Advertising Armageddon is averted, but recovery is elusive

The advertising industry narrowly avoided catastrophe during the recession, according to Sir Martin Sorrell, but the fear factor remains. Nick Clark reports

Don Draper, the dapper advertising executive, outlined his views in the first season of acclaimed TV show Mad Men. "Advertising is based on one thing: happiness. You know what happiness is? Happiness is the smell of a new car. It's freedom from fear. It's a billboard on the side of the road that screams reassurance that whatever you are doing is OK."

For Britain's advertising industry, last year was a long way from OK. Sir Martin Sorrell, the founder of WPP, the world's largest advertising group, said the industry had narrowly missed "Armageddon" and described some of the talk at the darkest hour of approaching "apocalypse now".

The evidence was plain in the company's full-year results announced yesterday. Sir Martin was more upbeat, but said it had been a "brutal year". Revenues rose 5 per cent in constant currency to £8.6bn, but headline pre-tax profit fell 16 per cent to £812m. He defined 2009 as "a game of two halves". Revenues had spiralled lower in the first half as recession-hit clients had pulled their marketing budgets. During the second half, those declines became "less worse". Britain makes up about 12 per cent of WPP's revenues. Its operations stretch from advertising and media-buying to public relations and brand consultancy, but growth in the country was down.

While the company expects a more stable year, "advertising remains challenged by clients' continued demands for efficiency", though WPP is confident that clients will have to return to marketing in the longer term, underpinned by "the need for our clients to continue to differentiate their products and services both tangibly and intangibly."

Sir Martin said: "The apocalypse was avoided, and it was followed by the less worse phase. We are in the stability phase, but have not returned to growth yet."

The Advertising Association said total spending was down 12.7 per cent year on year in 2009, representing the worst recession for the industry since it started tracking the industry with Warc in 1982. Still, many across TV, publishing and online have at least been hailing the slowing decline in ad revenues in recent months.

"It's an interesting reflection on the times when a slowing rate of declines is greeted by optimism and good cheer," said Rory Sutherland, the president of the Institute of Practitioners in Advertising. "The fundamental question is when better times return for clients, does that trickle down to the agencies?"

Mr Sutherland expects the US to return to growth faster, saying advertisers in the UK were more cautious. "There's possibly more of a cost-cutting and finance-driven mentality here than across the Atlantic."

Archie Norman, the new chairman of ITV, is worried about the post-general election landscape. The broadcaster predicts advertising revenues could be up 20 per cent in April but reminded anyone preparing to break out the bunting that the comparatives were particularly weak. Mr Norman added that potential rises in VAT and the potential "austerity budget" could well derail any rebound in advertising.

Tess Alps, chief executive of Thinkbox, the UK's marketing body for commercial broadcasters, said the industry was "anxious not to get overexcited". She said: "The last two years have been so bruising for all media in terms of advertising, but it has been marginally less so for TV as viewing is still growing." Ad revenues for TV retreated about 10 per cent, while the wider industry was down about 13 per cent. She also pointed out that with the proliferation of niche channels, advertisers can more actively target the demographics they want. She added. "TV is often an early indicator of where the market is going."

Cinema advertising had a surprisingly strong year, up 10 per cent year on year according to the Cinema Advertising Association. But this reflected cinema admissions that hit seven-year highs and box-office takings that smashed through £1bn for the first time. Other forms of traditional media are suffering heavily. Outdoor advertising, such as on billboards, suffered double-digit falls last year, with the nadir coming in the second quarter when revenues fell 24 per cent to £238.4m, according to the Outdoor Advertising Association.

Publishing companies are also struggling to deal with the worst advertising recession on record. While many have hailed the slowing declines in ad revenues – such as Trinity Mirror which reported results this week – others are more pessimistic. United Business Media, which reported yesterday, said 2009's economic conditions "accelerated the long-term structural decline in print-advertising revenues" with its print business falling 23.1 per cent as a result. "Traditional media will not return to pre-crunch times," Sir Martin said. "The overall market will grow, but parts will contract."

Online advertising has continued to grow throughout the downturn, although not at the same explosive rates as before. Of that, 60 per cent is search advertising, a market dominated by Google. Ian Carrington, industry director for Google in Europe, Middle East and Africa, said: "One of the reasons search has fared well is because advertisers can track its users. Everything is accountable." He added that there was no sign of the growth hitting a plateau.

Still, despite all the perceived threats and the desire to be cautious, the industry is more optimistic. The Advertising Association predicts that after nine consecutive quarters of year-on-year decline, ad spending will return to growth in the third quarter. Tim Lefroy, chief executive of The Advertising Association, said: "The underlying data show not just the painful recession effect overall but the dynamic reshaping of the UK advertising landscape." PricewaterhouseCoopers predicts another year of declines in 2010, before returning to growth the following year.

Media partner Nick George said: "After a violent storm, you get a slight sense of calm, but people don't necessarily run straight back onto the beach."

Arts & Entertainment
Madonna in her music video for 'Like A Virgin'
music... and other misheard song lyrics
Sport
Steven Gerrard had to be talked into adopting a deeper role by his manager, Brendan Rodgers
sportThe city’s fight for justice after Hillsborough is embodied in Steven Gerrard, who's poised to lead his club to a remarkable triumph
News
Much of the colleges’ land is off-limits to locals in Cambridge, with tight security
educationAnd has the Cambridge I knew turned its back on me?
News
Waitrose will be bringing in more manned tills
newsOverheard in Waitrose: documenting the chatter in 'Britain's poshest supermarket'
VIDEO
News
The energy drink MosKa was banned for containing a heavy dose of the popular erectile dysfunction Levitra
news
Environment
People are buying increasing numbers of plants such as lavender to aid the insects
environmentGardeners rally round the endangered bumblebee
Sport
Australia's Dylan Tombides competes for the ball with Adal Matar of Kuwait during the AFC U-22 Championship Group C match in January
sportDylan Tombides was diagnosed with testicular cancer in 2011
Arts & Entertainment
Customers browse through Vinyl Junkies record shop in Berwick Street, Soho, London
musicBest exclusives coming to an independent record shop near you this Record Store Day
News
Ida Beate Loken has been living at the foot of a mountain since May
newsNorwegian gives up home comforts for a cave
Extras
indybest10 best gardening gloves
Arts & Entertainment
tvIt might all be getting a bit much, but this is still the some of the finest TV ever made, says Grace Dent
Arts & Entertainment
Comedian Lenny Henry is calling for more regulation to support ethnic actors on TV
tvActor and comedian leads campaign against 'lack of diversity' in British television
News
Posted at the end of March, this tweeted photo was a week off the end of their Broadway shows
people
News
peopleStar to remain in hospital for up to 27 days to get over allergic reaction
Arts & Entertainment
The Honesty Policy is a group of anonymous Muslims who believe that the community needs a space to express itself without shame or judgement
music
News
Who makes you happy?
happy listSend your nominations now for the Independent on Sunday Happy List
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Helpdesk Engineer Apprentice

£150.00 per week: QA Apprenticeships: This company has been providing on site ...

Telesales & Sales Support Apprentice

£221.25 per week: QA Apprenticeships: This company is a well established Inter...

Client Relationship Manager - SQL, Python

£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

**Financial Services Tax**

£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

Day In a Page

How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

How I brokered a peace deal with Robert Mugabe

Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

British Muslims's Happy video attacked as 'sinful'

The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

Michael Williams: Do as I do, not as I pray

Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

A History of the First World War in 100 moments

A visit to the Front Line by the Prime Minister's wife
Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

Jenny Collier: 'Sexism on stand-up circuit should be extinct'

The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

Cannes Film Festival

Ken Loach and Mike Leigh to fight it out for the Palme d'Or
The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

The concept album makes surprise top ten return

Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

Lichen is surprise new ingredient on fine-dining menus

Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
10 best baking books

10 best baking books

Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
Jury still out on Manchester City boss Manuel Pellegrini

Jury still out on Pellegrini

Draw with Sunderland raises questions over Manchester City manager's ability to motivate and unify his players
Ben Stokes: 'Punching lockers isn't way forward'

Ben Stokes: 'Punching lockers isn't way forward'

The all-rounder has been hailed as future star after Ashes debut but incident in Caribbean added to doubts about discipline. Jon Culley meets a man looking to control his emotions
Mark Johnston: First £1 million jackpot spurs him on

Mark Johnston: First £1 million jackpot spurs him on

The most prize money ever at an All-Weather race day is up for grabs at Lingfield on Friday, and the record-breaking trainer tells Jon Freeman how times have changed
Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

Ricky Gervais: 'People are waiting for me to fail'

As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

Mad Men returns for a final fling

The suits are still sharp, but Don Draper has lost his edge
Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

Google finds a lift into space will never get off the ground

Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit