Word is Edelman's Million Dollar Venture is Almost Out of Cash
Remember the Tech revolution? Well, simple as this: the bubble broke when the client ran out of money. That's it. Burn rate sans profitability equals eventual flame out.
Well, unless you've got a tin ear, you've noted a huge difference lately in the PR blogosphere. The bravado's certainly gone. Some A-listers barely post at all anymore (Hello Aedhmar!). Granted, that's anecdotal. Here's a sure sign the "Revolution" is winding down. Word is Edelman's experimental Me2 Practice is running out of money.
This weekend we got a tip from an insider. Apparently, King Richard originally bankrolled the Revolution to the tune of $1 million. Simple calculations show that it could all be gone. Well almost. Here's a stab at the numbers:
- Salaries add up to approximately $540,000 per year. That includes division president Rick Murray at approximately $250K/year; SVP Steve Rubel at approximately $185K; senior counsel, online communications, Phil Gomes at approximately $40K; and various secretarial support at $65K.
- Out-of-pocket expenses likely top $200K/year. That would include: pointless trips; assorted "experimental" widgets and office toys; Second Life contests and other charades; and WOMM-like memberships and payoffs.
Total: That puts the burn rate at about $62.5K/month.
Projection: The venture can survive for less than 16 months (or 4 months after their 1 year anniversary February 16, 2007). We predict that without additional funding, the practice will be shuttered sometime the end of June, likely sooner.
Might Richard dump more money into the gamble? He recently wrote a summary of the year's accomplishments. It's pretty depressing. According to Richard:
Keep in mind, the rest of the firm had to make about $3 million in fees just to cover Me2's diddling.
So... is winding down necessarily a bad thing? No. The Me2Revolution has been a loss leader for Edelman... and PR frankly. Rubel and Co. is a billboard to in an effort to stimulate other, profitable sales. That's all. That said, regrettably, a loss leader causes various marketplace distortions. Let alone that under some jurisdictions, a loss leader is considered bait and switch and is illegal. Bottom line: like the tech bubble, all the other chumps that really believed that there was potential here cannot absorb the readjustment like Edelman. That's the real pain cause by a bubble.
Excellent report on the Me3Revolution meltdown.
Yes, if history repeats itself, Richard will probably let this unit fade away, much like his sister Renee's doomed PR21 unit, which at one time boasted of $14m in revenue. PR 21 died after many Silicon Alley clients evaporated. Rich kept the unit at arms's length and Renee often said it was "independent" of Edelman. But, of course, no one believed her. This time, Rich will probably say Me3 was "imbedded" into the account groups and refuse to admit it's gone.
And given that everything Edelman continues to capture our top spot in our ongoing "most negative comments about any agency in the blogosphere" contest, http://www.themeasurementstandard.com/issues/1-2-07/paineblogrep1-2-07.asp
it hasn't done their reputation any good either