PERSPECTIVE: There's cloudy water in industry's bathtub despite income data

Sir Martin Sorrell's invocation of his bathtub analogy this week will plunge many resurgent optimists back into the recessionary gloom that struck last autumn. And it should provide a stiff wake-up call from any hangovers still enduring from the excesses of Cannes. The path of economic recovery, Sorrell says, will follow the gentle upward curve of the bathtub after a prolonged flattening out - a frustratingly relaxing image to use for something that cuts so deep.

According to Sorrell it will be well into 2004 before the good-ish times make anything like a comeback, after which length of time in the tub many businesses will have shrivelled to nothing.

Sorrell's words have been interpreted as a profits warning by analysts and despite a rallying of WPP's shareprice after it's initial 7 per cent dip, his comments have trammelled some of the green shoots others were so hopefully nuturing.

When it comes, Sorrell says, recovery will be US-led and there are some signs of hope across the Atlantic. The tentative upturn identified in the UK TV market on page 8 of this week's issue is underlined by more definite signs of life in the US upfront TV negotiations.

All of which makes an interesting backdrop to the IPA's second annual agency income tables, unveiled on this page. True, without setting the figures against overhead data, the true robustness of the agencies is impossible to finger. But the relative rankings and the comparisons (where possible) with last year offer an indication of the buoyancy - or otherwise - of agencies as they face the struggle ahead.

And those media agencies that have joined the party this year should be applauded for bravery in what must be one of the worst times to start flashing your financial underwear.

These more comprehensive income tables are fascinating, very welcome, but also dangerous in the wrong hands. Take the deliciously facetious comparison of MindShare's £24 million income on billings of £448 million against, say, TBWA's income of £24.7 million achieved on billings of just £171 million. The comparison seems to speak volumes about the margins on which the two sides of the business are operating. Yet, when you get the opportunity to compare creative and media profit margins, for example, media's vice-like control of costs makes this side of the business seem a safer place to be in a downturn.

If Sorrell's right we'll have to wait until the figures for 2004 emerge before we can really assess how the different sides of the advertising business have weathered recessionary turmoil. Even if he isn't right, it will take time to build income trend data that can give any real sense to the figures, no matter how much we might wish to interpret them for signs of recovery. The true picture remains as cloudy as the water in Sorrell's bathtub.

- Caroline Marshall is away.

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