The Freud Supremacy

Freuds remains an iconic agency that divides opinion. Do you enjoy your maverick status?
I’ve always had quite a stand-offish relationship with the industry. I’m not sure it’s a deliberate strategy. We just work for our clients, keeping track of what happens, working out opportunities and mitigating or defending against the worst scenarios. But there is such a strong culture here – a moral compass, a value-driven ethic – that I don’t have to make decisions about my strategy.

Describe the culture at Freuds
There was a time when Freuds was an extension of me. But it has become its own organism, moulded by other people. We’re aggressive. We certainly favour action over inaction. No-one in the PR industry produces the sheer volume of coverage we do every day, from consumer to corporate. We see ourselves as highly trained content managers.

Freuds had a strong 2009, in terms of both revenues and profitability. How did you do it?
Arrogance is a word that people have used about Freuds, but we do have a strong belief in our own value. And there’s only one accurate way of demonstrating this – by charging for it. I look at companies in our space who are apparently good at what they do, but still charge low five figures or less a month when they should be billing much more aggressively.

Indeed, why do they charge per month at all? This is right at the heart of the problem. What else do you pay for on a monthly basis? Your gym membership? It’s treating what we sell as a commodity rather than phenomenally high value marketing and reputation management. We contract annual revenue commitments and bill quarterly in advance. Our top line grew by 18 per cent and our bottom line by 38 per cent.

We had 100 per cent client retention and we have among the healthiest margins in the Publicis group.

But how do you justify the higher fees to clients?
We have had to concentrate increasingly on validating fees. But when we’ve done it, the RO I has been phenomenal. No-one ever came up with a good way of measuring it, except reputational tracking. But what is a company or a brand’s reputation worth? The answer is not going to be £12,000 a month. Plus, when it’s lost or damaged, how much will it cost to restore?

The majority of PR firms may not actually provide enormous value to their clients, because they don’t have the tools to aggressively defend or promote their clients’ interests.

I structured Freuds to be a content provider to media – and to use that value to create a relationship that was one of mutuality. I think that’s one of the reasons we are able to command the enormous premium. It’s the difference between Topshop and Savile Row.

This suggests some clients are finally starting to recognise the value of good PR consultancy?
PR – in terms of reputation management, third party endorsement, crisis management – is about as core a function as any company currently has. Reputationally there has never been a time when you can divide companies more easily into the f***ed and the nonf*** ed. There is total consumer transparency, extraordinary media scrutiny and a massive collapse of public trust in companies, governments and institutions. Reputation management is a firewall around your business. If you don’t have it, you are likely to fall over. I believe our job is critical. If we do it well, we deserve to be rewarded for it.

So can we say that PR has finally moved up the marketing food chain?
Ten or 15 years ago CEO s used to know the head of their advertising agency, but now our peer group has emerged as the strategic advisers of choice in marcoms.

Clients are also now saying the best idea wins, rather than simply accepting their advertising shop as the lead agency.

For many of our clients we are now the lead strategic or creative agency. We were certainly the lead agency for Nescafé – three TV campaigns in a row were our ideas. For Walkers, its most successful consumerfacing campaign – Do Us a Flavour – was conceived by us in conjunction with film director Paul Weiland. The ad agency AMV BBDO played no real part in the strategy or idea creation.

What gives PR the advantage over advertising?
We apply more rigour than any other marketing discipline; we can provide creative solutions based on truth. It is because every day we have to operate through the editorial filter. Every idea that comes out of our building is scrutinised by sceptical journalists. This is mission critical for clients, who should have realised by now that they need a single comms message (corporate and consumer).

Does this mean that PR can charge advertisingscale fees?
Sometimes one needs an ad agency to come up with the right creative, but we can now carry out the execution in terms of promotions, virals, etc. This is where the planning kicks in.

We have 40 non-chargeable staff: planners, creatives, sustainability experts, media handlers, content distribution and logistics staff. We have issues managers and even advance and ground handling teams for CEO's, who now expect the same level of support at events as heads of states (and some of them run companies that are bigger than many countries in terms of GDP). These are the resources that make us smarter – our intellectual capital – and we have to pay their way through our charging model.

It is nearly five years since Publicis bought 50.1 per cent of your agency. How healthy is the relationship?
When I did the Publicis deal, I didn’t want to repeat the mistakes I had made in the past [AMV/Omnicom]. I sold very few of my own shares and as far as I’m concerned it’s still my company. The 0.1 is a technicality, so it can consolidate our numbers. I have enormous respect for Maurice Levy [Publicis CEO].

If you compare him with his peer group, he is head and shoulders – quite literally in some cases – above them. He is my friend and partner.

Would you like to buy your stake back?
Publicis wouldn’t sell. Even if it would, I don’t need to buy it back. I am in control. Publicis leaves us alone and we benefit from being in partnership with some very good companies.

So would you want to acquire agencies instead?
I’ve never successfully made an acquisition. I believe the best businesses are owner-driven.

What about your international ambitions? Your New York foray didn’t really work [Freuds’ NY office merged into HL Group last year], did it?
No, I shuttered my operation into Hamilton South [founding partner of HL Group]. I realised that, in 100 years, I was never going to be as good as him in NYC.

Publicis already owns Kekst in NYC [agency of the decade, according to PRWeek US] and its MS&L brand is strong across the US. In any case, we’re already international. London is an important business and media hub. We have relationships with all the global media and we can do much of it from London. I want to be in London. My family is here. Elisabeth [Murdoch – Freud’s wife] runs a big company [TV producer Shine Group] here.

So where does the future growth lie?
We’re encouraging businesses to re-engineer their comms functions for a rapidly changing world. In the age of deference, it used to be about interruption (advertising). Then there was the age of reference, when it was all about editorial. Now it’s about something else – the ‘f*** you, we’ll work it out ourselves’ generation.

There’s not nearly enough understanding of the media (the macro-media business) at a senior level. If you know this you can understand the potential reputational damage: the way stories will develop. But if you deal with the source material efficiently, you can watch it proliferate in the right way. That’s why you need digital listening posts. Then you can decide on how to intervene: editorially, legally, or through the right relationships.

Increasingly, we’re dealing with the really big issues: effecting behavioural change in important areas such as better health for people and sustainability. The good stuff, life-enhancing stuff. It is compelling.

25 years of Freud Communications

I hope that over the past 25 years we’ve had influence over an industry that has changed beyond all recognition. The agency is my eldest child (I’ve got six others) and it has behaved exactly like a child. During the first couple of years it would have died without me. At about age five it did the first major thing that I didn’t know about.

At around nine to ten it got slightly irritating and I wanted to smack it about a bit, but couldn’t. The gangly teenage years weren’t particularly attractive, but it started to gain its own muscularity. When I moved out for a while – to the Mayfair consultancy spin-off – it was the ‘university years’ when the main agency forged its own identity. When I came back, I really started enjoying its company.

Like a good parent, I’ve realised that the agency is not just an extension of me. I’m proud of it and have never enjoyed it more.

The infamous parties

After 25 years working in London, I have a lot of friends. We’ve grown up together. Many of them are in positions of influence. But you cannot exploit that connectivity; you can’t deploy it for your own gain. I like entertaining and I have a nice house. There’s never an agenda at my parties. It’s certainly not me paying for any kind of access. We don’t do lobbying. I don’t see entertaining as part of my work.

The best host enables his guests to relax. It can be quite lonely being a boss: a CEO , a politician, a celebrity, an editor. It’s nice that they can relax among peers and not be ‘on duty’. That’s why I never allow photographers to my parties: not because it’s secretive, but when there’s a photographer present, you immediately get a social hierarchy.

Political and media connections

Politics is a hobby for me, not a job. I don’t want anything from politicians. I admire and like Tony Blair, and I get on well with Sarah Brown, but my relationship with them is on the cause-related stuff – Aids, maternity health, etc. I am a trivial person in the world of politics, and don’t aspire to be more.

The News Corp relationship [Freud is married to Rupert Murdoch’s daughter Elisabeth] is complicated. I make it very clear that it has no bearing at all on relationships with other media organisations, many of which we work for. It’s impossible for me to abuse the situation, because there would only be one outcome – failure.

I tell various media and journalists to ‘sod off’ at times, and they do so even more to me, but life goes on. Sometimes the media mess up, sometimes my clients do. But the media are tough enough to stand up to me and my clients, and sometimes we have to be tough enough to stand up to them.