So what key practices areas are helping to protect PR budgets? Which services are clients investing in? What trends are driving PR firms' influence and results for clients? The answer: reputation management and the ascendency of social media. Read for more perspective on how PR budgets have fared in recession—and for useful tips for tapping these two and other key areas for continued firm growth when it counts most:

Recession Realities: Why and Where CMOs Cut

Looking at the PR/communication functions of U.S. organizations in toto, the recession's impact has been relatively modest, according to a survey of nearly 200 senior level corporate PR/communication professionals released in February by the USC Annenberg Strategic Communication and Public Relations Center.

But when there is an impact agencies are the first to feel it, the survey revealed. Of the 58 percent of responding organizations who reported working with one or more outside PR agencies, 69 percent indicated they have already reduced, or plan to reduce, the fees paid to agencies. Those that have already reduced agency compensation have done so by an average of 28 percent, while those anticipating cuts expect them to amount to an average of 22 percent.

Another survey—this one by Verse Group and Jupiter Research—polled 101 marketing decision-makers between Nov. 1-10, 2008, and found that:

• 62 percent of marketers say traditional advertising efforts are no longer as effective as they once were in attracting new customers,

• 62 percent are seeking breakthrough methods that are more effective than brand positioning,
• and 89 percent say that marketing is under greater scrutiny than ever before.

But according to the clients, agencies and consultants we interviewed, most of those cuts seem to be coming from somewhere other than public relations.

PR's Power for Marketers: Communicating Strength

You know something's up when public relations gets a huge shout-out from Ad Age. Jonah Bloom's recent editorial (http://adage.com/columns/article?article_id=136530) speaks volumes about the power of PR. "Marketers are spending more on PR and getting excited about it, too," he writes. He then goes on to offer his readers a primer in public relations. (PR was also the star of the recent Ad Age Digital Conference; more on that below.)

Kelly Wenzel CMO Tideway

Paul King CEO Hercules Networks

She adds that cutbacks elsewhere can ultimately benefit a PR agency who is "a good partner." Wenzel has been forced to work with fewer resources and has the opportunity to outsource projects to her agency. It's not an approach that works for every client and agency, but it's "a tremendous opportunity for savvy agencies to go after more project work."

Moreover, Wenzel says she's willing to cut other areas of her budget, from photos for the website to promotional items, before she makes cuts from PR's allocation

And she's not alone.

Paul King offers a similar perspective. He's CEO of Hercules Networks, a distributor of automated charting machines. Not only does he see what's happening with his marketing budget, but his clients' as well.

"We deal with clients on a daily basis, and are hearing a lot about their budgets being cut, and where." In some cases, PR budgets are not being cut, or at least not as much as marketing budgets, he says. "In most cases, marketing is being driven to ROI and PR is being driven [by] reputation management."

He makes an interesting point about public relations metrics. "We have seen that ROI is very tough to measure with PR, and most clients do not expect that. However, since there are so many ways to measure ROI with marketing, clients expect it." That challenge is an opportunity: "Perhaps the public relations firm that can accurately measure ROI will be in a prime position," he says.

Staying Strong: Reputation Monitoring and Digital PR

On the condition of anonymity, the Fortune 1000 PR executive explained that his organization is cutting marketing expenses across the board.

PR is being cut, however, proportionally a little less than other areas. There are several reasons, he noted:

• It's an efficient form of spending.
• PR is often essential, particularly in terms of assuring the company's story is being told accurately (and engaging in issue management when such problems arise).
• In this current environment, reputation and trust of the brand are both more important than ever.

Those last two point to the value of digital PR.

Diane Thieke Marketing Director Dow Jones & Co

So businesses are turning to PR pros—in-house and agency—to help them monitor and participate in—the global conversation taking place about their organization, she explains.

She's not alone in that assessment, of course. In fact, Unilever CMO Simon Clift made a similar point in a speech at the Ad Age Digital Conference in April—and in a subsequent interview with the magazine. You probably heard the buzz: It was all over the blogosphere. Social media is transforming brand management, he argues, and as a result PR may become the fastest-growing focal point of Unilever's marketing services.

Taking it one step further, a 2008 survey conducted for MS&L and PR Week by Millward Brown suggests that digital PR may be recession proof.

The survey, which polled 252 U.S. chief marketing officers, found that despite weakened economy, more than 75 percent of senior marketers say they expect spending for new media and online initiatives to increase in the next year. Marketers also overwhelmingly agree: They would be "most likely" to cut from many other disciplines before turning to digital if forced to scale back budgets as a result of poor economic conditions. Digital is at the bottom of the list, with only four percent of respondents indicating they would be most likely to cut from this area.

That corresponds with Wenzel's experience and observation. Marketers may not complete understand what social media means for their brands, but they know they have to participate in those discussions.

It's an important part of the marketing mix, and it's a line item CMOs are going to protect, she says. So, insofar as social media is part of PR, "that's a saving grace for PR budgets."

It's still evolving though, and even the most sophisticated marketers are still trying to figure out the impact. It may be tougher to measure the influence, she says, "but everyone knows it's there."

Proving Value: Bringing It Back to Metrics

But if social media is indeed the saving grace for PR budgets, agencies will have to figure out how to measure it. In a statement accompanying the aforementioned survey results, MS&L said: "These results show us that not only is digital marketing a global capability that marketers must truly embrace for its effectiveness and ROI, it is also a discipline that fares very well in tougher economic conditions."

Charlie Kondek Director of New Media Relations MS&L

"There seems to be two things happening here. One is that the economic climate has got everyone rethinking how they spend their budgets. But the other is that people in our industry are still innovating in their approach to social media, and discovering new ways of providing value through it. We're still discovering and quantifying the impact of social media activity on the brands we work with."

—by Roxanna Guilford-Blake [roxannaguilfordblake (at) yahoo (dot) com]