Are the flood-waters beginning to recede?

After a cataclysmic start to the millennium, optimism is on the rise again. Ad spending in 2004 is set for its biggest hike in nearly four years and Chancellor Gordon Brown predicts strong UK economic growth of three to 3.5 per cent.

With the Olympics in Athens, European football championships in Portugal and a presidential election in the US, it should be a big year for marketers globally. The US is finally crawling out of the worst of its economic downturn and Europe should not be too far behind. Zenith Optimedia forecasts 4.7 per cent growth in ad spend worldwide, though it says Europe will lag behind the US and Asia. It forecasts UK ad spending will rise 3.2 per cent this year, nearly triple last year’s growth.

Nascent cheer can be noted among advertising agencies’ new business directors, who are predicting more account moves than last year as clients unleash their pent-up desires to create new campaigns.

One advertising account likely to top agencies’ lists of prospects this year is retail chain WH Smith, under the direction of new chief executive Kate Swann. Other account prospectors wonder whether Lloyds TSB will round up its galloping steeds from that beach and lasso a new advertising “pardner”.

Those who loathe Tesco’s “Dotty” ad character, played by Prunella Scales, predict she will be shuffled off to a retirement home a long way from the television cameras, while others think Jamie Oliver has passed his sell-by date as a spokesman for Sainsbury’s. But this is by no means the death of celebrity advertising, according to Hamish Pringle, director-general of the Institute of Practitioners in Advertising. “Contrary to what many people say, celebrity advertising campaigns will continue to do well in the market,” he says.

Meanwhile, sources speculate that staff at advertising agency St Luke’s, which was hit by management turmoil last year, have been entreated to act in line with their saintly provenance and fall down on their knees and pray. And some predict that Mother will find a new father figure in the form of Sir Martin Sorrell, who they think (without any evidence) is set to buy the creative shop and integrate it into his WPP advertising conglomerate. Others wonder whether the new agency set up by hard men Mark Wnek and Ben Langdon will be the next trendy boutique, or whether the two will simply knock sparks off each other.

The Seventies revival that has been so fashionable of late could start infiltrating the agency world itself, at least if AAR chief Martin Jones is to be believed. He thinks that the coming year will witness the return of the full-service agency. “I can see the industry going full circle and one of the big agencies returning to full service, having media and creative back in the same building so they can have corridor conversations again,” he says. He also believes that direct marketing agencies could start to become more differentiated, in the same way that advertising agencies are. The top ten direct marketing agencies are all quite similar, while the leading advertising agencies each appeal to different types of clients, he argues.

This year sees media regulator Ofcom swing into operation, with various consultations on the telecoms and media markets, including the future of public-service broadcasting and the regulation of broadcast advertising. Further fireworks could be ignited in the media world with any battle for control of the Telegraph newspapers.

There is speculation that ITV will launch a children’s channel, and an “ITV Gold” channel showing repeats is planned. Now Carlton and Granada are one it will be interesting to see if any global media player such as Viacom makes a move on the merged ITV. Potential purchasers may wait to see how the merged ITV performs and how the “contracts rights renewal” remedy – which will govern the sale of ITV airtime – will affect its revenues. Advertisers will be keen to see how the Newspaper Marketing Agency fares in wresting newspaper revenues back from internet, outdoor and other media.

Zenith Optimedia deputy managing director Mark Waugh believes that Sky+, the personal video recorder technology, could start to have an impact on the price of television advertising as viewers make use of the ability to zap quickly past the ads. “If Sky+ becomes a standard part of the package, the debate comes back to TiVo and the impact on spot advertising. TiVo failed, but if Sky is able to market Sky+ cleverly and powerfully to existing business, it could have serious implications for consolidated ratings,” says Waugh. With fewer people watching ads, the price of TV advertising would be pushed up as advertisers struggle to maintain impact, he believes.

Third-generation mobile technology will be watched closely and some wonder whether 3, which has performed below expectations, will be forced out of the market. It is unlikely to have the 3G sector to itself for much longer – at least some of the other networks are likely to launch services this year.

For the National Lottery, 2004 could turn out to be the most significant year since the launch of the great game ten years ago. The Euro Millions game is to launch, with a &£4m advertising budget, heralding a single lottery game played across the UK, France and Spain. Huge jackpots will be introduced to reignite interest among punters. The UK National Lottery will be relaunched yet again, with a new advertising campaign as operator Camelot hires a new agency. Lottery funding will also become more explicit as 10,000 lottery plaques are put up around the country.

Retail spending will be closely watched for any signs of an increase in consumer confidence. Verdict Research chairman Richard Hyman says: “Our view is that it is going to be the proverbial ‘game of two halves’, with the first half pretty tough and the second half somewhat better.” Retail sales rose by 4.6 per cent in 2000, but the growth fell to about 3.7 per cent by 2003. Hyman predicts a rise of 3.9 per cent this year.

But anyone wishing to celebrate the cautious new optimism with an all-night drinking session will have to wait yet another year before the licensing laws are finally relaxed – the newly liberalised 24-hour drinking regime will be introduced in early 2005.