It was Lord Leverhulme, the British

It was Lord Leverhulme, the British soap pioneer, who is said to have complained that they knew half of their advertising budget was wasted, but didn't know which half. The real effects of advertising become more measurable, exposing another, potentially more horrible truth, for the industry: in some cases, it can be a lot more than half of the budget that is going down the drain.

The advertising industry is passing through one of the most disorienting periods in its history. This is due to a combination of long-term changes, such as the growing diversity of media, and the arrival of new technologies, notably the internet. With better-informed consumers, the result is that some of the traditional methods of advertising and marketing simply no longer work.

The media are the message.

But spending on advertising is up again and is expected to grow this year by 4.7 per cent to $343 billion. How will the money be spent? There are plenty of alternatives to straightforward advertising. They range from public relations to direct mail and include consumer promotions (such as coupons), in-store displays, business-to-business promotions (like paying a retailer for shelf space), telemarketing, exhibitions, sponsoring events, product placements and more. These have become such an inseparable part of the industry that big agencies now provide most of them.

As ever, the debate in the industry centres on the best way to achieve results. Is it more cost-effective, for instance, to employ a PR agency to invite a journalist out to lunch and persuade him to write about a product than to pay for a display ad in that journalist's newspaper? Should you launch a new car with glossy magazine ads, or — as some carmakers now do — simply park demonstration models in shopping malls and motorway service stations? And is it better to buy a series of ads on a specialist cable-TV channel or splurge $2.2m on a single 30-second commercial during this year's Super Bowl?

Net sales.

Such decisions are ever harder to make.For a start, people are spending less time reading newspapers and magazines, but are going to the cinema more, listening to more radio and turning in ever-increasing numbers to a new medium, the internet (see chart 1). No one knows just how important the internet will eventually be as an advertising medium. Some advertisers think it will be a highly cost-effective way of reaching certain groups of consumers. But not everyone uses the internet, and nor is it seen as particularly good at brand building. So far, the internet accounts for only a tiny slice of the overall advertising pie (see chart 2), although it has begun to grow rapidly.

Despite all of these complications, many in the advertising business remain confident. Rupert Howell, chairman of the London arm of McCann Erickson, points out, TV never killed radio, which in turn never killed newspapers.They did pose huge creative challenges, but that's OK, he maintains: “The advertising industry is relentlessly inventive; that's what we do.”