Web 2.0 reinvents the press release
The business of do-it-yourself publicity has two entrenched heavyweights, but a Web startup is trying to disrupt the game: look out, Warren Buffett. Fortune's Oliver Ryan explores the new world of PR.
NEW YORK (Fortune) -- When Adam Cohen learned that developers planned to build condos on five acres of pristine wetland within sight of his home on North Street in Northampton, Mass., he panicked.
Cohen, a 39-year-old Web entrepreneur who works from home, had moved to the bucolic Berkshires with his wife from New York in 2003 to get away from the big city grind. The couple's primary requirements: "A nice place to raise a family and high-speed Internet access."
Condos didn't promise to do much for the former, so Cohen swung into action: he organized a neighborhood association to oppose the development, blanketed his street with flyers, and invited his neighbors to a backyard barbecue to learn more about the impending threat. Then the tech-savvy Cohen went one step further: on August 2nd, he spent $220 and issued a press release via PRWeb.com.
Thanks to the release, Cohen's North Street crusade landed on the front page of the local section of the Sunday Republican, the major Springfield, Mass., daily, not to mention front-and-center in Northampton's local Valley Advocate, as well as one of that paper's firebrand weblogs. In short order, Cohen and his association became a cause celebre, and their concerns have quickly become part of the town's broader planning discussion.
"A tool like this allows us to broadcast our message widely and quickly at a reasonable price," says Cohen. "We've been able to get traffic levels for the association's web site that approach that of our local newspaper -- but the local newspaper has been around since the 18th century!"
Welcome to the world of the DIY Web press release. Press releases may not be the most glamorous corner of the media world, but represent nonetheless a $2.2 billion market in the U.S. And just as Web 2.0 upstarts like MySpace and Digg pose a disruptive threat to old media enterprises, so too do the likes of PRWeb.com threaten to topple PR industry leaders like PR Newswire and Business Wire.
Founded in 1997, PRWeb was snapped up last year by tiny, Maryland-based Vocus (Charts), which has been on a tear of late and has re-ignited the ten-year-old firm. Since going public in late 2005 - in part to raise the cash to make the PRWeb acquisition - Vocus has seen its stock triple from $9 a share to $27; and the company expects sales of $56 million for fiscal 2007, up 39% over 2006.
One of a new breed of "software-as-a-service" companies, Vocus' core business is the sale, on a subscription basis, of a web-based "dashboard" that allows public relations pros or marketing execs to keep track of their press hits, press releases, and generally manage their publicity. Prices for the service range from $10,000 for a year for a typical midsize organization, up to $40,000 for bigger accounts. It's a good business, growing at 20% a year, and still accounts for more than 80% of Vocus' revenues. The acquisition of PRWeb, however, gave Vocus a marquis industry name in a slightly faster growing market with even better margins.
PR Newswire and BusinessWire are the Big Two of press release land, and together they still control roughly 70% of the market in the U.S. It's this quasi-monopoly position position that no doubt attracted Warren Buffett to the market: his Berkshire Hathaway (Charts) acquired Business Wire in March of 2006.
On the Internet, however, PRWeb has the pole position. Like any respectable disruptor, the company has dramatically undercut its competition on price, offering a basic release for $80 vs. upwards of $500 for the Big Two. In addition to grabbing share from the incumbents, PRWeb's economics have stimulated new demand from small companies and individuals like Cohen that have never before considered issuing a press release.
But price aside, the key advantage for PRWeb is that its releases are designed to spread the word in the new Web ecosystem. Unlike the old school products which deliver carefully edited text releases to conventional newspaper newsrooms, PRWeb press releases support hyperlinks, as well as audio and videos (even YouTube videos.) Moreover, they can be "tagged," like blog posts, and easily re-distributed via PRWebs RSS feeds. (The company pushes out over two million RSS feeds a day.)
Most importantly, the releases get indexed favorably by Google and other search engines. "The main reason that I like to distribute through PRWeb is because of their ability to make the releases visible online," says Inga Beyer, a young PR rep at the Henry Bruce Russell agency in Iowa, who confesses in her first year in the business she has almost never used the bigger players. Indeed, in the modern era, press release distribution is almost entirely about "search engine optimization." That's a tricky and inexact science, and one that PRWeb has mastered to a far greater degree than its rivals. In fact, when Business Wire wanted to add Web 2.0 features like tagging and search engine optimization to its portfolio of services, it opted to contract with Vocus for a co-branded version of PRWeb.
Still, the game is far from over. "A lot of companies have come and gone trying to unseat the Big Two," says Greg Hazley of O'Dwyers, a PR industry trade newsletter. Both Business Wire and PR Newswire, which is owned by UK-based United Business Media, have far greater overseas distribution. Moreover, old habits die hard, and Fortune 500 PR operatives will likely be slow to switch from the services they've long used. That means the legacy players will have time to upgrade their Web offerings. But the new generation of Web-centric PR professionals who have adopted PRWeb may be hard to win back. "It's very convenient to simply have all of my past press releases in one place," says Cohen of PRWeb. "There's a bit of a moat there. Somebody would have to come up with a compelling product to lure me away."
Furthermore, Vocus is not wasting any opportunity to press its advantage. On Tuesday, the company announced the launch of IssuesWire.com, a sub-brand of PRWeb designed to target political or issues-oriented newsmakers and readers in time for the 2008 presidential campaign.
So what's the bottom line? The importance of the Internet and search engines to the distribution of news is only increasing. And if this industry story plays out the way its analog has in consumer media, bet on Vocus and short the incumbents, Buffett or no Buffett.