EXCLUSIVE - Media agencies in uncharted ad spend territory

Chris Pash
By Chris Pash | 3 June 2021

The ad spend canary, which took a beating during the depths of the pandemic in 20202, is flying high as media bookings rocket on the path to recovery. 

Digital (up 47.1% in April) and television (up 44.2%) are leading the way but that means a tighter market in terms of lead times for ad spots, according to industry players. 

No more accusations of media agencies talking up the market, to push prices higher. Inventory really is tight and booking times stretched. 

SMI AU/NZ managing director Jane Ractliffe says the meteoric growth -- the overall (Standard Media Index) was up 39.7% to $584.4 million in April -- has sent the market into uncharted territory.

Steve Allen, director of strategy and research at independent media agency Pearman, says the result, 8.32% below the pre-COVID April of 2019, was a little shy of predictions.

“It is, and will be, an uneven recovery,” he told AdNews.

“Digital is naturally the leader, and fully recovering, bettering April 2019. FTA TV also fully recovered. radio not far away, but not fully recovered. But that is it. Outdoor trending back but by no means back to 2019. Cinema showing signs of recovery, but no blockbusters yet (soon second half) so admissions less than half of historic trends.

“State or market lockdowns obviously hurt, probably outdoor more than any medium.

“The print media are challenged in recovery. Both newspapers and magazines, and within both plenty of rationalisations and closures, so will never be back to their old ad revenue figures.

Allen forecasts 2021 media markets to be up 6.83%, all but recovering to 2019 levels.

Pia Coyle, managing partner, Avenue C, says it’s good to see the market coming back so fiercely in April.

“But it’s also a hard pill to swallow, as lead times re-adjust to worse than pre-COVID levels,” she says.

“There is some friction between client’s ability to predict sales and therefore budgets, as they grapple with volatility (especially in the face of current Melbourne lockdown), and agency’s need to secure good quality avails well in advance.

“It will take some adjusting to match a long term view with the growing need to trade at 12+ week lead times.

“As agencies, we need to over communicate with our clients to ensure opportunities aren’t lost, as the market continues to tighten.”

Ben Willee, general manager and media director at Spinach, says the SMI numbers are great news because they add real measure to the intensity felt in the last couple of months.

“Also TV traders can finally demand more empathy from managers and clients who suspected some were just ‘talking up the market’,” he says.

“What’s going to happen next? There will be more rumours and gossip about the ad market than that there is about the duration of a Victorian lockdown.

“In short, while the world economy is going strongly, that will trickle down to Australia. Fingers crossed this is the last of the lockdowns and things can start to smooth out and we can all get back to doing business the way we want to.”

Steven King, partner, Frontier Australia, says the big increases in the SMI numbers are no surprise to anyone in the industry.

“It’s great to see, although with April last year being a train wreck, comparative numbers were always going to look good,” says King.

“What’s interesting is that when compared to pre-pandemic April 2019 only TV is in positive territory. This shows that whilst we are on the right track in our economic recovery, there’s still a little way to go to getting back to where we all were a few years ago.”

Liesa Newland, GroupM head of investment intelligence, says growth is expected to continue throughout 2021 as spends cycle over the 19% decline experienced throughout January-October 2020. 

And it will be driven by television, particularly via a surge in video on demand. 

Newland: "Television was up 13% YTD, with results boosted by April spend (+44%), only 2% behind 2019 levels.

"Digital is also expected to fuel the overall demand growth throughout 2021.  SMI reported spend increased by 21% YTD, with a 46% spike in April.  Digital is currently sitting 9% ahead of 2019 levels. The IAB qualified these strong growth results, reporting +26% YoY increase in Q1, 2021. 

"Whilst Radio experienced heightened spends in April, +38%, they will still take a while to recover with commuter traffic yet to return to previous levels.  Digital audio is growing quickly but retains a small share. 

"Outdoor rebounded strongly, +49% in April, after disappointing results posted by the OMA in Quarter One. This growth is expected to continue as the medium reaps the benefits of investment in innovation in programmatic digital out of home, now representing 57% share. 

"Whilst recognising the significantly reduced levels in 2020, it was encouraging to see Cinema return to growth in April."

Newland says the positive story for Australia is where growth is coming from. Categories such as Food, Produce & Dairy delivered 18% increase in spend in 2021, building on 2020 growth. 

With Australians largely returning to normal and business models pivoting to home delivery, Restaurant category spend is up 16% with Alcoholic Beverages increasing by 38%. 

Home Furnishing is +26% with In Home Entertainment +54%.  Technology is +34% with a massive +86% since 2019. 

Australia’s largest categories such as Insurance, Government and Banking are all normalising their spend levels.

Categories such as Leisure are expected to return to health.  Advertising growth rates in sectors such as Technology (including BioTech), Healthcare and Luxury are growing their revenues quickly.

Huong Nguyen, Alchemy One business director, says the SMI numbers are incredibly robust and the rapidity in which the market has bounced back has exceeded expectations.

“However, in reality the ad market is reflective of a broader optimistic outlook,” says Nguyen.

“On virtually any measure of economic performance, Australia’s economy has demonstrated remarkable resilience and the recent Federal budget announcement focused on economic growth, small businesses and the taxpayer will have continued to embolden optimism in people's discretionary spending.

“We'd expect the demand to continue into Q3; driven by categories such as domestic travel, online retail and E-commerce/Business solutions, however as TV demand will surely remain robust, we expect to see some of this demand shift to channels such as out-of-home and cinema pending lockdowns in markets as marketers balance budgets for growth with delivering audience numbers.”

Anthony Ellis, MD of Publicis Media Exchange: "The total market is recovering faster than forecasted, however TV and digital are the beneficiaries with all other channels yet to see the same recovery versus 2019. At a category level, we can now see some of the most strongly affected categories starting to improve, such as travel for example, highlighting that the recovery is now more widespread. (Travel is up 221% vs 2020, and only back 30% vs 2019, its best results so far in 21)

"The positive momentum observed across the broader Australia economy since Q3 2020, continues to resonate in the ad market, as consumer confidence remains high. We anticipate that categories that have been dormant  will further drive growth through the back half into a strong Q4." 

IMAA general manager Sam Buchanan: “Although it's from a lower base, the SMI numbers are outstanding. It is no surprise from the IMAA's point of view, with all our member data showing a tremendously strong market. Whilst indies were the first to be affected by the pandemic, they are the first to bounce back...and bounce back hard.

"The strong numbers are a reflection of the resilience of the market and it's hard to believe how far we have come in 12 months. We believe we will continue to see strong numbers for the following two quarters, however 2022 will be the true test."

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