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The advertising market is clearly cautious, with brands committing to short term spend, giving them leeway to pull back if the economy worsens.
The March SMI numbers, showing media agency bookings down by 5.2%, can easily be explained by looking at the comparison to a federal election month last year when money poured into the system.
But analysts say the market has been nervous for some time and what's emerging now is fallout from the war in the Middle East.
Analysts at Macquarie say it is unclear if March data represents a low point or if challenges will continue.
“The sequential slowdown in March is unsurprising, being the first data point reflecting the impact of macroeconomic volatility in the Middle East,” they said ina note to clients.
“There is minimal visibility on whether this is a cyclical low point or headwinds persist over 2026.”
Ben Willee, executive director - media and data at Spinach Advertising, said looking at the latest SMI numbers is a bit like checking your bank balance after a long weekend. You already know it’s not going to be good.
“The market is back about 5.2% year on year, which on the surface doesn’t look great. But context matters,” he said.
“We’re coming off a very strong, election-fuelled period, so these were always going to be tough comparisons.
“What’s more interesting is why we’re seeing this softness. Consumer confidence is shaky, inflation is still hanging around, and the prospect of further interest rate pressure means businesses are understandably cautious.
“That caution is showing up in media investment. TV is down more than 10%, radio is off, and digital has softened as well. But there are some bright spots. Outdoor is holding up, streaming continues to grow, and importantly, February has now been revised into positive territory.
“And that’s the key point. Money is still there, it’s just arriving later and being spent more carefully.
“In environments like this, history tells us the brands that keep investing tend to come out stronger, because share of voice gets cheaper when everyone else goes quiet.
“So yes, the numbers are a bit soft, but they’re not as scary as they first look.”
Shai Luft, co-founder at Bench Media, said the market has now been in the red for several months, and the trend is clearly negative.
“It’s still a very cautious environment,” he said.
“Business and consumer confidence remain low, with ongoing global uncertainty, higher fuel prices, inflation and interest rates all weighing on decision making, and that’s flowing straight through to marketing budgets.
“What’s interesting is where spend is still holding and where it isn’t. Streaming continues to grow and now makes up a meaningful share of digital, while Social has overtaken Search, which is a pretty significant shift. At the same time, linear TV, radio and broader digital are under pressure.
“There are a couple of forces behind that. Search is starting to feel real pressure from AI, with fewer clicks and less predictable performance, so it’s no longer the safe bet it once was. At the same time, there’s a clear shift toward channels that can tell a brand story and engage people. That’s why less cluttered environments like Outdoor, Streaming and Social are holding up. They give brands a chance to be seen, not just served.
“It’s not just a soft market, it’s a selective one, and the money is moving accordingly.”
Tom Carlon, head of investment, IAG, Initiative, said there’s likely much further fragility just around the corner with the May Federal budget and probable rate increases to come this week.
"Despite total figures still being in the negative, - 5.2% Vs March 2025, a large portion of this is driven by 2025 Federal election spends – of which the Albanese government is doing their part to plug the gap with the new fuel crisis campaign," he said.
"We are however, seeing changes in the way in which advertisers are approaching the market, with late bookings becoming the norm and sector share movement becoming more apparent, particularly seen as social overtakes search, whilst the continued negative growth across TV opens the door for further upside across video and streaming.
"Brave marketers that leverage longer term forward planning and bookings will have greater opportunity in gaining efficiencies and value, whilst a considered approach to how advertisers show up in sectors such as Cinema and Video will provide the competitive edge."
Amy Carr, general manager - growth at Yango, sees shorter-term planning demanding agility from agencies and brands alike to navigate the quickly changing economic environment.
“Social Media overtaking Search is a direct reflection of evolving consumer habits,” said Carr.
“With audiences using social platforms as primary search engines and social commerce maturing, the loop between inspiration and transaction is now closed.
“Furthermore, the emerging 'clickless' environment—driven by AI directly answering queries—has fundamentally shifted the traditional search landscape.
“We are helping a lot our clients navigate this currently. Brands can no longer rely solely on traditional Search to capture high-intent users. The data is finally reflecting how modern audiences seek information.
“We are seeing a natural culmination of audience migration and ad-supported tiers on the major streaming platforms becoming the norm.
“We are starting to see premium video inventory scaling and matching the eyeballs that have left traditional broadcast TV. Spend patterns are mirroring this reality as advertisers embrace a unified total video approach.
“The growth in retail media supports that when times are tough, advertisers tend to hit the bottom of the funnel and focus on conversion. Retail OOH offers the last chance to influence consumers on their path to purchase.”
Alfie Lagos, director and founder of Lexlab, said search dropping behind programmatic and social in agency spend is the first time this order of finish has been seen in the Australian market.
“After years on top of the pile, that's the kind of result you don't expect to see in your career,” he said.
“AI Overviews and AI Mode are chewing into the click pool from the supply side, while platforms keep bundling Search, PMAX and Demand Gen into a single number on the demand side, which makes the headline look healthier than the underlying business.
“Our analysis of Roy Morgan data shows the percentage of Australians rating internet search as their most useful media source has stayed flat across 27 categories all through 2025.
“Spend up, usefulness flat. That gap is where the structural story lives, and brands need to start treating answer engine visibility as a discipline of its own.
“The other one to watch is Video. Streaming up 16% in March sounds great until you remember the Video category overall is still back 6.8%.
“The good news is the audience is moving with the money. OzTAM's latest VOZ Total TV report* has BVOD weekly minutes up 27% year on year and combined broadcast and BVOD reach still hitting 87.2% of Australians each month.
“The audience hasn't gone anywhere and the shift to BVOD is real. The pullback in total Video spend is more about advertiser confidence than a shrinking audience to buy.”
Media analyst Steve Allen at Pearman said SMI pacings show a surprisingly consistent solid outlook to June.
“We are very cautious about our outlook," he said. “Some significant challenges face the Australian economy in the coming months.
He describes March as better than expected at just 5.2% down.
The comparison was distorted, he said. SMI numbers in the March quarter of 2025 were artificially held up by a wall of government spending, +44% January, +46% February.
There was also a reasonably sizable distortion in February this year affecting television revenue and digital video streaming, the Milan/Cortina Winter Olympics.
Paul Wilkinson, client partner, head of investment at Hatched, said television had a rough quarter despite the Australian Open performing strongly and the Winter Olympics providing an audience boost.
“But with spends down 8.8% overall for Q1 it’s clear that the migration of audiences to streaming and on-demand is now fully reflected in agency bookings,” he said.
“And that without a major cultural event to force broad-reach buys (eg Winter Olympics), linear TV is unfortunately being down weighted on plans, and budgets are following eyeballs into digital video and other channels.”
Digital was flat overall (+0.2% for the March quarter), but the sub-category breakdown tells a far more interesting story.
Pure Play Video was the standout, up 20.7% across every month of the quarter — the direct beneficiary of streaming reaching critical mass and TV dollars in transit – albeit potentially somewhat inflated due to the Winter Olympics in Feb.
Programmatic (+2%) and retail online (+9.4%) both grew steadily, with retail media networks increasingly treated as a distinct channel by major FMCG and consumer goods advertisers.
Social (+2.2%) held modest positive ground for the quarter, though March softened to -1.8%.
“The broader context, however, is significant as social channels have now surpassed search in terms of spend for the first time,” said Wilkinson.
“It is true to say that social channels have been structurally gaining ground on search for some time, but the reality is there is no singular reason for this ‘phenomenon’ – it is very much multi-faceted.
“Firstly, nearly 60% of Australians now use social media for brand research, and short-form video has become the dominant discovery channel.
“Further, over the last number of years, social has also moved with pace into performance media territory, blurring the line between brand and conversion budgets and at the same time eroding budgets across search.
“Coupled with this, Australia's under-16 social media ban, may have paradoxically accelerated this shift - concentrating high-intent adult targeting and making social more efficient for many categories.
“Finally, we are seeing a trend of consumers using social sites such as Tiktok as search tools, side stepping traditional search engines for more ‘trusted’ peer reviews.”
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