Ad market cools as mobile and video spend steams ahead

Arvind Hickman
By Arvind Hickman | 12 December 2017
Magna Australia managing director Victor Corones.

Australian advertising spend is predicted to grow by 2.9% to $16 billion in 2018 with digital set to increase 10% to $9 billion, according to the latest forecast from IPG Mediabrands investment arm Magna.

The headline growth figure is below this year’s ad spend growth of 3.2%, which fell short of Magna’s most recent prediction of 4.3% growth – indicating a cooling of the market.

Much of the decline is predicted to come from linear television, which Magna forecasts will drop 4% next year and contract 6% annually for the next five years.

TV’s greatest challenge will be diversifying revenues while continuing to protect its linear TV broadcast base, the report adds.

“The clock is ticking on this scenario,” Magna Australia managing director Victor Corones says.

“As consumers continue to seek out content across multiple devices and platforms, linear TV channels face audience declines, which in turn is driving inflation for this medium. The concept of clients paying more for less is always challenging even for such a powerful and dominant medium such as linear TV."

Corones, who attended all of the TV network’s upfronts events this year, says all three major commercial networks need to deliver on promises to offer more sophisticated digital streaming capabilities in 2018, particularly as connected TV apps start to deliver audiences at scale. 

“This lays an important foundation for new revenues so getting the consumer and experience right are critical,” Corones adds.

Online video stars

TV’s loss appears to be digital’s gain, despite ongoing concerns over YouTube’s brand safety and Facebook’s accuracy in measurement rocking digital media over the past year.

The report says the star performer will be online video, with ad spend forecast to grow 21.7% in 2018 and at a compound annual growth rate (CAGR) of 17.8% over the next five years.

Social media is expected to see continued growth in ad spend of 18.1% with the rise of news feeds, diversification of social platforms and increased mobile usage key drivers in 2018.

Search investment is forecast to rise by 7.7%, fuelled by new features such as location-based search, shopping feeds and integration of search features in more devices that allow advertisers more opportunity to connect with customers.

Within digital, mobile is predicted to attract close to 54% of spend next year and 72% by 2022 in Australia.

How other media will fare

Magna’s report says that out of home (OOH) ad spend is expected to grow 6.6% in 2018, with digital OOH expected to increase by 15% and account for close to half of ad spend within this sector. 

A major issue the outdoor industry will need to overcome are concerns about measurement verification, which AdNews understands are being worked on by specialist agencies supporting the sector.

Radio is forecast to have marginal 1% growth while print continues its “precipitous decline”.

Although the overall growth is below previous forecasts, Corones explains that events next year could fertilise ad spend across several media channels.

“The Commonwealth Games and several state elections are potential growth levers across the year for several media sectors,” Corones adds.

“A federal election currently pegged for 2019 also has the potential to move earlier and fall into 2018.”

The industries expected to grow spending most include travel, automotive and retail, particularly as the Australian market awaits the impact of Amazon’s launch.

Magna expects activity in the overheated real estate sector to contract in 2018.

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