Media agency insiders and analysts are celebrating a surge in ad spend post pandemic 2020 but have one eye on possible economic dampening from lockdowns.
Brands are reported to be mostly holding the line this round of COVID-19 restrictions rather than the quick halt on spend of a year ago.
But the road ahead, clear and unhindered at the start of 2021, is becoming more opaque with uncertainty around the delta strain of the virus.
Still, the market remains upbeat. The SMI (Standard Media Index) reported a 44.3% jump to a record $754 million in ad spend for June, hitting pre-COVID levels of 2019. It was the third month in a row in which ad spend recorded year-on-year growth of more than 40%.
Steve Allen, Pearman’s director of strategy and research, describes the June SMI as remarkable and positive but has some reservations.
For the first six months of the year national marketer ad spend grew 25% above the same half last year.
“Never-the-less plenty of expected, explainable shocks in recovery,” says Allen.
“We have now experienced in one way or another lockdowns in five states, and NSW will likely be as long, disruptive and commerce-killing as Victoria’s of last year,” he says.
“This will blow up the recovery, especially the pace and trajectory.”
He says June showed a remarkable lift, but was only just above June 2019, about $600, or +0.085%, and this would have been helped by some end of financial year spending of budgets.
Allen expects growth to ease in the September quarter.
“For TV in particular, Olympics always distort the market ... this to wash through July and August as SMI pacing suggests,” he says.
“Note also, only digital is actually posting growth, compared to the last normal year 2019.
“At this point in time, we remain optimistic that our 2021 Media Markets forecast will be met … and probably modestly exceeded.”
Sarah Keith, managing director, Involved Media and Active International Australia, says the August forward numbers are of most interest at the moment.
“Anecdotal evidence suggests that while media channels aren’t experiencing cancellations to the degree they did this time last year, some businesses including locally based SMEs are exercising caution and rolling activity forward as the Sydney and south-east Queensland lockdowns continue,” she says.
“The strong forward ad bookings from restaurants, specialty retail, movies/cinemas and theme parks are likely to be affected as the stay-at-home orders continue.
“On the upside, the increase we saw in government spending in the June half will continue across the rest of 2021.
“The Tokyo Olympics have also seen a lift in marketing activity by the big partners and sponsors such as Toyota, Woolworths, Optus, McDonald’s, Harvey Norman and AAMI, and new entrants such as NordicTrack. Their investment is a sign of their confidence in the rest of 2021 and a good sign for media companies.”
Simon Ryan, CEO of RyanCap, says Australia’s COVID recession hasn’t been as severe as in most other comparable countries.
“That’s because we’ve done a better job than most suppressing the virus to date plus the government has provided fiscal support to install confidence from consumers and businesses alike.
“This means that companies had the balance sheets to reinvest into growth areas, digitise their businesses and invest in ad spend to achieve the financial year results closing out June. The result was an increase to June ad spend focusing on business results and future growth targeting confident consumers.
“The watchouts to businesses moving forward is ‘vaccine hesitancy’ barrier to returning to a new ‘normal’, Australia has one of the highest vaccine hesitancy rates out of a number of advanced economies. We need this to change to install confidence and bolster future economic ad spend growth.
“The current lockdowns will probably turn Q3 GDP into negative territory, but there should be a strong rebound in Q4 as vaccinations kick in and we approach the Australian summer.
“If central banks keep the cash rate low and our government continues stimulus this will again filter to increased ad spend and further confidence in what is a ‘dynamic’ ad market economy!”
Natasha Pelly, media analytics director, Publicis Media Exchange: “The latest SMI numbers are hugely encouraging, and reflect the trading conditions we’ve seen in-market.
“Though only digital has recorded real growth (versus 2019) due to the medium’s scale it should see total market revenue exceed 2019 levels. TV also looks in a strong position to return to 2019 levels by the end of the year.
“Despite recent lockdown conditions in many states, consumer confidence has not suffered significantly, with July actually growing two percentage points compared to June. This is a very encouraging sign for consumer spending and in turn, for the ad market.
“The Australian numbers appear symptomatic of a wider global trend, according to which advertising spend is rebounding at record pace.
“We’ve recently seen a Warc report forecasting growth in the UK ad market of 10% vs. 2019, which is exceptional. Global forces will always have some impact on local spend, so the news is welcome after a very challenging 2020.”
Steven King, joint managing partner, Frontier Australia: “Another stellar month’s performance. Twelve months ago if we were presented with these figures we would have absolutely banked them.
“It’s especially good to see the huge uptick in June for the travel category. However, I do feel for cinema and out-of-home. Both channels were starting to rebound well, only to be impacted once again by the latest lockdowns.”
Ashwin Govender, client solutions director, Half Dome: “It is so positive to see the market lift considerably in June compared to the ‘Armageddon’ experienced this time last year.
“Despite being in the middle of a testing second winter experiencing lockdowns across every major city, brands have come to terms with advertising in the new world.
“Our clients remain confident in media as an investment into the longevity of their brands. It is pleasing to see outdoor and cinema revenue lift so considerably given how heavily both were hit at the height of the pandemic in 2020 while digital video continues to boom.”
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