsoft chalice

....the world's leading.... said...

Do we take it that you're ex-Inferno..?

No, no...of course not.

Anonymous said...

I wasn't surprised to see that AO's merging back into Text 100 but I couldn't help feeling that it was the end of an era. I, for one, have some great memories of working at AO and had the chance to work with some pretty great PR people whilst there. There is definitely a lesson to be learned from its demise - get rid of your senior dead wood before it sucks the life (and the talent) out of the organisation. A lot of what you say is right, TWL, there were far too many expensive and ineffective senior bods there scrambling to justify their existence via over-complicated strategic pontification. The shame of it was that if they had just got their hands a little more dirty and used their considerable experience to do solid PR for its clients I reckon AO might still be here today. It could also have done more to keep some of its talent, too - that man Pinsent springs to mind, as does Mr Callington and Mr Hayward. They were the reason why the company set the standard in the early days, not the lofty strategic methodology that came to characterise a company that simply lost its way.

Sophie Brooks said...

Apologies for my tardiness in joining this lively debate, but I'm afraid I've been busy, well, having a life really. But at an otherwise very pleasant lunch today I was alerted to the fact my name had been used in association with something not altogether complimentary on a blog, so I thought I'd better check it out. Expecting to feel seven shades of outrage and injustice, to my surprise I found TWL's comments on the sad tale of August One fairly accurate.

Fact is, August One was a strategic mistake from the outset.

Establishing a new company based around one client - the tech industry's (arguably the PR industry's) most challenging client to boot - was never going to be an easy win. Doing it at a time when that account was struggling, staff lacked motivation on that client, and then splitting what was a successful growing international company in two to create two inherently competitive sister companies, made it an almost herculean task. Call me an old hippy, but the brand never had good karma.

There are many reasons why with the benefit of that old failsafe for responsiblity shirkers -hindsight - is a wonderful thing. But what astonishes me in this debate is not only the utter cowardliness of most of your contributors - all you industry gurus with your ears to the ground - enough buck-passing to start a rodeo - but the smugness of all these 'people close to the company' in being so sure they would, could or did do anything differently or better.

For my sins, I had the task of leading August One twice - neither time did I ask for the job and neither time did I claim to have all the answers to that businesses' various and not insignificant challenges. But I do know that all the people mentioned here put everything they had into trying make August One work - making some mistakes along the way admittedly, but strangely enough, I don't remember being inundated with alternative strategies from all of those business gurus who've so vocally (but anonynously) contributed to this column.

Some of us tried to pick up the pieces of an doomed merger with Joe Public even when the senior managers there were dead set against it from the outset and certainly poisoned their own staff against the whole idea before it began. Some of us actually tackled the issue of moving on some of that senior 'dead weight' - only to find them re-appearing on this blog (and in various other dark corners of the PR industry) slagging off the company for trying to cut its cloth....in their minds I'm sure the 'dead weight' always to refers to someone else, not themselves.

And at least I'm willing to put my name to my comments, something which so many of your 'sources close to the company' just can't seem to manage.

....the world's leading.... said...

Hi Sophie - thanks for popping by, albeit a little late. But no matter...your insight is welcome.

You say that "August One was a strategic mistake from the outset" yet surely, as one of its founders (we think) and two-time CEO, that was your strategic mistake? So why waste year's of your life on a "brand that never had good karma"? Odd.

As we say, your response to the post is a little after the fact, as it were, so we can't guarantee that any od the original commenters will see it and respond. However, what we can do is drop emails in to those people that contributed to the original story and see if they want to comment further. As you said, though, that you found our original post "on the sad tale of August One fairly accurate" they might not feel that they have anything to defend!

Oh, and sorry if we ruined your lunch.

Matt Wood said...

Interesting debate - love it and this all makes fun reading. I'm happy to put my name to this tuppence worth... there were lots of fuck ups and of course those not bought into the merger of JPR and AO, including me (shock, horror). Taking on JPR was always going to be very tough and it was also always going to turn out to be a poison chalice. There were lots of egos involved, including my own, and unfortunatly the 100% buy-in that was required to give it a fighting chance didn't happen. The smartest person in this whole silly mess was Clive Armitage of Bite (hello Clive) who put his ego to one side, recognised that it was trouble when presented with the opportunity to take it on, and priced himself out of the market from day one - a very smart move! The only regret I have is that I didn't fight hard enough to prevent a merger happening... and one final point, if you want my take on AO - paralysis by analysis... shame.