Online ad spending leads the way in global growth

As the Aegis advertising group raised its forecasts for global advertising growth yesterday, a bidding war was breaking out over the future of Grey Global, the US ad agency.

As the Aegis advertising group raised its forecasts for global advertising growth yesterday, a bidding war was breaking out over the future of Grey Global, the US ad agency.

Those in the know are saying that the London-based WPP Group is set to bid up to £700m for Grey, in rivalry with the US private equity group, Hellman & Friedman. The French agency group, Havas, is also expected to make a play.

Ed Meyer, Grey's chief executive and controlling shareholder, put the company up for sale in July, calling for offers to be in by next week.

Grey shares rose $12.09 (£6.75) to $912.50 in early trade on Wall Street yesterday, valuing the group at more than $1bn.

The bullish Aegis survey boosted shares by 1.5p to 87.5p. It has raised its forecast for ad spending for 2004 from 5.3 per cent to 5.7 per cent, and from 4.4 per cent to 5 per cent for 2005.

"This growth is being led by the US and European markets, although growth in Asia-Pacific remains robust," said Doug Flynn, the Aegis chief executive.

After a three-year industry recession, the big driver in Europe has been the Euro 2004 soccer championship, while the US presidential election has provided a worldwide stimulus.

The recovery is "now global", Mr Flynn said, with Europe due to expand by 4.4 per cent this year, the US by 5.8 per cent and Asia-Pacific by 6.2 percent.

But the survey produced little evidence that the Olympic Games has been as significant a driver of global advertising expenditure as expected. In the 46 countries surveyed, respondents in only nine reported an increase in spending around the time of the Olympics, the company said. These were Australia, Austria, Germany, Greece, Hong Kong, Israel, Japan, Malaysia and Taiwan.

However, while the recovery had been led by economic expansion in the first quarter of 2004, economic indicators in the second quarter were slower.

Internet advertising is predicted to provide some of the strongest growth this year. The online market should expand by 15 percent in 2004, Aegis said.