Australia, unlike the US and Canada, is seeing a tough advertising linger, stubbornly refusing to pick in the first two months of 2024.
The Standard Media Index (SMI) for February was down 6% in Australia compared to the same month last year, a contrast to record and near-record results in other ad markets.
The US reported record US ad spend in February, Canada had a 7% increase and China grew 12.5%.
Most analysts had expected a quiet market at the start of the year, with a pickup in the second half, driven by an improving economy and big sporting events such as the Paris Olympics.
"Post pandemic revenge spending is well and truly over and it’s a tough advertising market out there,” Ben Willee, general manager and media director at Spinach, told AdNews.
"There are the obvious reasons impacting consumer confidence and therefore advertiser confidence.
"History tells us that years with big events like the Olympics show year on year growth. However, more recently advertisers have tended to plan away from some big events especially elections and there are rumours of a Federal Election in the back half of this year.
"I can’t help thinking there are some new pieces to the dynamic jigsaw puzzle that is the media landscape and the big one being retail media. How much money is going direct, I don’t know but I’m sure it’s a lot.
"There’s a long way to go, and it's way too early to make definitive predictions for calendar 2024, but the economic fundamentals are sound and it won’t take too much to see rising consumer confidence.”
Frank Carlino, group investment director NSW for dentsu’s Carat, isn’t surprised to see media consumption continuing to move to digital from traditional.
This has resulted in an increased investment across programmatic outdoor (+91%) along with the continued rise of social media (+5.9%).
TV was down 12.9% and radio 5.9%.
"It will be interesting to see how broader macro-economic conditions and inflation will continue to impact already soft advertiser confidence and spend,” said Carlino .
"I do hope for everyone involved that the market gets some positive impact from the Summer Olympics and another ‘gold medal performance’ like in Tokyo 2020 (+41.9% YOY growth across TV spend).”
Sam Cousins, chief strategy officer, The Media Store, late last year predicted that Australia hadn’t truly realised the cost-of-living crisis yet and that 2024 would be the year of the crunch.
"I think what we are seeing here are the compounded effects of this,” said Cousins.
"Whilst consumer confidence may be improving, that hasn’t translated to people’s wallet yet. The average homeowner with a $590,000 home loan is paying $1,345 more a month than they were a year ago .
"Consumer and business confidence continue to remain low. So it’s no surprise that there is a knock on effect to the ad market. If consumers spend less, brands, products and services struggle with sales and revenue and, in turn, ad budgets.
"Proving ad spend effectiveness is still one of the biggest challenges for our clients. If you are a brand with money in market, now is the time to cement share of voice with lower competition and where consideration sets are still small.
"One of our biggest clients is going through a huge rebrand this month and we’re definitely maximising the opportunity for them in this regard; and getting access to premium inventory within shorter deadlines is also the upside of a softer market.
"It will be interesting to see how the Olympics affects the second half as many of our clients are looking into strategic opportunities around the games without bigger budgets to invest directly in them.”
Stephanie O’Donnell, head of Investment, Melbourne, Initiative, said a declining market was not unexpected, especially given weaker retail spend and brand consumer goods spend impacting the TV market.
"Foxtel linear declines sharper than FTA, although this may change when more robust Kantar data becomes available,” O’Donnell said.
"OOH least impacted by declines with continued OOH digitisation helping protect yields overall. Looking deeper at OOH spends, performance is still largely driven by retail formats which have had consistent growth amid continued centre contract changes, driving a highly competitive market.
"Large format remains relatively flat, although this may also be a result of PDOOH spend not being captured effectively overall. Would estimate PDOOH at 9% of OOH market.”
Jonatan Morales, senior strategy director, Orange Line Digital, said Australian ad spend differs from other markets.
"While the RBA has hinted at the possibility of interest rates cuts as early as May, their generally ambiguous commentary has left Australian companies speculating resulting in a slowing down of the economy and resulting in lower-than-expected results for companies leading to layoffs at major firms like Amazon, Google, eBay, and PWC,” said Morales.
"Not surprisingly, marketing budgets are down, but several opportunities for advertisers arise in a scenario like this.
"Reduced competitor ad spending could allow underdogs to boost their SOV and SOM, offering a brief window for gaining loyal customers, while lower investment across media channels may lead to more competitive advertising prices in the short term.
"Companies with reduced marketing budgets can focus on internal improvements, for instance reviewing CRM and CMS systems, optimising SEO strategies, enhancing website functionality, and refining conversion paths.
"Digital advertising remains resilient as advertisers turn to trackable and cost-effective DR channels. However, maintaining brand awareness is crucial, giving brands a longer lifespan in the mindset of potential consumers.”
Michael Mellington, head of media partnerships, Melbourne, UM, said ad spend often follows two things, the first being audience consumption, the other being consumer confidence and household spending.
"With the cost of living still impacting many Australians, household spending is down, so too is the media spend market, which recorded a -7.5% reduction overall in Jan / Feb," Mellington said.
"Interestingly channels that have been experiencing strong growth such as OOH have now also dropped off at -4%, largely driven by Street Furniture, based on this soft demand, clients that do choose to play will no doubt benefit from sharp deals. While TV continues to dip, deals may be more challenging to push. With a continued drop in audience, more inventory is required to hit the same numbers meaning a push on yield.
"With spend down across the board, we can expect more pressure on live briefs as partners do their best to take share of the shrinking pie, the optimist in me doesn’t see this lasting forever."
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