The nearly always-optimistic leaders of the US advertising industry, coming off the most lucrative decade in history, are casting a wary eye on their future.

The record US economic expansion, the phenomenal growth of the Internet and the dot-com companies it has spawned, and the proliferation of traditional media outlets have fuelled tremendous growth for the industry.

However, its leaders, in Bermuda at the Fairmont Southampton Princess over the weekend for a major conference attended by hundreds from the industry, are wondering how much longer the good times can roll, with signs of a possible slowdown in the record US economic expansion, continued strong competition from Internet ventures for talented staff and the prospect of a new administration in Washington in the future.

"We may be in the best of times and the most dangerous of times,'' said John Kamp, senior vice president for government relations in the Washington office of the American Association of Advertising Agencies, the industry trade group.

"We are right now in sort of a sweet spot for the media /Internet era.

Because the economy is so good, the normal enemies of advertising are somewhat muted.'' Like many businesses that have benefited from the strong economy, ad agencies have found it difficult to recruit new talent. They also have seen staffers lured away not just by competing agencies, but by their own clients as well.

"The bright, young, creative-minded and marketing-minded kids who used to flock to our doors and fight for a place on our rosters are simply not showing up,'' said Phil Dusenberry. He is chairman BBDO Worldwide, New York, and incoming chairman of the group, known as the Four A's. "They're missing in such numbers that we've lost a whole generation along the way,'' he told the meeting. Dusenberry said the industry's talent deficit "deepened during the awesome expansion of the Internet and corresponding explosion of dot-coms and IPOs. Everybody is after the same smart, talented young people we're after.'' His predecessor, Ogilvy & Mather Worldwide CEO Shelly Lazarus, told the gathering: "There is more opportunity in our business than we have the people or resources to handle.'' Ad industry leaders meet in Bermuda A lot of that opportunity has come from new dot-com companies trying to stake a claim on the Internet, as well as from traditional brick-and-mortar companies that are expanding their businesses to the new medium.

While many ad agencies benefited from the surge in spending by fledgling dot-com companies, others have since taken a much more prudent approach to working with them. Some are demanding payment in advance; others are demanding a broader consulting role with the dot-coms, and many, such as Lazarus' agency, are turning down some accounts.

However, executives from smaller agencies said that while they might have some misgivings over working for a dot-com start-up, they could not afford to turn away work. "Some of these guys work in a different world. Shelly Lazarus can turn down all kinds of work from dot-coms, but the smaller shops can't afford to turn away work,'' said an executive from a Midwestern agency, who requested anonymity.

Meanwhile, with the stock market and other indicators signalling to some that an economic slowdown is on the horizon, agencies are fearful of what long-standing concerns may resurface.

Kamp, of the Four A's Washington office, said a recession would likely revive discussion in Congress on the taxation of advertising and marketing expenditures and the deductibility of such costs. It would also likely renew talk at both the state and federal levels on taxing commerce on the Internet.

In addition to the tax issue, the matter of consumer privacy on the Internet weighs heavily on marketers. The industry insists it can be self-regulating, while privacy advocates insist on a government role. "Internet privacy is perhaps the loudest issue,'' Kamp said.

While the privacy issue has been discussed almost exclusively in the online context, the issue of database marketing is also on some legislators' agendas and concerns the industry greatly. While federal officials have been primarily concerned with online marketing, state regulations are focused mostly on traditional offline direct marketing practices.

"There could be an assault on that part of our business that leads to the most efficient marketing tools we have,'' Kamp said. While industry leaders hope most of these threats to their continued prosperity can be forestalled, they do face another nagging aggravation over the next few weeks, if not months.

Members of the Screen Actors Guild and the American Federation of Television and Radio Actors, the performers who appear in the radio and TV commercials the ad agencies create, went on strike on May 1.

A negotiator for the agency group and advertisers told the conference he expected the walkout could last another four to eight weeks before negotiations resume. The dispute is over the method of payment for actors based on how often and where the commercials play.

In a timely reminder to the ad agency executives of the labour dispute, a boat hired by SAG/AFTRA cruised alongside others carrying the executives across Bermuda's Great Sound to a dinner party on Friday night. A union activist blasted an air horn, drawing the executives' attention to a sign on the smaller boat that read: "Pay Per Play. Fair Contract for SAF/AFTRA Now''.

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