MAGNA says Australia’s advertising market grew by 23.1% to $A20.3 billion in 2021 driven by economic recovery.
And Australia’s advertising economy will grow by +10% to reach $A22.5 billion in 2022, according to the latest forecasts by MAGNA Global. The outlook is more optimistic than forecasts from GroupM (6.2%) and Zenith (5%).
We continue our forecast coverage. The following article first appeared in the Nov/Dec 2021 edition of AdNews. Subscribe here to make sure you get your copy.
Forecasts 2022. The direction of the industry in 2022 and the challenges for CMOs.
Sir Martin Sorrell, the founder of pure-play digital advertising company S4 Capital, acknowledges the recent surge in ad dollars but asks, “Is this a dead cat bounce?”
He told AdNews late last year: “The true test of these companies, the ad hold companies, will be in 2023 when all the noise is out of the numbers from the fiscal and monetary stimulus, which quite rightly was put in post-hand pandemic.
“They said we had the best Q2 that we have ever had and they forgot to mention that the year previously they had the worst one.”
The big global advertising groups reported, for the September quarter, numbers which mostly show a return to pre-pandemic times, 2019.
Sir Martin isn’t impressed: “We're much smaller, obviously, but we're running in the first half of the year 75% ahead of where we were two years ago.”
He says the self-satisfaction being exhibited by those saying the advertising industry is doing well isn’t the case when you take a pre-pandemic or full pandemic view.
“GDP growth this year will be 5% to 6%, next year 4% to 5%. In 2023, it'll go back, the pundits say, to 2%-3%.
“That's when the rubber hits the road. Now we have two tailwinds driving us. One is GDP growth and the other is digital transformation. And usually digital transformation accelerates when economic growth slows.
“What we learned this year is that there are two worlds, two planets, and really with all due respect to yourselves and analysts, you should really look at two different industries.
“Look at an analog industry, which is represented by the ad hold companies. And you should look at a digital industry which is represented by ourselves and the tech platforms and the hardware companies, the software companies and those companies that focus on digital.
“We grew by 20% last year. This year, so far, we've grown by 50% and that's organic, and we've indicated we'll grow by 40% for the year. And the hold Cos are saying, at best, they'll do 9% or 10% this year.
“The true test will be, I think, in 2023. The fiscal and monetary stimulus, which was huge … but we have to pay for it at some time.
“We've already seen taxes rise, for example, here in the UK, they will go further. I think that'll have a political influence in many respects. So we'll see how it all shakes out. But I would say the principal thing we learned last year, or this year, was that there are two distinct worlds. And I think journalists, analysts should start to think about the world as two. One, an ex-growth world or planet, and one a strong growth world or planet.
“And the pace of digital change. The other thing we learned really is that the pandemic accelerated digital transformation or digital change at the consumer level, because we're educating our kids, financial services, healthcare all online.
“Once you go that way, you don't go back. It's accelerated, as you know, in the media industry. So the streamers have got great attraction, free-to-air networks, more pressure, digital, outdoor, more pressure.”
KPMG CEO Survey
Customers will want a simplified and personalised experience post pandemic, according to Carmen Bekker, partner-in-charge, KPMG Customer, Brand & Marketing Advisory.
“Personalisation unequivocally continues to be recognised by Australian customers as the number one driver for customer experience, having the most impact on both advocacy and loyalty,” says Bekker.
“Customers are looking for personalisation that goes beyond ‘know me’ to ‘understand me.
“To design and deliver compelling customer experiences there needs to be a high degree of orchestration across the business. This orchestration requires breaking down complexity and aligning the business around the customer, based on a deep understanding of the customer, their needs, the marketplace and the organisation.
“We’ll also see the continued rise of purpose as a marketing platform. In our most recent global CEO survey, 88% of respondents saw a clear corporate purpose as having the greatest impact on building strong customer relationships over the next three years.
“Whilst the economy is going well and there is consumer optimism, there is opportunity for ad spend to continue its rise. However, I suspect there will be an increasing focus by the C-suite on understanding the ROI for media investment as we return to a more ‘normal’ macro environment.”
Kevin Doyle, regional vice president of Salesforce, started in agencies, his last role at Clemenger, running the Virgin Blue to Virgin Australia rebrand.
“When I started at DDB, when we were making radio ads and billboards, the data would come three months after a campaign was live. Then it was about, ‘How many cars drove past my billboard?’
"We then moved into a social media era and it was how many views did a post get? How many likes did my post get? And this is all cost centre stuff.
“Now it's about that one piece of communication that I ran or that one initiative that I launched. What value is that driving that aligns to the KPIs of the CEO and the board?
“And unless you can effectively, and in real time, bring those data sources in, understand what parts of your marketing strategy are working and not working, and make effective decisions accordingly, you will not be in this game for very long.”
The first priority in 2022 for Australian CMOs, according to a Salesforce survey, is unifying data sources.
“Data is a CMO's map through COVID-19 and you need to be data fluent in order to be able to deliver value and deliver outcomes for the client that you're working with,” says Doyle. “Number of data sources that a CMO is wrangling with is exponentially increasing year-on-year.
“And really what that's about is we no longer truly understand or truly know who our customer is.
“It used to be quite easy. They'd come into our shops, they'd come into our branches, we'd be able to talk to them on the phone. Now we can't. Now it's really, really difficult.”
And so the key area that marketers want to invest in is, "How do I actually get a true single view of my customer?"
And Salesforce found that a big part is that a customer can be different people at a different moment in time. And marketers don't know whether they are talking to Dr Jekyll or Mr Hyde.
“They're working on crude data points, on whatever the last click might be or whatever that one reason they picked up the phone and called without any context of every other interaction that's previously happened.
“Advertising is now disjointed with walled gardens, blocking the ability to actually get those interactions into a single place.
“And so that was the number one thing that marketers wanted to fix and also the number one area where they're going to be spending their money going through the next 12 months.”
“From a technology perspective, the biggest shift that marketers are moving to is a CDP, a customer data platform.
Marketing technology has been evolving over the past few years. There was a traditional CRM that the sales organisation would use. Marketers then started to shift to a DMP, a data management platform, and that survived on third party cookies and the ability to get your drop mobile phone identifiers or third party cookies collect all this anonymous information, not just from your advertising being served wherever it may be, anywhere on the internet, but also tagging on your own website.
Now with third party cookies being deprecated, Apple's changes in what they're doing with email, that's all going away.
“And so first party data is absolutely the king. How are people engaging when they land on your website? When they talk to you, when they actually are engaging with you on a one-to-one basis and they want to transact with you. How do you get that first party data and stitch it together?
“But that's the technology bit, which is really boring and really dull for marketers and advertisers. They just want to be able to use that once that actually comes in.
“And so that's what a customer data platform has. And when we talk to marketers, the number one investment area within technology is a customer data platform during the next 12 months to bring all that in, to be able to understand who my customer is and actually make it actionable, not just for the marketing department, but also for the agencies that they work with.”
The name of the game in the media is knowing who the audience is and being able to add value.
“There's nothing worse than when you're watching TV and you're seeing ads for something that's totally irrelevant. That's when you get at your phone and you start flicking through — multiscreening — and do something else.
“But if you can actually be relevant to that person and show them something that they're interested in, that's how you're going to actually engage with that person.”
The Salesforce study had 88% of marketers saying that their ability to meet customer expectations is dependent on their digital capabilities and their ability to engage with this new ecosystem that is emerging.
“And it's no surprise that the number one channel that increased the most in value since last year is video, only shortly followed by audio. And that's a big shift from the previous 12 months.”
The Future of Marketers
Doyle: “Their jobs absolutely are safe, probably more important than ever, as there's a shift from marketing being a cost centre to a revenue centre. And digital really is the answer to that.
“Marketers are optimistic about the future. When we ask them about how do they expect their role to change and also revenue associated to their role, about three out of four marketers, 72%, expected revenue growth over the next 12 months, 80% of respondents see themselves having a bigger role in driving this growth, with their work providing more value now than in a year ago.
“Marketers are seeing themselves as the customer custodian. And also as we're in this era of huge digital change, as we mentioned, the third-party cookies going away, all of these changes that Apple is making ... long live digital. There has to be a totally new way of reimagining how marketers can engage with that end consumer. And that falls on the CMO and the people within the CMO. There's a huge amount of upskilling that has to happen. And that is happening right now, but marketers are leading that charge and it's effective and it's absolutely showing them up.
Agencies and media and advertising predictions from the global consultancy:
The pandemic’s impact on talent and the marketing they produce leaves a void CMOs and agencies must fill. In 2022, the pendulum will swing back toward creativity generated by new constructs of technology, partnerships, and ingenuity.
Intelligence-fueled creativity will shatter the line between “agency” and “consultancy”. A new form of creative partner emerges from the collision of precision and persuasion marketing and proliferates in 2022. The “performance agency” label will disappear as agencies pair creative skillsets with media/data expertise, allowing CMOs to pursue intelligent creativity and produce multi-dimensional creative experiences that connect emotional, functional and transactional marketing messages.
10% of agencies crack the code to monetize their creative and media technology. Agencies will monetize the outputs of people working with platforms, forever changing how marketing is created, executed and paid for. The FTE model will start to shift to the Human/Technology Equivalent model, permitting CMOs and agencies to produce effective, scalable creative outputs.
Agencies bet big on creative-driven commerce as B2C brands go digital-first. In 2022, agencies will bring creative campaigns to product launches on Amazon marketplace; scale livestreaming; and make creativity relevant to category owners and traditionally B2B scenarios.
Agencies outsource to Big Tech partner programs to fill the talent void. In 2022, anticipate the ranks of agencies relying on partner programs to swell by 20%, in-line with digital ad revenue growth.
In-house agencies shift from supporting cast to 41% taking the director’s chair. Interest in insourcing shows no signs of slowing as 44% of CMOs intend to expand in-house teams by moving more marketing in-house over the next 12 months.
Media and advertising:
The pandemic-induced consumer behavior shifts and marketing resource constraints of 2020 and 2021 gave way to marketing ingenuity: brands pivoted their advertising, creative production and even products out of necessity. In 2022, Forrester predicts that advertisers and publishers will continue to experiment with new modes, models and methods.
Global revenue from the retail media category will reach $50B. In 2022, marketers will shift even more ad spend to retail media networks because they have deeper zero-and first-party data on customers and can better influence the customer at the point of purchase compared to other digital ad platforms like Google or Facebook.
Brands will flock to AI-powered audience solutions fueling 20% category growth.
Amazon’s “actionable video ads” will be the bellwether of shoppable ads everywhere. Brands are hungry to capitalise on the decreasing distance between product awareness and purchase. Forrester predicts a tsunami of shoppable CTV ads starting with ad-supported providers such as Tubi and Pluto.
Metaverse buzz will attract bandwagon ad dollars from twenty Fortune 100 brands.
Niche publishers will test new revenue models building momentum for micropayments. In 2022, midsize and niche publishers looking to diversify their revenue models will help pay-as-you-go options finally start to take off. The conditions are ripe, but Forrester expects a corresponding spike in listicles, clickbait headlines and political content as publishers vie for share of consumers’ paid content consumption and wallet.
Dentsu CMO Survey
The dentsu 2021 study is based on 105 Australian CMOs across Australia, working in businesses ranging from less than 50 employees though to more than 1000 employees across a range of sectors.
If 2020 was a journey into the unknown, then 2021 and beyond is a journey into the light.
In 2021/22 Australian CMOs are optimistic about growth and an expanded remit underpinned by innovation.
43% of Australian CMOs are expecting budgets to increase over the next 12 months with more than half expecting increases of 5%+.
When nominating the top three functions of marketing with their organisation, CMOs ranked:
1. Delivering business growth (60%) — maintaining the top position YOY for Australian CMOs
2. The functions of understanding consumers and market trends (48%)
3. Developing new products/services (32%)
Positions 2 and 3 have increased significantly as key responsibilities of the marketing function, with this top three also seen to be the most important in the next 6-12 months.
How are CMOs going to drive business growth?
In 2021-2022 to support this business growth, Australian CMOS are directing more effort to:
Shifting more of the marketing spend towards ecommerce with 31% already doing this (up 18 points YOY) and 20% implementing this and 28% considering.
Increasing the pace of digital transformation with 56% implementing or already doing this (up 15 points YOY).
Investing in Customer Experience is also a priority with only 6% of those surveyed not considering or already actioning this.
Getting the job done. Over the last 12 months, Australian CMOs have gained confidence in their ability to achieve ecommerce (83%) and digital transformation (82%) strategies, rating themselves as ‘somewhat’ or ‘highly able’.
Investing in improving Customer Experience is the strategy that most CMOs feel confident about with 88% rating their ability to achieve this as ‘somewhat’ or ‘highly able’.
Customer Experience The key ingredients that CMOs nominate (top 3) for creating differentiated customers experiences: Personalisation (72%); Innovative use of technology (64%); Consistency across touchpoints (56%).
Unsurprisingly understanding the consumer (97%) is seen as the most important organisational requirement for CX success, however this is closely followed by data integration and leveraging data (94%) and innovating faster than competitors and collaboration, both at (93%).
Emerging tech. Almost a quarter (24%) of CMOs claim they are already using artificial intelligence and chatbots, 20% using augmented reality and 19% using machine learning.
What do CMOs want from agency partners?
When asked about delivering superior CX strategies, what CMOs want most from their agency partners is: Creative thinking (52%); Innovation capabilities (33%); An understanding of Data (31%); Business Transformation services (29%).
Expectations of marketing agency relationships are largely aligned with growth strategies, with CMOs expecting agency partners to be: Able to provide fully-integrated solutions across all elements of the marketing mix — 71%; Driving innovation for clients — 70%; Delivering competency in technology and data — 69%; Business partnering to drive execution and growth over the long-term — 68%; Although “Explicit focus on efficiency and cost reduction” is rated number one at 73%.
CMOs have a different perspective on the impact of COVID-19. In 2020, only 7% rated the impact of COVID on their business as minimal, in 2021 this has increased to 33%.
Those that claimed to be significantly impaired or badly impacted dropped to 30% in 2021 from 43% in 2020. Significantly, 37% of CMOs think the COVID-19 crisis will increase the importance of the marketing function in their organisation.
This most common strategy employed in response to the coronavirus crisis has been 'Understanding changing consumer behaviour/market research’ with 41% of CMOs nominating this, followed by ‘Adapting marketing messaging to the current situation’ and 'Price optimisation’ — both at 32% of CMOs. These three strategies were also nominated as the most effective.
The crisis has caused business to zero in on the customer, with 42% of CMOs agreeing they have refocused business transformation efforts to be more centred around the consumer and 30% implementing direct-to-consumer approaches.
But with this comes disruption through the “Redeployment of resources from traditional advertising spend to other parts of the marketing ecosystem” (36%) and “Investment in innovation and products & services to diversify and differentiate their offering” (38%).
Overall, CMOs are more optimistic than they were in 2020, but there are still challenges ahead. Declining consumer spending is less of a concern in 2021 than it was in 2020 with 34% of CMOs this year citing it as a worry versus 51% last year.
In line with this, decreasing marketing budgets are also less of a concern, with 23% of CMOs citing this in 2021 vs 36% in 2020. One challenge of increasing concern is data. Obtaining the right data to make timely and appropriate decisions has almost doubled YOY from 15% to 28%.
‘Aligning with new/changing customer sentiment’ is the most common perceived challenge by our CMOS in 2021 (36%).
But overall, the majority (78%) of CMOs feel their business is prepared for the next six months.
Of the strategies previously employed, the six most CMOs expect to continue once business is back to ‘normal’ are:
1. Understanding changing consumer behaviour/market research — 79%
2. Developing direct-to-consumer (d2c) sales models — 77%
3. Focusing on marketing that gives the biggest ROI — 74%
4. Developing greater ecommerce capabilities — 72%
5. Understanding the needs of our employees — 70%
6. New product development — 70%
Gartner 2021 CMO Spend Survey
Marketing budgets have fallen to their lowest recorded level, dropping to 6.4% of company revenue in 2021 from 11% in 2020. Pure-play digital channels account for 72.2% of the total marketing budget, with CMOs indicating that they’re shifting offline budgets into digital spend.
29% of work that was previously carried out by external agencies has been moved to in-house teams over the last 12 months. CMOs have focused in-housing efforts on high-value, strategic capabilities such as brand strategy, innovation and technology.
“Despite facing in-year budget cuts in 2020 due to the pandemic, most CMOs expected budgets to bounce back in 2021. This budgetary optimism was misplaced, as marketing budgets have fallen to their lowest level in the history of Gartner’s CMO Spend Survey,” said Ewan McIntyre, co-chief of research and vice president analyst in the Gartner for Marketers practice. “However, these cuts have been a slow burn over the course of the last year, where many marketing budgets have not recovered what was originally lost.”
Isobar CX Survey 2021
The annual study of more than 800 global CMOs finds a transformed approach to marketing post-COVID. With accelerated digitisation, CMOs say creativity is critical to differentiation, with the boundaries of Content, Commerce and Culture blurring.
83% of marketers agree that there can no longer be any disconnect between what a brand promises and what it delivers for its customers, communities, and employees.
86% say every touchpoint can and should tell the brand story, from comms to commerce.
Innovation, integration of the brand promise and delightful interactions enhanced by technology were named as the top three key ingredients needed in the creation of brand experiences.
82% marketers are investing or have already invested in creativity and digital technologies to create brand differentiation.
Alternative sensorial brand experiences are on the rise with 86% of marketers saying creating brand design systems for a multi-sensory world is increasingly important, and 36% asking specifically for new craft skills designed for a multi-sensory world from their agency partner.
Isobar: “Touch-free technologies, gestural technologies, voice interfaces and virtual brand properties including avatars, idols, products experiences and configurators are all being increasingly adopted.”
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