The number of PR agencies that are expecting to see a jump in either revenue or profits when they close the books on 2023 has taken a considerable hit from last year, according to a new study released by legal firm Davis+Gilbert.

In its “2023 Public Relations Industry Trends Report” the firm, which specializes in the advertising, marketing communications and media sectors, got responses from 182 firms on such topics as profitability, artificial intelligence and DEI. Nearly three-quarters of those predicted that they would see revenue in excess of $5 million for the year.

More than half of the respondents (53 percent) said that, in terms of revenue, they were expecting 2023 to wind up being a better year than 2022. But that’s not nearly as optimistic a view as they had last year, when 88 percent of respondents predicted a revenue hike. On the other hand, a third (34 percent) thought their revenue would drop—a big jump from the 5 percent who made that prediction in 2022. No change in revenue was expected by 13 percent (up from 7 percent last year).

Davis+Gilbert “2023 Public Relations Industry Trends Report”: Revenue and Profitability Trends

Profit estimates showed an equal cooling down of industry optimism. While nearly half (47 percent) look for profits to increase for 2023, 69 percent did so for 2022. In addition, almost as many (40 percent) anticipate a drop in profits (up from 15 percent last year).

Firms with 50-99 employees are being hit a little harder than others, the study’s results say. Of those firms, 67 percent expect to see decreased revenues and 75 percent are planning for lower profits.

When the numbers are broken down by market sectors, healthcare comes out on top, with 80 percent expecting increased revenue and 60 percent looking toward higher profits. Following behind are public affairs (67 percent higher revenues, 34 percent higher profits) and corporate/financial (58 percent and 34 percent).

The effect of AI on bottom lines seems to be good. Of the firms that have seen revenue or profit increases of 10 percent or more, three-quarters (75 percent) are currently using AI. Almost half (47 percent) of all firms using AI say they expect it to result in revenue increases for the year, and 24 percent are anticipating a profit hike.

The most popular use of AI—written content creation (47 percent), with ideation (37 percent), social listening (34 percent) and conducting market research (33 percent) also being prevalent choices.

DEI is still definitely on the radar, but its growth does seem to be slowing somewhat. More than four in 10 firms (42 percent) increased the number of employees “from historically underrepresented groups” in 2023, down a bit from the 60 percent who said that for last year.

Looking toward the future, overall optimism seems to be winding down a bit as well. While 66 percent voiced a positive outlook for 2023, only 53 percent say that when it comes to looking in the crystal ball for 2024.

Big challenges include client budgets remaining flat or decreasing, the rising cost of talent and the difficulty in retaining existing talent.