Ask any executive in the advertising industry how their business is doing and your question will be met with a foot-shuffle, head-scratch and a sharp intake of breath.
For an industry so renowned for its capacity to party, there's not been much fun and laughter for some years now. The advertising econ- omy has been steeped in gloom since the dot.com bubble burst at the turn of the century. Worldwide, there have been thousands of redundancies as advertisers have slashed their marketing budgets in a knee-jerk reaction to the economic downturn.
Such cutbacks are clearly reflected in the performance of the industry's large holding companies. The share price of Interpublic Group of Companies has gone into free fall following repeated changes in senior management, reduced profits and the discovery of accounting errors in its McCann-Erickson subsidiary.
Havas, too, watched its share price collapse and the chairman of its largest ad network, Euro RSCG, step down unexpectedly earlier this year. Even WPP, a darling of the City, suffered a 50% fall in its pre-tax profits in 2002 to £205 million.
Multinationals have borne the brunt of the advertising downturn. Their determination to defend their share price has left several of their operations understaffed and in many cases lacking focus for the job they need to do for their clients. This has given many new, independent agencies an edge. Over the past two years, start-up agencies in the UK have been snatching clients from their international rivals with startling regularity. Examples include British Gas moving its £30 million account out of DDB London and into Clemmow Hornby Inge; and Mother taking Coca-Cola's main account from McCann-Erickson and Boots from J Walter Thompson, subsidiaries of Interpublic and WPP respectively.
These independents, confident of their appeal, have also succeeded in producing many of the most awarded ads. Wieden & Kennedy London, part of an independent micro network, created last year's 'cog' ad for Honda. The ad, which showed a chain reaction being played out by a succession of car parts, was named by Campaign magazine as the best TV ad in 2003.
But there is light at the end of the tunnel for the multinationals. By the end of last year, Omnicom and WPP figures were indicating that the worst was over. Sir Martin Sorrell, WPP's chief executive, declared: 'We are climbing out of the bath', referring to his famous bath-shaped analogy for the economic recovery. For two years now, Sorrell has stuck to his assertion that the recovery would begin to kick in in 2004.
Such signals have begun to fuel hope for a recovery, and in the advertising market that's a powerful stimulant. Adam Smith, head of knowledge management at ZentithOptimedia, explains: 'Advertising is very responsive to improved sentiment.'
Not only that, it responds exponentially to any actual recovery. 'If the economy does grow, advertising will tear away. We have a record of underestimating advertising recovery,' he adds.
In the US, improved profits among client companies have already resulted in increased marketing expenditure. Procter & Gamble, General Motors and Ford have increased their American adspends by 21%, 11.1% and 10.6% respectively.
According to Smith, Europe will follow this recovery, with an 18-month to two-year time lag.
Long-term, the prospects for growth in China and India are huge. Although China contains 28% of the world's population, its share of world adspend in 2003 was only 2.3%. Zenith forecasts that this will rise to 2.9% by 2006.
But the really good news is probably not for the current working generation to enjoy. Smith says there are 200 million bourgeois Chinese (a population equivalent to that of western Europe) and predicts that the Chinese economy will reach the first rank among world economies in about 50 years.
The advertising industry still labours under a misleading image of unremitting profligacy, earned during the excesses of the 1980s. This has changed.
Its people do play very hard, often with clients, but they also work very hard. Some individuals earn vast salaries, but they are the exception rather than the rule. The average account director's salary is now £41,000.
So advertising is emerging from the downturn bruised, bashed and a little humbled. But the industry's underlying optimism will help it to a speedy recovery, just as soon as those marketing budgets are restored.
Reported cost of a 30-second ad slot in the last episode of Friends on Channel 4: £100,000 Average daily adspend in the UK: £28.3m
SOURCE: BRANDREPUBLIC, NIELSEN MEDIA RESEARCH
Proportion of UK advertising employees aged under 30: 48%
SOURCE: IPA CENSUS
TOP 10 GLOBAL ADVERTISERS
Worldwide European Worldwide
adspend '02 adspend '02 +/- '01-02
1 Procter & Gamble $4.48bn $1.64bn 21.9%
2 Unilever $3.32bn $1.71bn 19.2%
3 General Motors $3.22bn $522m 9.0%
4 Toyota $2.41bn $347m 11.2%
5 Ford $2.39bn $746m 7.2%
6 TimeWarner $2.35bn $413m 2.4%
7 DaimlerChrysler $1.80bn $356m 0.5%
8 L'Oreal $1.68bn $1bn 15.4%
9 Nestle $1.55bn $819m -4.2%
10 Sony $1.51bn $417m 22.2%
SOURCE: ADVERTISING AGE (NIELSON MEDIA RESEARCH, TNS MEDIA INTELLIGENCE,
IBOPE, ET AL)
WORLD'S MOST VALUABLE BRANDS
1 Coca Cola $70.45bn
2 Microsoft $65.17bn
3 IBM $51.77bn
4 GE $42.34bn
5 Intel $31.11bn
6 Nokia $29.44bn
7 Disney $28.04bn
8 McDonald's $24.70bn
9 Marlboro $22.18bn
10 Mercedes $21.37bn
SOURCE: INTERBRAND 100 BEST GLOBAL BRANDS 2003
ADSPEND AS % OF GDP
'00 '02 '04* '06*
Hungary 1.70 1.88 2.29 2.74
Per capita $86.8 $124.8
Thailand 1.04 1.25 1.44 1.69
Per capita $19.2 $25.1
Brazil 0.91 1.55 1.52 1.52
Per capita $32.7 $40.7
US 1.53 1.38 1.39 1.38
Per capita $546.4 $507.2
Czech Republic 1.42 1.42 1.42 1.36
Per capita $83.8 $96.2
Russia 0.32 0.58 0.87 0.97
Per capita $5.7 $13.9
Germany 0.98 0.85 0.88 0.93
Per capita $227.9 $206.1
UK 1.12 0.97 0.93 0.90
Per capita $267.5 $256.1
Spain 0.93 0.78 0.75 0.75
Per capita $134.8 $126.2
France 0.72 0.64 0.63 0.62
Per capita $164.0 $152.6
SOURCE: ZENITH MEDIA * ESTIMATE
BRITAIN'S MOST COMPLAINED ABOUT TV ADS BY NUMBER OF COMPLAINTS
Wrigley's Xcite man vomits dog 863
Mr Kipling woman gives birth on stage 570
Velvet toilet tissue bare bums 403
Take a break old lady ignored by Meals on Wheels 318
Toyota Corolla key party 236
SOURCE: CAMPAIGN BOOK OF LISTS 2003
UK HISTORIC ADSPEND BY MEDIA SECTOR
1954 1974 1994 2002
Newspapers £76m £434m £3.2bn £4.8bn
TV - £176m £2.5bn £3.7bn
Magazines £50m £158m £1.3bn £1.9bn
Outdoor £14m £34m £350m £802m
Radio £1m £6m £243m £545m
Internet - - - £197m
Cinema £4m £8m £53m £180m
SOURCE: ADVERTISING ASSOCIATION
BRITAIN'S FAVOURITE TV ADS
1. Honda cog Wieden & Kennedy
2. 118 118 runners WCRS
3. Lynx dancer Bartle Bogle Hegarty
4. Radio 5 Live commentators BBC in-house
5. Mercedes Benz athletes Campbell Doyle Dye
SOURCE: CAMPAIGN BOOK OF LISTS 2003