Ad industry leaders predict deep recession

LONDON - The marketing communications industry has been warned to prepare for a recession that could be deep and long and which could see some of the weakest agencies and clients going to the wall.

Martin Sorrell...warning on economy
Martin Sorrell...warning on economy

With banks reluctant to lend money, industry observers predict that it will be a case of the survival of the fittest.

They also expect the credit crunch will speed the migration of advertisers into more measurable media, particularly digital.

"At first, I thought we were going through a normal cyclical downturn," Bob Willott, the editor of Marketing Services Financial Intelligence, said.

"Now I think the scenario is much less predictable, which reinforces the need for agencies to keep their balance sheets as strong as they can."

WPP's Sir Martin Sorrell this week claimed the crisis engulfing the world's financial markets would make the economic prospects for an already tough 2009 even bleaker and that it would be 2010 before the gloom lifted.

"The smell of fear is incredible," he said of his recent visit to New York. "People are terrified." And he warned: "The next 15 months are not going to be easy."

Global advertising leaders expect the turmoil to impact more seriously on some parts of their business than others.

Maurice Lévy, the Publicis Groupe chairman, said: "We're seeing some signs of a slowdown in fourth-quarter spending, especially in the auto and financial sectors, but it's not heavy and nobody is panicking."

"You have to look at the situation client by client and category by category," Andrew Robertson, the chief executive of BBDO Worldwide, whose clients include AIG and Bank of America, said.

"The auto category will suffer as it gets harder for consumers to borrow money to buy cars. For some other sectors, the problems will be confined to Wall Street rather than Main Street."

However, Lord Bell, the Chime chairman, said the impact had been minimal so far.

"I've been waiting for my numbers to drop off the cliff but they haven't," he commented. "People are still shopping and repaying their mortgages."

Mike Hughes, the ISBA director-general, predicted that small development projects agreed at the beginning of the year would be put on hold as advertisers revisited their spending plans and focused mainly on their power brands.