The Chief Executive of French advertising company Publicis Groupe SA (PUB.FR) Tuesday predicted that the company would start growing organic revenues by the middle of next year because the advertising markets have started a gradual recovery.

The global advertising market has slumped since the summer of 2008 as the world's major advertisers have cut spending in response to the credit crunch and economic downturn. However, Publicis CEO Maurice Levy reiterated that the market hit a bottom in June and a third quarter recovery should continue into the fourth quarter and beyond.

"The advertising market has stopped deteriorating during the summer and a slow and gradual recovery is underway," Levy told reporters.

The company is looking for acquisition targets to continue growth in China, as well as opportunities to strengthen its position in India, he added.

Levy has been one of the first industry executives to call the recovery of the advertising market. While Omnicom Group Inc.(OMC)' Chief executive John Wren last week said that client spending is showing signs of stability, other advertising executives, such as WPP PLC's (WPP.LN) Martin Sorrell and Havas' (HAV.FR) CEO Fernando Rodes Vila have been reticent in forecasting a return to growth.

Paris-based Publicis, the owner of Saatchi and Saatchi, Tuesday reported a 7.4% drop in third-quarter organic revenue, which excludes the impact of any acquisitions and disposals and currency moves. The figure was an improvement on the 8.6% decline in the second quarter.

Levy said Publicis should outperform the expected 10% decline in the global advertising market in 2009, and could post organic growth for the whole of 2010 once it returns to growth around the middle of next year.

Publicis agency ZenithOptimedia last week forecast that global advertising spend would return to 0.5% growth in 2010.

For the three months ended Sept. 30, Publicis' revenue was EUR1.05 billion, down from EUR1.11 billion in the same period last year but in line with an average EUR1.05 billion forecast by five analysts polled by Dow Jones Newswires.

Revenues continued to tumble across all regions, with the sharpest drops in Europe and Asia Pacific, where Chinese growth could not offset sharp declines in Japan, South Korea and Australia.

Still, analysts said Publicis' third-quarter performance confirms a rebound in activity.

"What's positive is that pretty much all regions, except Asia-Pacific, improved, and that the group again outperformed peers in the U.S.," Exane BNP Paribas analyst Charles Bedouelle said. He rates Publicis outperform.

Despite the tough market conditions, Publicis, whose clients include General Motors Co. and French car maker Renault (RNO.FR), said it won new business worth $4.8 billion in the first nine months of the year, which analysts say should help boost organic revenue growth next year.

"What has been unusual in this crisis is that advertisers are not afraid to change advertising agencies in a low cycle," Levy said.

Still, Publicis will continue to cut costs to preserve its margin, which should not drop more than 200 basis points this year, Levy said. He said in 2011, the group's operating margin should be back in the region of the 16.7% posted in both 2007 and 2008.

At 1055 GMT, Publicis shares traded up 1.6% to EUR27.91. The stock has gained about 49% since the start of the year as analysts believe the group is well-positioned to emerge stronger from the crisis than some competitors, notably due to its position in digital advertising.

Smaller French rival Havas last week posted a steeper-than expected 9.3% drop in third-quarter organic revenue. WPP, the world's largest marketing company by revenue, reports Friday.

-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 54; ruth.bender@dowjones.com