Editorial: Recovery brings a new ad challenge

What kind of landscape will greet the recession-battered global ad industry as it begins to re-emerge blinking and rubbing its eyes from the gloom into the sunlight?

It's a question worth posing in the wake of some bullish sets of results just posted by some of the major communications operators. WPP announced figures at the very highest end of expectations, Publicis Groupe saw its net profits rise by almost 22 per cent last year and Aegis Media announced a profits leap of 12.7 per cent to £80.5 million over the same period, as it declared Europe's ad recession largely over. Even the loss-making Interpublic is starting to look less like a hospital case, with resurgent revenues sustaining its belief that the worst is behind it.

Undoubtedly, there is accumulating evidence of an improving climate, with consultants reporting significantly more client interest in disciplines such as design and digital. Previously, these might have been considered non-essential and cash-strapped advertisers had been content to do without them. But optimism needs to be tempered with the knowledge that the longest post-war recession has changed some things irrevocably and poses problems that the ad business will struggle to resolve.

For the industry powerhouses, several key issues will need to be addressed, not least the intensified competition for business. Many small agencies have treated the recession as an opportunity to raise their game. As a result, clients are spoiled for choice among a range of high-quality shops and big accounts will follow talent wherever it's to be found. Large agency structures simply don't allow for the kind of concentrated brainpower that most clients now demand on their business.

At the same time, the absence of new business has compelled agencies to concentrate on retaining what they have. Not only have clients never been better serviced, but procurement specialists ensure they are in a strong position to continue screwing down margins. As the economy picks up, agency chiefs know that overcoming clients' aversions to paying more is essential if their best people are not to be lost to better-paying rivals.

Their dilemma is made worse by the fact that the new- business pool isn't getting bigger. Moreover, the consolidation of the client community means that fewer pieces of business will move off roster.

The main challenge facing agencies as the economic climate warms up, however, may not be how to win new business - anecdotal evidence suggests there's plenty up for grabs - but how it can be run profitably. All the more reason why the industry has to press its case harder than ever with chief executives who neither appreciate the true value of their brand nor advertising's ability to enhance it.

Can Mr Kipling regain gentler humour?

Mr Kipling may make exceedingly good cakes but his most recent TV ad seems to have fallen wide of the mark. Saatchi & Saatchi's Christmas campaign with a woman giving birth in a Nativity play may have worked well with the creative community but was clearly out of kilter with the brand's gently humorous credentials. Whether or nor a review produces the right recipe remains to be seen.

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1 Job description: Digital marketing executive

Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).