Sir Martin Sorrell's famous remarks last year about a bath-shaped recession seem to have made sense - we may just be nearing the towel rail, even in the UK. Analysts and industry pundits are sounding confident and the IPA and the ad industry charity, Nabs, have produced research confirming an uplift.
Lorna Tilbian, a media analyst at Numis, is one of the more definite optimists. "Past advertising cycles have lasted for six to eight years," she says.
"Assuming the green shoots of recovery continue to strengthen, this could be the first of many years of cyclical growth."
Green shoots so far spotted include those noted by the IPA's Bellwether Report a few weeks ago. A quarter of the companies taking part in the research said they were revising budgets upwards on the back of higher sales revenues and improving profits.
The report also confirmed that the number of companies boosting budgets has exceeded those reducing them for the second successive quarter.
But the recession has not passed without pain and change in the communications industry. There have been swathes of redundancies and exercises in restructuring.
A focus on the bottom line, with an emphasis on accountability, is now a fundamental part of everyday business.
Of the more high-profile casualties, Interpublic had to put in place an international restructure involving up to 4,000 job losses last year following a collapse in profits at McCann Erickson WorldGroup. Havas had to slate more than 1,500 job losses after a first-half net loss of £41 million against a profit of £10.8 million in the corresponding period in 2002.
A recession-hammered Cordiant was sold to WPP for £266 million.
Sam Pooley, the head of support services at Nabs, believes a lot of the redundancies in the UK during the recession affected staff in the £70,000 to £100,000 salary bracket - senior creatives and the like - as well as plenty of second jobbers. At the end of last year, Nabs' annual survey showed increased optimism across the industry and recruitment seems to be on the way up, though agencies are being picky. "It's certainly a buyer's market," Pooley says.
New media's renewed popularity does not seem to have been affected by the cutbacks that followed the bursting of the internet bubble. "There is no shortage of talent in that area," Mark Cranmer, Starcom MediaVest's chief executive for Europe, the Middle East and Africa, says. "More people are being attracted to it and they are more talented and more professional than a lot of the froth that was around in the boom time."
The biggest lesson agency chiefs are drawing from the recession is the relentless need to focus on productivity at the same time as developing talent. According to Stef Calcraft, a partner at Mother: "Clients are emerging from the latest downturn much more focused, leaner and demanding.
Those that have traditionally downsized, pulled in their belts and waited for the storm to blow over are going to have a real problem. However, those that have looked at their management system and nurtured their talent will profit ahead of the norm."
Cranmer is clear the industry needs to be concerned about profit. "We're stealing share and that's coming at the cost of growth and net margins," he says. "If the worst is now over and it's now no longer about survival but about how one might thrive, we need to remain competitive but reduce some of the value-destroying intensity of the competition."
Clearly, one way to make efficiencies is to streamline business across different communications disciplines.
The Bellwether Report suggests extra investment is being channelled into the internet or direct marketing rather than above-the-line work. But the industry still has a way to go before the different communications strands are knitted together.
The pressure is on to make efficiencies wherever possible. "Client organisations are unrecognisable from a decade ago, while most agencies are all too familiar," Calcraft says. "In the long term, that's an untenable situation. Most clients feel change is resisted and agencies are being dragged kicking and screaming into the 21st century."
SIR MARTIN SORRELL CHAIRMAN AND GROUP CHIEF EXECUTIVE, WPP
The shape of the industry is better than it was this time last year.
Better than it was two years ago . Having said that, life is still difficult in the UK, and Europe as a whole is not that great.
We're seeing growth in the US and in Asia, in China and in India. Japan has strengthened quite considerably in the past year and Latin America, because it was so bad, looks much better. Russia and countries in the Commonwealth of Independent States (CIS) look quite strong. All in all, it's better than last year, better than the past couple of years.
It's not back to the gung-ho days of 2000 but that is a good thing because that was unsustainable. We had an extraordinary bubble - a south sea bubble - and we'll probably see another, perhaps less extreme.
The media investment management part of our business has been the strongest part through the recession. Healthcare, direct, interactive and the internet stayed pretty strong through the recession. The laggard sector was PR and public affairs but even that seems to be coming back a bit.
The one cloud on the horizon is what happens after the US presidential elections. The US government has been spending very heavily, the dollar is very weak and interest rates will have to rise.
I don't think our industry has changed its shape so radically as a result of recession. Where there have been cutbacks, it could be that you had too many people to start with.
The headline always says cutbacks, but the automatic assumption that adding to the number of people in an organisation is a good thing may not be right, particularly if you are investing in new technology.
Coming out of recession, our priorities are Asia, Latin America, China and the Middle East as well as Russia and the CIS countries - and what we call "non advertising". We would like the business to comprise two-thirds marketing services.
We want to expand in the quantitative areas such as market research, direct, interactive and internet. The clever clients have been investing more in new media and there's been quite a surge in new media activity.
DOMINIC PROCTOR WORLDWIDE CHIEF EXECUTIVE, MINDSHARE
Suppliers of own-label, oven-ready frozen chips do well in recessions.
So do debt collectors and liquidators. But for most of us, it is a fairly miserable time. So, are we out of it? Not quite.
Our view is that the UK in 2004 is in the "Goldilocks" phase of being neither too cold nor too hot, but just about right. The rollercoaster of the past ten years has taken our clients through the dotcom bubble, a consumer boom, global instability, several wars and an advertising recession. But now that the recession, at least, is nearly over, what can we expect and what can we learn?
First, we can expect the recovery in the UK to be slow and gradual. The fiscally cautious government, the cooling consumer expenditure patterns, the mounting debt pile and the steadily rising interest rates all say that the exit from this recession will be measured and controlled.
Second, Darwin will be proved right again. If any weak agencies have survived, they will be under even more pressure as the market grows. During recession, the economics of a service business will have forced weak agencies to cut to the bone. So those agencies that continued to invest and expand during recession will be best placed to grow more when it is over. There will be more consolidation.
Third, agency managers will make far more mistakes. I remember getting my first chief executive job at the start of the last recession in 1991. With hindsight, it was fairly simple because there were not too many progressive decisions to take and, therefore, not many mistakes to make.
Fourth, most of these mistakes will be about which new services to invest in and how quickly to invest in them. It is crucial to keep reinventing ourselves, especially in good times, but very difficult to get right every time.
Fifth, all sorts of specialists will launch, make a loud noise, prosper and sell to the big groups just before the next recession. If they are clever.
Last, but most important, the real value of good media agencies to clients will have increased and been noticed during the recession and now their revenues will rise accordingly.
RORY SUTHERLAND EXECUTIVE CREATIVE DIRECTOR, OGILVYONE
Mixed feelings were once defined as "the emotion you experience watching your mother-in-law roll off a cliff in your new Jaguar". It's also my reaction every time I read Sir Martin Sorrell's prediction that the recovery in marketing communications will be driven by spending on both the US presidential election and the Olympics. Though I'm naturally happy to see any upturn in the business, I can't pretend to be pleased when it's driven by these two hideously overblown events, which generally show advertising communications at their annoying, extravagant worst.
If people in the advertising business didn't love the advertising business so much, they might see that their biggest problem isn't really the personal video recorder, media fragmentation or even demographics: it's the fact that, even in a downturn, the combined effect of all those billions of pounds spent on indiscriminate marketing communications often adds up to so much white noise. With a few extra billion spent to tell us X is the Official Moist Toilet Paper of the British Olympic Team, this will get worse.
So, to paraphrase a great US president: "More advertising spending isn't the answer to the problem, it is the problem." To me, a direct, one-to-one approach to reaching markets offers a vital counterbalance to all this because it is one marketing discipline that concentrates on reaching fewer people. And it has the virtue of being relatively measurable, which supposedly makes it easy to justify to sceptical finance directors, procurement folk and the other powers increasingly to be reckoned with.
Given these factors, it may be that another prophesy comes true and the next few years will see a shift of spending below the line. But I believe this will only happen if clients and agencies use some of our new wealth to repair a vital part of our business, which, in recession, has been allowed to fall into disrepair.
Quite simply, for all the progress, technological and creative, seen since I joined this business in 1988, one thing has got worse. Somewhere we just lost the art of creative and media testing. It just disappeared and has resulted, disastrously, in direct agencies being measured far more on price and timing than on their results. How can we restore testing to its proper place? Answers on two postcards, please.
RUPERT HOWELL PRESIDENT EMEA, MCCANN ERICKSON
The industry is in reasonable shape. A lot of what has been done during the recession leaves it in better shape than it otherwise would have been. Has the recession produced leaner and meaner communications companies? Yes, they're leaner and meaner. But are they communications companies? Not yet.
We are poised to make the most of the recovery but I'd say we could benefit even more if we were more efficient.
We had a real opportunity during the downturn - when clients demanded more integrated communications - to make efficiencies by not having replicated cost structures in different disciplines. Some agencies have done some interesting things but most agencies still operate separate silos.
We would also do better if we had more talent. During the previous recession in the early 90s, we lost a chunk of a generation that otherwise would be our senior talent now. Then we lost a lot of talent to the dotcom boom.
I also think we underinvested in training and development throughout this recession. We learned from the recession in the 90s, but not enough.
We now know that recessions are inevitable. It's the natural cycle of life, just as tides come in and go out. When they come, you have to be decisive in your actions. If you are going to cut, you have to cut hard and fast and not mess about. I think the major agencies that did that are in better shape than the ones that dilly dallied.
The smaller, independent agencies flourished during the recession because they are nimbler and quicker and that is what clients are looking for.
One of the main reasons why agencies such as Mother, Clemmow Hornby Inge and Miles Calcraft Briginshaw Duffy have flourished, apart from being good, is that they always do well during a recession.
HHCL & Partners was Campaign's Agency of the Year in the last recession.
Big agencies should learn about efficiency and process from HHCL, Rainey Kelly Campbell Roalfe/Y&R and Mother.
The reason why big agencies flourish in times of growth is that clients have more ambitious, multinational growth plans that only big groups can deliver.