Jeremy Warner's Outlook: Sorrell refuses to be Googled as WPP makes internet more an opportunity than a threat

Alan Greenspan: god or magician?; Alarmist nonsense on bird flu fallout
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Now that broadband is widely available at affordable prices, virtually no line of business is immune to the march of the internet search engines.

Yet few are more affected than advertising, where the threat to traditional forms of the medium has prompted some to predict their eventual demise.

Why spend millions on a "funny, ha ha" television commercial when you can go direct to the interested customer through Google or Yahoo! at a fraction of the price? Does that not make the future for Sir Martin Sorrell's WPP and other big league advertising groups look bleak? It would do if Sir Martin ever stood still long enough to allow the cyberspace juggernaut to run him over. Instead this human dynamo of a chief executive seems effortlessly always to be one step ahead of the game.

Yes, traditional forms of media from newspapers to magazines, radio and broadcast television, are struggling against the onslaught of multi-channel television, the internet and other new forms of direct marketing, but if you've positioned the company to take advantage of these growth opportunities, as Sir Martin has with WPP, then there's nothing to fear from them. WPP's latest half-year figures, published yesterday, show direct marketing, interactive and internet business at 15 per cent of total group revenues, up from 11 per cent a year ago. Since internet advertising is still only 5 per cent of the global total, Sir Martin looks as well positioned as any.

Elsewhere, the advertising market is proving more robust than Sir Martin has predicted. He expected this to be a flat year at best. Instead, he achieved top-line growth of 6 per cent in the first half, with even sclerotic old Europe showing some signs of life. Why so?

The main reason seems to be high levels of corporate profitability. After a prolonged period of cost cutting, the business world is awash with cash, and there must be limits to investors' appetite for share buy-backs and other forms of capital repayment. In any case, marketing budgets are looking less tight than they were as managements seek to revive revenue growth.

That's bound to be good for the likes of WPP. In the meantime, WPP's transformation continues apace. Already 30 per cent of the total, Sir Martin aims to grow direct marketing, interactive, internet and market research share of group revenues to more than half. The emerging markets of Asia and Latin America grow ever more important too. The advance of the search engines appears unstoppable. Yet as Sir Martin demonstrates, correctly handled, they are much more of an opportunity than a threat.

Alan Greenspan: god or magician?

To Wyoming (I wish), for the annual gathering of central banking mufti at Jackson Hole, which this year is being devoted to a celebration of Alan Greenspan's 18 years as chairman of the US Federal Reserve. The British press is largely excluded from this invitation-only symposium of monetary experts, but no matter. The power of modern communications means that at the click of a the mouse we can all worship at the feet of the great man now, even if we're still not allowed to see him in the flesh.

Day one was in fact less remarkable for Mr Greenspan's own speech, "Reflections on central banking", as for the comments of his one-time sparring partner Alan Blinder, which given that Mr Blinder resigned as vice chairman of the Federal Reserve in disgust at Mr Greenspan's autocratic ways, were remarkably generous. Since then Mr Blinder has had plenty of time to reflect and he's now of the opinion that the soon-to-retire Mr Greenspan is "the greatest central banker who ever lived".

Now an economics professor at Princeton University, Mr Blinder exhaustively rebutted just about every policy criticism that has ever been levelled at the great magician, including that he gave up on his "anti-bubble" rhetoric too easily in the face of political criticism after his famous speech about irrational exuberance in the stock market, or that he delayed too long in choking off the bubble with higher interest rates.

And the "however" is? However, says Mr Blinder, Mr Greenspan has perhaps not served the long-term interests of the Fed well by apparently deliberately allowing a cult of personality to develop around the position of chairman. "Extreme personalisation of monetary policy" is one "genuine negative" that can be levelled at Mr Greenspan.

The other is that he too often thrust himself into the political maelstrom by serving as America's self-appointed economic wiseman on just about any issue that took his fancy. For instance, he enthusiastically backed the Bush tax cuts in 2001 and the partial privatisation of social security in 2005. This to many has made him seem politically partisan. Ouch! Old sores aren't so easily healed, it seems.

Yet Mr Blinder is right on both counts. Central bankers that poach on political territory shouldn't be surprised when the politicians poach back. What's more, the elevation in the eyes of the American people and the world's financial markets of Mr Greenspan to god-like status is going to make things extraordinarily difficult for his successor. Or as Mr Blinder puts it: "The coming replacement of Alan Greenspan by a mere mortal ... may in fact prove a traumatic experience for the markets. We will soon learn whether the Greenspan era has created a deep reservoir of faith in the Federal Reserve, or just in Alan Greenspan."

Yet the more important question is whether it's a house in good order or just a terrible mess that Mr Greenspan leaves behind when he hands over the keys to his successor. With the twin deficits still growing, there's plenty of reason to think the latter, in which case being a "mere mortal" will be the least of his successor's problems.

Alarmist nonsense on bird flu fallout

Here's a reassuring story to cheer you up for the weekend. As if the threat of a bird flu pandemic wasn't bad enough, along comes Donald Coxe, portfolio strategist for the Canadian bank BMO Nesbitt Burns, to suggest that any such outbreak could trigger a global depression. Isn't he being just a teenie bit alarmist?

Mr Coxe thinks the chances of an avian flu pandemic any time soon are still remote, but if it did happen, then airlines would stop flying, production lines and offices would close, international trade would grind to a halt and eventually the shops would run out of things to sell. In his view, the economic consequences would be catastrophic.

Well, possibly they would, and certainly companies need to be prepared for the worst. The lessons of Sars have already been largely forgotten. But it's hard to see why even the most serious of pandemics would cause a depression. At most there would be a temporary hiatus in economic activity, which would in any case be partly compensated for by the extra health care and ancillary work created by the disease itself. Once over, things would pick up again sharply.

There's a particular breed of economist which specialises in predicting calamity, and Mr Coxe is plainly one of them. They are latter day prophets of doom, wandering the streets with their sandwich boards announcing that the end of the world is nigh. Catastrophe does happen from time to time, but I doubt Mr Coxe is right in thinking bird flu is about to cause it. In fact, Mr Coxe has no more idea what the effect of such a pandemic would be than the rest of us. It's easy to postulate the nightmare scenario, but because of the human capacity for resilience and invention in the face of adversity, this is usually the least likely outcome.

j.warner@independent.co.uk

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