• by Paul Gough , August 22, 2003

A pronounced pickup in the media planning and buying side of the business appears to be leading Madison Avenue out of its economic doldrums, the head of one of the world's largest agency holding companies said Friday.

With especially strong first half results pouring in from its MindShare and Mediaedge:cia units, WPP chief Sir Martin Sorrell said media units are paving the way for a full-blown turnaround in the ad industry, particularly in the United States.

Sorrell, who until recently had been one of the more bearish of the major agency chiefs, said WPP began to see a turnaround beginning in October 2002 and that it picked up noticeably in April with the TV upfront.

"There's almost a cycle at work here. The pickup seems to come first in media planning and buying, and feeds into advertising and then feeds into other areas of our business," Sorrell said.

Combined revenue at its media and advertising businesses rose 3%, with more than $2.13 billion in new business billings by the end of June. Among the second-quarter wins include $45 million in billings from Burger King by Y&R and MindShare's winning of the $150 million Nextel account. The second quarter had no major losses among agency business, said WPP's group financial director Paul Richardson. London-based WPP also owns Ogilvy & Mather, J. Walter Thompson Co., Y&R and Red Cell.

"I think we are coming out of it. We've had 10 months of continuous like-for- like growth in the U.S.," Sorrell said.

Sorrell sees some good signs in the United States, including the impact of the 2004 Olympics, the presidential election and the margins and profits rising at companies. He said that business-to-business spending might also be improving, with companies like Cisco Systems, SAP and IBM reporting an increase in activity. It's a change from the heavy cost cutting of almost three years, WPP said.

"You're starting to see a business-to-business uptick. Not large, to some extent, it's muted," Sorrell said. "[But it is] what we need to see because the consumer is pretty fragile."

He said a potential danger point is an increase in federal spending, growing at a rate faster than anytime since the Vietnam War 30 years ago. "Clearly President Bush wants to be re-elected next year and that's driving the spending," Sorrell said.