Lebanon has earned a reputation as the driving force of the regional advertising market over the past few decades.

Nov. 2, 2006- Before the July war, Beirut had successfully bucked the country's perennial instability and carved itself a niche as the creative hub of the sector by boasting a well-educated, multi-lingual human-resource pool and a relatively free, though politically sensitive, media environment.

War not withstanding, Lebanon's workforce will no doubt remain the engine of Middle East advertising as the latest crop of young talent decides whether to take a gamble and stay put or hedge their bets by joining the growing diaspora population currently dominating calmer Gulf markets.

It is yet to be seen if the summer's armed conflict will be the death-knell for the capital in its decade-long battle with its comparatively secure and more repressive challenger, Dubai, to attract Lebanese recruits and multi-national advertising firms.

True to form, Lebanon's resilient multinational advertising companies are cautiously optimistic about their prospects for recovery - less so their local counterparts - and insist that this summer was merely a blip, granted one that hit the local market hard, and continues to reverberate across their industry and the media. As with all sectors of the Lebanese economy, advertising executives can now be heard muttering the familiar refrain, "if the situation remains stable things should pick up."

The war interrupted the high season for the advertising industry, sparing none of the at least 60 agencies in Lebanon. According to media monitoring firm IPSOS-STAT, total advertising expenditures in Lebanon - which had been marginally increasing over the past few years, rising by 21 percent year-on-year in the first six months of 2006 - plummeted by 60 percent in July and August as firms cancelled pre-booked campaigns planned for all mediums - television press, outdoor, radio, and cinema.

"Our industry is the first to feel the war and the last one to recover," explains Allied Advertising CEO Waddah Sadek from the firms Clemenceau offices.

"I remember the soldiers were kidnapped Wednesday and by 5:00 p.m. at least 50 percent of campaigns were cancelled. The day after Israel threatened to start the war all of them had been cancelled," Sadek says.

Allied, which earns 25 to 30 percent of its annual income during the summer season, lost some $750,000 in revenue due to cancelled campaigns, Sadek says. Since many of the bookings were for seasonal products, this amount will not be recouped. He says the postwar marketing budgets of most of Allied's local clients - 80 percent of total - have dropped 30 percent, and expects cuts to continue into 2007.

But the war did not wipe out all of the firm's local clients. Sadek says two or three of the firm's 60-odd clients boosted advertising budgets after the war in response to increased demand for their products. A powdered-milk producer that profited from the shortage of fresh milk over the summer has launched a campaign to raise awareness of the brand since the blockade was lifted, and regional long-life dairy imports began to threaten its expanded market share. Electronic merchants are also spending more money too woo consumers shopping for their new homes.

Allied beat out competitors to win the contract doing public relations for the UAE - so far the only Gulf state to publicize its postwar humanitarian and reconstruction efforts in Lebanon.

Sadek insists that Allied's commitment to the local market has not wavered, though the firm is going ahead with prewar plans to expand into region and will open up new offices in Saudi Arabia in 2006, and in Oman and Kuwait next year.

Depending on the domestic political situation, more advertising agencies may begin refocusing efforts on regional markets since multinational-affiliated companies with a strong roster of international clients proved to be better equipped to handle Lebanon's constant uncertainty during the war.

Though no advertising firm was left unscathed - The Daily Star encountered summer losses ranging from 40-80 percent of annual income - those that deal mainly with the local market have fared worse than their global counterparts.

The managing director of Leo Burnett Levant - the firm behind the Johnnie Walker bridge campaign, en route to becoming one of the most iconic images of the July war - says a little less than half of their campaigns were cancelled, resulting in a 30 to 40 percent drop in revenue.

"People who take the biggest hit are purely local agencies that have maybe a local bank, juice, and chocolate manufacturer. For them things were pretty much dead for three months," Kamil Kuran says. "The repercussions of that, business-wise, will be felt for the rest of the year because they won't have big advertising budgets and will mostly be focused on surviving."