London:  After a miserable couple of years, the media industry is starting to see a glimmer of hope, with the first signs of a return to growth in the advertising market.

Over the past two weeks, a flurry of large media firms has provided evid-ence of a broad-based recovery, across the print, television, online and outdoor sectors. Among the firms reporting, News Corporation said advertising at its British newspapers, the Times, the Sunday Times and the Sun, had shown a 10 per cent improvement in the first three months of the year compared with 2009. Chairman and chief executive Rupert Murdoch admitted even he had been taken aback.

"There have been many weeks when the London Sun has had all-time records in revenue," he said at the results presentation. "I'm surprised, but it is very welcome." He added that there was "a lot of money out there" ready to be spent, and big advertisers were once again expanding their budgets.

The media tycoon is not the only one to have been caught out by the apparently robust recovery in the advertising market. At the end of last month, the Advertising Association, which tracks advertising spending, raised its growth forecast for 2010 from 0.4 per cent to 2.3 per cent. Suzy Young, data editor at marketing intelligence firm Warc, which compiled the data, said there was now "clear evidence that the industry has seen the worst of the recession".

But Adam Smith at MGroup, the media buying business of advertising giant WPP, thinks most forecasts are still too low. He says he sees the market growing by 5 per cent this year: "There has been a general return by pretty much every category of advertiser and into all media radio, outdoor, press, TV in the first half. One reason for that is advertising took such a dive last year that media now looks cheap. Advertisers want to rebuild their brands. Recessions tend to knock the stuffing out of them. But purse strings have been loosened."

Evidence for optimism

Other evidence for optimism has come from ITV, which has reported an 8 per cent rise in TV advertising. Time Warner posted its biggest revenue gains in two years, including a 5 per cent rise in advertising at its magazines business, while Pearson, BSkyB and Virgin Media have all been sounding upbeat. Outdoor advertising group JC Decaux said there had been a "significant rebound" in the UK market.

The advertising agencies are also crawling out of recession. WPP has reported a 1 per cent revenue increase for March its first since 2008 and is now tentatively upping its forecast to 2 per cent growth for the year. The World Cup will provide a boost across the board: ITV is expecting its second-quarter advertising revenue to be up 22 per cent because of the tournament.

But that is not to say that the market is back to anything near its peak. According to the Advertising Association data, the market in the UK declined by 4.2 per cent in 2008 and 12 per cent last year, so the gains of the first three months are from a low base. Smith estimates that advertising spending will reach £12 billion this year, still £1 billion down on 2008.

He notes that advertising is discretionary spending often the first thing to get cut when times are tough, but also an early indicator of recovery. "Advertising is notorious for overshooting on the way down and on the way up again."

Driver

Chris Williamson, chief economist at Markit, which puts together the quarterly Bellwether report for the Institute of Practitioners in Advertising, says the sudden recovery is thanks partly to companies having bitten down hard on costs during the recession: "The main driver of advertising is company profits, and a lot of firms during the recession have pared back their operating costs and are very lean. As business improves, this is feeding straight through to the bottom line and they are starting to spend on marketing again."

The most recent Bellwether report, which surveys marketing managers, also supports the view that advertising is coming back to life, suggesting that marketing budgets increased during the first three months of 2010, for the first time in nine quarters.