Authors
- Michael C. Lasky, Partner/Co-Chair, Davis+Gilbert LLP
- Matthew Rosenblatt, Partner, Anchin
- Kim Sample, President, PR Council
The Public Relations industry is experiencing exciting transformations, with consolidations, mergers, and evolving agency structures creating new opportunities. At the same time, the rise of artificial intelligence is enhancing how firms operate. Some organizations are embracing in-house or hybrid PR models, encouraging agencies to re-strategize their business operations and showcase their value in innovative ways.
As the industry evolves, several emerging trends are driving transformation and unlocking new opportunities. Five of the most impactful include:
1. Increasing Price Competition
Digital platforms and AI tools now enable organizations and agencies to handle many PR tasks more efficiently, freeing up time for more strategic work. This shift will challenge the standard hourly billing and retainer models as clients push for greater efficiencies and effectiveness. Some PR agencies are adopting more flexible pricing structures that reflect the value of the work. Some are looking at consistent or product pricing for work regularly requested by clients.
These alternative pricing structures take a more performance-based approach, shifting the focus away from metrics like click-through rates (which, as we note, can be prone to fraud) or impressions and towards more reliable indicators, such as sales and reputation, to measure success.
To remain profitable, agencies must carefully assess the financial impact of each client relationship, considering not only direct costs but also factors such as overhead allocation, staff utilization, and technology investments. As a result, there is a growing need for more advanced financial modeling and stronger accounting controls to manage these complex revenue structures.
2. Competitive Compensation Structures
In the face of increasing price competition, some PR firms are adopting innovative compensation models. Since a discretionary bonus often does not sufficiently impact the desired behaviors, many firms have worked with legal counsel to establish long term incentive plans (“LTIP”) for mid-level and senior employees. The LTIP awards both pay out over time (typically a 2-3 year period) and are based upon one or more pre-established key performance criteria such as revenue, growth, or profit growth. Techniques such as profit interests, or contract or “phantom” equity are often also utilized for senior employees, sometimes in conjunction with a LTIP. All of these models align employee rewards with company performance and long-term growth.
However, these new compensation structures require careful financial oversight. Firms must navigate complex tax implications, regulatory requirements, and performance metrics for equity-based rewards. The main impacts of these models are the timing of recording the expense on the company’s financial statements and the compensation received by the employee. It is essential to work with a trusted accounting and tax advisor to maximize tax benefits, including employment credits and incentives, while ensuring compliance with regulatory requirements. In addition, they can address implications in accordance with Generally Accepted Accounting Principles (GAAP) to determine how these should be accounted for and how the inclusion of certain terms can simplify the assessment process. It is also recommended that an attorney be consulted to ensure the best fit for the company and to appropriately structure the agreement.
3. Corporate Restructuring
Client demands, rising costs and new competition are forcing agencies to rethink how they operate. The industry is seeing a slew of mergers, acquisitions and restructuring as agencies seek to expand their service offerings, acquire specialized talent, and build technological capabilities to compete in an evolving market.
Tax implications for mergers and compensation structures, regulatory compliance across multiple jurisdictions, and the need for sophisticated audit trails are requiring firms to strengthen their accounting practices and financial controls while simultaneously developing new metrics to assess profitability in a changing industry.
4. Evolving Success Metrics
Traditional PR benchmarks including click-through rates, social media engagement, and online reviews have been undermined by the rise of sophisticated bots, click farms, VPNs, and other technologies. With estimates suggesting that over 40% of website traffic is now non-human, these once-reliable metrics can no longer be trusted to measure the effectiveness of campaigns.
In response, PR firms are developing new strategies to demonstrate and monetize their value. Many are shifting toward metrics that track actual business impacts, such as sales conversion rates and qualified lead generation, moving away from outdated engagement-based measures. This shift is also influencing how agencies structure their fees, particularly for performance-based contracts that traditionally relied on digital engagement metrics. Changes in fee arrangements are also causing many firms to revisit their client contracts to ensure the new fee arrangements are properly papered, and to ensure that the contracts, specifically termination provisions, are drafted in such a way as to avoid potential fee disputes.
With the advent of advanced analytics tools, agencies can now measure sentiment, brand perception shifts, and reputation scores, providing a more accurate reflection of campaign success. This evolution requires firms to develop new pricing models and success metrics that align with these sophisticated tools. As a result, agencies are rethinking their billing structures and revenue recognition practices, embracing a more holistic approach to performance tracking and client satisfaction.
5. Artificial Intelligence
Another form of technology fundamentally reshaping how PR firms operate is AI, which presents as the biggest industry trend for 2025 and beyond. PR firms are using AI-powered tools to analyze media coverage, track campaign performance, automate routine tasks, and even predict outcomes based on historical data patterns. According to Davis+Gilbert’s 12th Annual Public Relations Industry Trends Report, 2024 saw a dramatic increase of more than 20% from 2023 in firms using AI for ideation, written content, creation, data analytics, and project management, , with the surveyed PR firms reporting using more than 40 different AI platforms. In addition, almost 40% of firms reported cost savings and workflow efficiencies using generative AI, according to Davis+Gilbert’s findings.
However, AI integration brings significant legal, ethical, financial, and regulatory challenges and liabilities. Firms must navigate complex compliance issues around data privacy, intellectual property and personal rights clearances, and disclosure requirements for AI-generated content. Because of this, firms have recognized the need to develop and adopt new best practices. As of October 2024, 70% of firms had implemented a firm-wide AI policy and many are now updating their policies as best practices and AI platforms continue to evolve. Firms are also updating client contracts to address the unique legal and regulatory risks and responsibilities that go hand in hand with AI usage.
In addition, agencies must work with their tax and accounting advisors to manage ongoing expenses and ensure proper controls for AI-related expenditures while maintaining compliance with evolving regulations.
The Public Relations is undergoing profound changes, driven by advancements in technology, evolving client expectations, and competitive pressures. As digital platforms and AI tools transform the way firms operate, agencies are adapting by embracing more flexible pricing models, developing innovative compensation structures, and rethinking their service offerings to stay competitive. With careful planning and strategic adaptation agencies can leverage these trends to unlock new opportunities for growth and sustainability in the years to come.