EDITORIAL: Adland's problems are not economic

The size of adspend in the UK has long been a sensitive measure of

the country's economic well-being. Significant moves up or down have

invariably indicated the onset of illness or ongoing robust health.

So why aren't we basking in the glow of new figures from the Advertising

Association showing that adspend broke through the pounds 17 billion

barrier for the first time last year - a rise of 7 per cent in real

terms over 1999?

Probably because we can't reconcile this seemingly reassuring set of

statistics with what's going on around us. ITV's ad revenues are

slumping with Granada having suffered a decline of 10.6 per cent in the

nine months to the end of June. Magazines are going under at an alarming

rate, Capital Radio has issued a second profits warning and three

agencies - Saatchi & Saatchi, BMP DDB and WCRS - have shed well over 60

jobs between them over the past month.

At the same time, three of the world's leading communications groups,

Publicis, True North and Interpublic, are making pessimistic predictions

about their prospects for this year with True North warning of further

staff cuts.

Yet, beyond the ad industry, things seem pretty good. True, it's had

some nasty knocks, but the US economy certainly isn't in meltdown. Tills

in the UK are alive with the sound of rampant consumerism.

So what's going wrong? A decade ago, the link between the industry and

an economy ravaged by high inflation was obvious. Today, the most

optimistic interpretation is that advertising is undergoing a

fundamental refocusing of itself, rather than reflecting the state of

the global marketplace. If not - and advertising remains the accurate

forecaster it's always been - then the world's economic prospects look

bleak indeed.

This time, though, the industry is having to deal with a unique set of

challenges with the collapse of dotcom and telecoms budgets symptoms of

a deeper malaise.

As media fragments, TV shows signs of losing its allure. Advertisers

that once assigned almost their entire promotional budgets to the

dominant mass medium now spend across a mix which also includes radio,

press, outdoor, sponsorship, the internet, PR and direct marketing to

reach markets economically and effectively.

Meanwhile, agency supergroups acquire specialist subsidiaries to adapt

to the changed media landscape.

Perish the thought, but the latest AA figures may prove the last rose of

an advertising summer.